From the desk of Jane Galt:

Volley back to Mr. Slotman

Volley back to Mr. Slotman on the great Tolkien debate. Actually, it isn't much of a debate. Mr. Slotman reduced his point to the following:

I guess my point is --and now that I think of it, I don't think it's a very big deal-- is that I have no problem with literary people having complicated standards for judging which books they like, as long as those standards are the result of them reading a lot of books and genuinely loving books.

I have no problem either. In the case of whatever the hell his name was (I really think TNR must have screwed this one up), I happen to think his standards are silly.

I guess what bothers me is not the metrics per se, but that it feels to me as if the literati first decided that any book that's too accessible can't be any good, and then developed the standards that yield an appropriately obscure list. In fact I know many professors who I adamantly respect who judge books by carefully reasoned metrics, yielding many of the same results. . . but the funny think is, awfully few of them go around spouting about how awful it is that LOTR is everyone's favorite books. They can be heard to argue that other books are better -- but not that everyone has to hew to the same standard.

And when Megan says "But too, those lists of "The Greatest Books" weren't coming from English professors; they were coming from regular people. And those people didn't set up some complicated standard by which to judge greatness; they ranked their favorite books" --I mean, there's no reason to think regular people don't have their own complicated standards for judging greatness.

Mr. Slotman is absolutely right; they may. And in fact I'm sure they do -- but my experience in talking to book lovers of all types is that probably many of them didn't ever verbalize, to themselves or anyone else, why they love LOTR -- they just read it over and over.

Tolkien's achievement is that his great personal and heartfelt work happened to mirror the great internal workings of a whole lot of other people. . .

Well said.

I only want to disagree with Slotman on a few small points:

I still don't think you could figure out whether people were "stunted" by books they embraced early because first, you would have to find some objective definition of stunted; then you would have to find a way to measure it to a statistically significant degree; and then you would have to establish a causal link to a single book. It seems to me you'd almost certainly bog down at the first, but if you didn't, either the second or the third would stop you cold.

Starship Troopers the movie was an affront to human dignity and all freedom-loving peoples everywhere reject it at its core.

Mr. Slotman is not the first person to address me as Mrs. McArdle. I have no ideological opposition to a woman's using her husband's name; in fact, when my MacKinnonite college roommate told me that I wasn't allowed to take my husband's name, I resolved then and there not only to take it, but to insist on being addressed as "Mrs. John Doe". However, Mr. Doe hasn't arrived yet. The only Mr. McArdle in the house is my father, and I'm afraid he's taken. I have assiduously searched my posts for any reference to a husband which may have caused this confusion, and find none. I can only assume that the ubiquitous husbandry of other female bloggers has caused this error. Or that he's following the Romance language practice of promoting me to Mrs. in deference to my advanced age.

So anyone who's wondering can address me as Miss McArdle, or Ms. McArdle, or just McArdle, or even Megan. If you address me by some of the names I've been called by people who take issue with my position on the corporate tax, however, I won't respond.

From the desk of Jane Galt:

SORRY ABOUT ALL THE ECONOMIST

SORRY ABOUT ALL THE ECONOMIST POSTS, but darn it, I just love the dang thing, and especially when the editors agree with me that the credit and asset bubble has not yet deflated. Of course, if you'd followed my advice you'd have gotten out of the market in '97, so caveat emptor.

From the desk of Jane Galt:

THE GLOSS IS OFF THE

THE GLOSS IS OFF THE AOL/TIME WARNER MERGER, says The Economist. I take a certain personal interest, since the merger was born during my abortive attempt to become an investment banker, and I was forced to memorize the most trivial details of the transaction (then pending) in order to impress interviewers with my deep knowledge of the industry.

And what was it based on? Synergies, those marvelous efficiencies that were going to make us all rich as soon as we'd done enough mergers. Well, it turns out the synergies aren't what they'd hoped. They almost never are; mergers usually cause the value of the company to decline, or so my finance professors told me. The Economist makes a half-hearted stab at the company line, plugging all the synergies that made Lord of The Rings so successful:

The most recent example was the release in December of “The Lord of the Rings”, the first of a trilogy of films, by New Line Cinema, part of the AOL Time Warner kingdom. This film has already taken $246m at the American box office, and was the fourth-biggest hit of 2001. Together, AOL and New Line created a “community” of fans who were offered a tantalising advance snippet of the film on the Internet in April 2000; this was downloaded over 1.7m times. To keep them coming back, the official website is continuously updated, and will feed visitors a steady supply of exclusive morsels throughout the life of the trilogy.

AOL subscribers, however, were treated to more: a chance to enter a competition to be flown to the movie’s world première in New Zealand (where it was filmed)—if, that is, they upgraded to AOL 7.0. In two weeks, 800,000 community members signed up. Few corners of the AOL Time Warner empire have not been turned into marketing outlets for the film, from the WB network, which first aired the movie trailer, to Entertainment Weekly, part of the Time Inc stable, which ran a special competition to win “figurines”, little toys based on the film’s characters. Given that yet another of the group’s films, Warner Brothers’ “Harry Potter and the Sorcerer’s Stone”, broke box-office records last year, and that both films have brought in lucrative merchandising and licensing deals, this might look like vindication of the AOL Time Warner synergy model.

Certainly, the cross-promotion of assets within a large media group can be potent, especially when exclusive offers are made to insiders, such as subscribers to AOL. The addition of the AOL distribution channel, after all, with its more than 30m subscribers, was part of what lured Time Warner’s Mr Levin into the merger in the first place.

Problem is, none of these things are particularly synergistic: all of these promotional things could have been done by the two companies perfectly easily without merging; in fact, all of these things are done by companies every day. Disney doesn't have to buy McDonalds in order to get action figures into our Happy Meals.

In fact, most mergers destroy rather than create value; acquiring companies overpay for assets, destroying value for their own shareholders (although, of course, they create an equal amount of value for the shareholders of the acquired company by compensating them more than they deserve); and the transaction costs associated with a merger are enormous: the investment bankers and lawyers to do the deal, the costs of merging the administrative and technological infrastructure, the lost efficiency during the merger -- and the costs savings from streamlining (read: layoffs) end up disappearing into severance packages and lawsuits.

There are only two situations in which merging makes sense: when there are massive economies of scale, it makes sense to merge smaller organizations; and when companies have what is called "co-specialized assets", mergers can overcome otherwise insurmountable barriers to trade. A co-specialized asset is one that is good only for making goods for a particular buyer. For example, an auto parts maker that has to refit his shop just to make a certain headlight for GM will be reluctant to do so, because once he has, he is totally dependant on GM. If GM goes out of business, or decides to stop using the parts, he's hosed. Moreover, this will give GM a disproportionate pricing power over him that will make the refit unprofitable. In this case, it makes sense for GM to buy the parts maker, because otherwise the parts won't get made.

Most mergers don't work on this principle; AOL Time Warner did not realize economies of scale, nor did it have co-specialized assets. So why did they merge? Beats me. But if you've got an investment banking job you want to give me, I can do a hell of a pitch on the synergies.

From the desk of Jane Galt:

THIS ARTICLE ON the Gitmo

THIS ARTICLE ON the Gitmo prisoners reminded me of this fantastic quote from Mark Twain on the "committee of sappy women" petitioning the governor to pardon Tom Sawyer's Injun Joe:

"If he had been Satan himself there would have been plenty of weaklings ready to scribble their names to a pardon petition, and drip a tear on it from their permanently impaired and leaky waterworks."

Let's see, now. . . who does that remind me of?

From the desk of Jane Galt:

THE ECONOMIST HAS A GOOD

THE ECONOMIST HAS A GOOD ARTICLE delineating the various legal options for dealing with the Al-Quaeda prisoners. It told me a couple of things I didn't know, including the fact that the outfits we're so up in arms about were only used for transportation (they're only shackled now to be moved). Here's the thing: European governments are saying that we should give them Geneva Convention treatment. They're also saying that we shouldn't try them with military tribunals or give them the death penalty. Well, it has to be one or the other. If they're combatants under the Geneva Convention then we'll be trying them for war crimes, under our own military law -- and I'm guessing that there's a death penalty in there somewhere for randomly executing civilians. If they're not -- well, who the hell knows, but it's a sure thing that Europe doesn't have any standing in the matter. I'm afraid they're going to have to make up their minds.

From the desk of Jane Galt:

Happy Australia Day, Theodore!!! I'm

Happy Australia Day, Theodore!!!

I'm sorry, I was overcome by irrational exuberance at the thought of a place with some decent weather. We will now resume our regularly scheduled program.

From the desk of Jane Galt:

Why I Object to Book

Why I Object to Book Snobs

While trolling Matt Welch's fine blog I stumbled across this quote from Michael Barone that perfectly captures what I hate about literary snobbery of the kind that I claim to have found in that TNR LOTR review:

The culture wars are not about conventional politics. They are about the politics of moral aesthetics. In conventional politics, an opponent is someone who is wrong in his choice of party, or on a particular issue, and this is something that can be argued about. But the politics of moral aesthetics are about taste; and about taste, there is no arguing. An opponent is not just wrong in his views; he is wrong as a person. He is wrong on an existential basis: It is not the fact of what he espouses that is appalling; it is the fact of himself.

From the desk of Jane Galt:

Excellent post by Natalie Solent

Excellent post by Natalie Solent on the Northern Irish troubles, pointing out a fact of which I was only dimly, innumerately aware: the Catholic death toll is much higher than the Protestant death toll because the Republicans kill so many of their own (Catholics, that is).

Of course, I'd want to be sure that the site is not run by and for some Protestant leaning organisation, but I have no reason to suspect that it is.

From the desk of Jane Galt:

Slotman's comments won't fit in

Slotman's comments won't fit in the comment window, so I'm putting them here, because they're fair and I want to respond. Slotman's comments are in the clear; mine are in italics.

OH MY GOOD GOSH --I have comments on your comments.

MM: Nor can Soskis hang on me the charge he makes that those who really love the books read them as adolescents; I just read them last week. As I say, I found his prose uneven, but his imagination. . . that soars. . .

JS: He can't hang it on you maybe, but that doesn't mean he's wrong in general. If he can somehow prove the majority of Tolkien fans haven't moved past Tolkien in the years since they first discovered them --and if that discovery usually happened when they were in their teens-- then he'd be on to something with the Tolkien-stunts-your-growth-as-a-reader argument.

I meant only that I don't have a longstanding emotional attachment to the books the way those who've been reading them for years do. If he could prove such a thing. . . I don't see how you could. I was a Robert Heinlein baby and continue to re-read his books regularly. . . when I saw what they'd done to Starship Troopers in the movie, I wanted to sob. But that doesn't mean that I am unable to appreciate the intricate prose of William Faulkner, or the emotional landscape of Jonathan Cheever, merely because these are not his charms. I find it hard to believe that people are stuck on Tolkien like some sort of arrested literary development. I think the fact that Tolkien speaks to all ages speaks well, rather than ill, for the book. I read Huck Finn at 15 and loved it. . . and at 22 and loved it for utterly different things. . . and the next time I read it, I am sure that I will find it has changed again. Not all great books are able to speak to us before we have done the work to ready our intellect and literary palates for them, but many are -- and I would argue that all great books continue to speak to us throughout our lives, or they are not great.

MM: I would argue, on the contrary, that any book that doesn't get decent circulation in the literate (not literary) community of its time is doomed to obscurity unless hauled out by some ethnic studies group of the year 2200.

JS: What about Moby Dick? Nobody read that at the time, I think.

It wasn't The Old Curiosity Shop. But it wasn't Gravity's Rainbow either.

MM: Soskis undercuts his argument thoroughly in the final paragraphs, where he tells us why he is so hard on Tolkien: because he doesn't deserve to top the list of best book of all times. My question: why on earth should Soskis care?

JS: Most likely because Andy Shippey wrote a book saying that Tolkien was the greatest author of the 20th century, a perfectly controversial position that Soskis could not suffer silently. So he critiqued Shippey. Soskis probably likes other books better. You know? Maybe he could have helped himself by saying what they were --but maybe he doesn't want to generate debate like that. That's his point: that Shippey's "'take no prisoners' policy--you are either with Middle-earth or you are with the poncey eggheads--polarizes the debate too much." That's what he's on about: Tolkien fans telling him how great Tolkien is when he just can't see it --though he's willing to give Tolkien his due as he sees it.

Yes, to be fair, Soskis/Jenkyns is critiquing Shippey's book, and it's a perfectly fair target. But I am not quarreling with the fact that the reviewer doesn't like the book -- he's perfectly free not to -- or even with the idea that if there were some sort of objective, platonic ideal of a best books list, Tolkien would not be on it. (I'll quarrel with that later) Rather I am quarreling with the reasons he ennumerates for not liking the book, which I think aren't particularly valid; and the fact that Jenkyns/Soskis thinks that all those people shouldn't have LOTR as their favorite book. He doesn't offer any candidates for what should be there, or even any criteria, though I will give you that he has offered lack of sex, religion, and verbal craft as the putative reasons LOTR shouldn't be there, so perhaps the inverse would be appropriate decision factors. It seems to me (and this is just an impression) that there is more than a little of the "literature as medicine approach" -- books as signals of, or agents of, spiritual and intellectual health.

And Shippey probably wants people like Soskis replying to him thoughtfully and telling him where he's wrong and where he's nuts. The whole point of ranking somebody number one --especially a controversial choice like Tolkien-- is to get people talking. And Shippey has done that. But Soskis has every right to
respond. You can ask Shippey the same question: why on Earth should he care? Because he loves the books, and so does Soskis --just not the same books.

I am in no way questioning the reviewer's right to quarrel with the criteria by which Shippey asserts that LOTR is the greatest book ever. I just disagree with most of the points on which he chose to base his quarrel. I think you will find it hard to deny, however, that there is a healthy dose of unjustified elitism in the reviewer's position that is not found in the Shippey stand.

And RE: Freud: He has a point. The 20th century was the century of Freud; Tolkien wrote as if he had no idea Freud existed or if he wanted a world where Freud did not exist; an author who could not acknowledge Freud cannot be the greatest of the century that was Freud's. Unless the 20th century actually was the century of Tolkien. Or of neither of them. That's all I got.

I respectfully disagree. You could make the same argument of Karl Marx or Darwin, but whoops! There goes Dickens, James, Thackeray, Austen, Melville, Hawthorne, Eliot, all three Brontes. . . if currency with the fad ideas of the century is all that counts, H.G. Wells was the 19th century's greatest novelist, and George Bernard Shaw its greatest playwright. I'm awfully fond of both of them, but the greatest authors of their times? I'm not saying LOTR is the greatest book ever; I have my own candidates. But too, those lists of "The Greatest Books" weren't coming from English professors; they were coming from regular people. And those people didn't set up some complicated standard by which to judge greatness; they ranked their favorite books. Lord of the Rings, for good or bad, was the one that the largest number of people read and re-read and enjoyed. So what Soskis/Jenkyns is saying when he says that it shouldn't be at the top is, in some way, that all those people shouldn't be allowed to have a book like Lord of the Rings as their favorite. I find that deeply objectionable, for reasons that I ennumerated in the original piece, but will restate thus: the qualities that the literary establishment values in a book are no more of an objective, perfect standard than are the qualities that the masses who love LOTR value. When Jenkyns/Soskis asserts that people shouldn't value LOTR the most, he is asserting, a priori that these standards are superior.

From the desk of Jane Galt:

Interesting note from reader John

Interesting note from reader John Weidner on the book Soskis/Jenkyns was reviewing in the article that kicked off my original Tolkien screed.

From the desk of Jane Galt:

The Blogs of War points

The Blogs of War points out that the Lord of the Rings article was written by Richard Jenkyns, not Benjamin Soskis. But I swear I'm not stupid enough to pull Soskis' name out of a hat and pin it on the review. I can think of only two explanations: either Soskis' name was on another piece near the LOTR piece on the web site, and I randomly fixed on it; or TNR screwed up, has fixed the error, and is now pretending it never happened in a nefarious effort to make me look bad.

Coincidence. I THINK NOT!!!

From the desk of Jane Galt:

Why. . . why. .

Why. . . why. . . why. . .?

Rand Simberg has answered the question I posed a little while ago: why the hell was Enron making commercials? Answer: to prop up the stock price, of course.

From the desk of Jane Galt:

IT LOOKS LIKE the former

IT LOOKS LIKE the former Vice-Chairman of Enron, who stepped down in May, has killed himself. This could be coincidence, but I think it likely means that there are more and worse revelations to be made about Enron.

I just had a thought -- does this mean the lefty nuts are going to start their own version of the Clinton Death List?

From the desk of Jane Galt:

The Megan McArdle Certified Wing-Nut

The Megan McArdle Certified Wing-Nut Hermes Tax, Part II

Seems that confiscatory taxation is gathering a following, although their solution is much less creative than mine.

On the same site, Evil Princetonian Dave Tepper has awarded me "Favorite MBA". . . I'm stunned. . . it's all so sudden. . . I'd like to thank my parents, my financial aid officer, and all the little people -- Tattoo, Mickey Mouse. . .

I just wish I knew how tough the field was. But I'm pretty impressed that I managed to snag it even without putting provocative pictures up a la Nataljia Radic.

From the desk of Jane Galt:

We're All Gonna Die, Part

We're All Gonna Die, Part XIII

We just got our blood test results. No one's got dangerous levels of Lead or Mercury in their blood. Whoopee! I'm going to go out right now and celebrate by eating a thermometer.

From the desk of Jane Galt:

IT SEEMS THAT unemployed techies

IT SEEMS THAT unemployed techies (a category into which I almost fall,) have taken up spamming as another creative way to get that resume out there. And it's certainly catching people's eye: one enterprising recipient, who got two copies of a resume, set up a webpage called "Bernard Shifman Is a Moron Spammer", reachable through this link, to tell the world all about the spammer.

But all is not lost, Mr. Shifman. Surely some direct marketers are hiring?

From the desk of Jane Galt:

I'm finally catching up on

I'm finally catching up on my backlog of email (you'd be absolutely amazed at how many people are interested in the subject of corporate taxation) and wanted to point out the Fritz Schrank has an interesting rejoinder to my attack on Richard Cohen:

I'm not challenging the strength of McArdle's arguments about corporate taxation. I just can't help noticing that Cohen's points are far more broadly stated than the question of whether or how to tax business entities.

I take Cohen at his word when he says he resents "anyone who manages not to" pay federal, state, or local taxes. The term "anyone" is not usually limited to corporations. I also take Cohen seriously when he says,

Most people pay taxes, but some don't -- and the ones who pay subsidize the ones who don't.

(Emphasis supplied.)

Actually, the interesting thing is that most people don't pay income tax. I'm trying to find the damn chart on the web, but 55% of taxes are paid by either the top 5% (I think this is right) or possibly the top 10% of all earners.

But I'm no rich guy and 40% of my check is gone before I get it, you say? First of all, it don't take much to make the top 5% -- ca. 52K per annum. And second of all, a great deal of that is FICA, which isn't a tax, it's a Ponzi scheme. . . excuse me, social insurance. The bottom quartile pays about 5% of the nation's income tax, far less than their share of national income.

Ted Kennedy doesn't pay that much either, relative to his share of the nation's income. Why? Because he inherited it, and there's a lot of it, so he can afford to structure his income to avoid taxes, much like the evil Enron. It's the Upper Middle Class that's caught between a rock and a hard place -- my parents pay about 60% (that's right, 60% after you include property, sel-employment, and sales taxes) of their income, which is far more as a percentage of annual income than the Kennedys will ever pay).

Roberts’ taxpayer/voter data more than proves Cohen’s point that the current income tax code is

a reflection of a society in which the rules you think apply to everyone actually don't.

So let’s come up with an income tax system in which everyone pays. Shall we?

Couldn't agree more. Actually, I'm not against the progressive income tax per se (I hear a gasp from my libertarian companions, but come on -- the guy who was born with a 90 IQ to a 15-year old mother can't be expected to turn over the same share of his meager income as folks like me who had all the advantages of birth, plus brains, beauty and charm.) I have even been known to advocate, when in my cups, what became known among my friend's as "The Megan McArdle Certified Wing-Nut Hermes Tax" which goes like this: Hermes sells a handbag for $10,000. I think that if you buy that handbag, the government should take half your assets and give them to [Insert political cause of the week: it's currently Enron employees]. Why? Because the only reason to buy that handbag is to show how much money you have. It has absolutely no utility whatsoever above a $1,000, $250 or $100 handbag. And if you have so much money that you can spend $10,000 to show people how much you have, you have too much and it should be taken away, because you don't appreciate, in the words of Ayn Rand, "the living value that money represents." [Before you whip out the rusty quill with which to verbally lacerate me, I'm kidding, OK? Although I do find $10,000 handbags ethically and aesthetically repulsive] So I'm not the Uber-Capitalist you might think. Like economists, I am less concerned with the tax code's progressivity than with its complexity, which is ridiculous and detrimental to the economy.

However, I see significant problems with it as it's currently enacted, the greatest of those being that most people in the United States don't currently pay any income tax, and therefore don't do even the most elementary cost-benefit analysis (as in "Politician A is going to raise my taxes to pay for all this crap he's promising") on the goodies they demand from government, because to them it's free. No nation, so constituted, can long endure.

I think that total tax burden should be capped at 25% of income, for a number of economic reasons, but mainly because of fairness. Why? Think about it in terms of time instead of money. Every extra percentage of income you demand is an extra percentage of the taxpayer's life spent providing it. Does the government have the right to demand that 50% of someone's life be spent supporting it?

From the desk of Jane Galt:

Taxes and Transfer Costs This

Taxes and Transfer Costs

This article from Fox News highlights the transfer costs of taxes, and illustrates why it is that people are able to say such stupid things about government spending "creating jobs": because they can see the jobs the government creates right there, while the jobs the government destroys through taxation are invisible.

Think of it this way: we can all agree that the money spent to transfer tax dollars from people to the government are lost, destroyed. They replace other economic activity we'd rather have. So in order to justify spending, there either has to be some phenomenally important task we need to complete, such as repelling the Invading Hun and Making the World Safe for Democracy, or the government investment has to get radically better returns on its investments than the private sector. In a few cases this may be true, but does anyone who's stood on line at McDonalds, and then stood on line at the DMV, think that it's true most of the time?

From the desk of Jane Galt:

Zing! PatrickRuffini says we're no

Zing!

PatrickRuffini says we're no longer allowed to use the word "take down", which forces me to new creative heights in describing in hilarious indictment of Marion Berry's totalitarian tactics (tee-hee! I love alliteration):

Berry's whole existence seems increasingly like an audition for a position as minister of information for a regime that sends people to forced labor camps. Fortunately, if she ever got the job, it's likely that her subjects wouldn't have to endure her for very long. Any regime that would countenance her and her shoddy comic-book tactics would likely be swatted away in a military coup within weeks.

From the desk of Jane Galt:

I know that everyone and

I know that everyone and their cousin has linked it, but I just had to throw in a link to Andrew Hofer's absolutely terrific piece on derivatives. I talked earlier about how much investment banking revenue is now derived from exotic structures designed to get around taxes or regulation; well, Hofer describes it better, and in more detail. Everyone should read it.

From the desk of Mindles H. Dreck:

Boldly going where no man has gone before

(deep breath) Against all better judgement, and after careful consultation with the better half, I am going to dip my bloggin' toe into the waters of the "wifework" debate*. I fully expect to emerge in shreds, but maybe I'll get a point or two for effort.

Shiloh Bucher writes:

But how many of these men do you think sit around with their friends and complain about their wives? I agree with Moira, many women complain about their husbands far too much. It's like a sport with some of them.

Well, the sad truth is that many men complain about their wives, and even make a "sport" of it, sort of like "the dozens." (It may be the men who shred me) The general theme is something along the lines of "needing permission from the warden" or "doing time". When it gets really out of hand men accuse their wives of Lysistrata tactics when hubby fails to pitch in.

The interesting thing is (observing an inappropriately small population) that I find this sort of talk much more prevalent among men whose wives stay home than those whose wives work. Perhaps that is why I can honestly say that I do not engage in this. Of course it helps that there is really no debate about me getting the better half of the deal, so complaining -even joking - seems churlish.

There may be reasons for this stay-at-home bias, as I'll attempt to suggest below.

First things first. I know this sounds condescending, but the whole housework thing is petty roommate stuff until you have kids. The stress over home-duties increases geometrically with the number of children. It was certainly after we had kids where I started to fall down on the job.

The reason for this is not just the volume of work, but the quality of your involvement. I do the dishes every night after dinner, but there is little attention to the quality of my efforts. If my mind drifts, the dishes don't seem to care. When you spend time with your kids, however, one needs to stay on one's toes, and since my family time is limited, the pressure to have "quality" interactions is enormous. One feels not only one's own internal pressures, but significant pressure from the spouse.

I think the reason it is actually a bit easier with dual-career couples like ourselves is just the concentration of kiddie-responsibility for the stay-at-homes. As James Lileks has discovered, one can only put on the Richard Scarry video so many times before going bonkers and blogging on Bananas Gorilla. The evening return of the working spouse marks an opportunity to disengage the mind of the latest dispute over stolen lego pieces, two-year-olds bent on home demolition or electrical engineering, or sudden piano-practicing brain freeze. A shrink I know once called kids "psychotic dwarves with a good prognosis." The stay-at-home spouse sees the returning hubby or wife as a lifeline from permanent brain damage. So if the working spouse feels he arrives on the doorstep only to be suddenly shackled to the kids and the sole representative of his age group in the abode, there's a valid reason, however unpleasant. When both "spice" have careers and have spent some of the day dealing with fully grown, self-sufficient psychotics, there is less of this desperate sanity preservation and more cooperative and smooth transitions.

It is uncomfortable to read about husbands expecting the wife to remember a birthday present or upcoming school obligation. Familiar, but uncomfortable. My super-cool new (and discontinued) Visor Edge helps, but the systems politburo at work have decreed that it is "out of scope" to synch it to my home PC, so we have not yet achieved a state of fluid datebook automation.

Specialization has been part of the answer. You can't share all tasks evenly, but you can divide them up fairly. We had a long conversation some years ago where I agreed to assume a few more specified jobs. She understands that I let some of these things pile up, and restrains her otherwise tidy nature to let me perform my appointed tasks.

My wife interjected an atypically hearty expression of approval to this passage from Moira Breen:

I aspire to the golden order and serenity of a household out of a de Hooch painting, in reproductions of which I'd lose myself as a girl. Here order makes its stand against chaos. It is a very basic instinct, and very satisfying to indulge.

I have to admit, I don't get that. I feel at home in piles of stuff.

Having read the Bucher, Breen and Solent contributions at my behest, my true love also passes along this suggested reading to the blogosphere: More Work for Mother, by Ruth Schwartz Cowan. Cowan maintains that all the modern contraptions lauded by Breen may have increased the wifely load, or at least made homemaking more of a solitary endeavor. This and several books you will see on the "also bought by" list Amazon provides in this link, are favorites amongst the material culture illuminati with whom she hobnobs (when not tending the psychotic dwarves).

One other thing. Not only does my wife having a job put us on a more level playing field, I think her having a job makes her more sexy. I suppose someone will write to me saying I'm denying her the choice of staying home. Well sue me, but a wife with a job or avocation outside of the home seems more exciting.

* the shot-by-shot here is: Solent serves, with sidespin. Breen returns. Solent hits a deep approach which is politely lobbed back by Breen. Ginger Stampley leaps across from the adjacent court and smacks a smooth volley which is returned by the line umpire, Bucher for a cross-court winner.

From the desk of Jane Galt:

The Enron collapse had nothing

The Enron collapse had nothing to do with its campaign contributions. That's why it proves how urgently we need campaign reform, says Jonathan Chait.

No, really, that's the argument. It's clear to me, anyway, that this is a fairly cynical strategy to keep repeating Enron and Bush together and hope that the peepul are too dim to apprehend the difference. Not one of the things that Chait mentions has anything to do with the Enron collapse -- except the ones that don't have anything to do with campaign finance. The pretext he uses to hang them all together:

Granted, these Bush administration favors didn't contribute to Enron's downfall. But that's almost certainly because this oh-so-friendly administration has held office for only a year.

For one so certain, Chait is mysteriously silent as to what sorts of things the evil Bush administration would have done to facilitate Enron's collapse, if only they'd had the time.

Meanwhile, Noam Scheiber delivers a blistering diatribeon campaign finance rings largely true to my (non-political-operator) ears, but curious from a reformer, since it basically concludes that until we reform men's souls -- or the state withers away and true communism arrives, whichever comes first -- nothing we do is going to make much difference.

From the desk of Jane Galt:

THE NEW REPUBLIC has an

THE NEW REPUBLIC has an interesting, but ultimately unsatisfying discussion of the Lord of the Rings trilogy (the books, that is). A partial list of the topics covered:

The question of whether they are books for adolescents or adults. I would argue that the question is a little anachronistic -- Tolkien, the medievalist, strikes me as thoroughly Victorian, and the Victorians did not delineate adolescent and adult literature the way we do. That Benjamin Soskis doesn't seem to grasp this is particularly apparent in the reason he chooses to illustrate why he doesn't consider them adult books: sex.

Tolkien invented his own mythological world, but it lacks the dignity and the sinew of a real mythology, for it is without religion and essentially without sex. Hobbits may have fur at the bottom of their legs, but they have seem to have no balls at the top; and that pretty much goes for the rest of Middle-earth, too. The women in The Lord of the Rings are few and pallid. . . what disturbs is not so much the absence of women, perhaps explicable in an adventure story of this kind, as the absence of desire. In this work that presents itself as the representation of a whole world, there is hardly any awareness that we are sexual beings.

In the post-Freudian world, it is impossible for us to imagine that one could write a book for adults without layer upon layer of sexual tension, but in fact before those licentious Edwardians got in, there was a booming school in exactly that. The women are few and pallid? One could say the same of Mark Twain. There is a total absence of desire? No awareness that we are sexual beings? That describes 90% of novels written before 1900, and a good many written after. . . the fact that contemporary English departments enjoy savoring the fraught sexual atmosphere of a Henry James or Kate Chopin (who, in my humble opinion, has been elevated to canonical status on the basis of this rather than, say, writing talent) does not mean that one cannot write a novel for adults without sexual themes; it is merely that no one does any more, because we are all Freudians now -- and because most "literary" writers imagine themselves to be writing for posterity, and so consider their market to be the English departments of America. There is no sex in Lord of the Rings because it is a family novel, and because it isn't important to the plot. Not that I'm against sex, but I think it would be nice if we saw more of this diversity in the literary world.

When he says the books are religionless I suppose he means that a struggle for good isn't religious -- only religious rituals count. Don't tell the Unitarians.

Actually, I agree that few of Tolkien's characters have any deep emotional life -- they're rather like characters in a medieval epic, with a few grand passions rather than complex emotional lives. But if we are to argue that you need characters to have complex emotional lives in order to have an adult novel, you'll have to knock out a great deal of contemporary literature from Waiting for Godot on. Contrast this with the indubitably for children Anne of Green Gables series, where the characters often have extremely complex emotional lives -- just read this passage about the death of a childhood friend (no, men, it won't cause you to lose your facial hair and take up needlepoint) if you don't believe me. But then I suppose there isn't any sex, so it doesn't count. Emotions are only complex if they involve sex somehow.

The symbolism is flawed. Having told us that the emotions in the book are insufficiently complex, he immediately turns around and complains that another problem with the series is that

the moral economy of the work is radically flawed--that there is a confusion between whether the corrupting ring symbolizes sinful desire (the lust for power, or whatever) or should be seen as a magical object that acts upon the wearer as an external force

That's what I would call intricate, nuanced symbolism, but once again it doesn't involve sex, so I'm probably confused. Soskis might prefer it if Tolkien just told us in an appendix exactly what the symbolism was so we wouldn't have to wonder.

I shouldn't make fun of Soskis. His criticism is interesting and well written. But I am struck, while reading this, by how entirely modern criticism has come to view everything through the prism of sex. We expect to find subtle and nuanced evocations of sexual themes, yet everything else is supposed to be right out there, unambiguous and unexplored in any but the most superficial way. It strikes me also that this may be why so much modern "literature" has degenerated into increasingly violent and bizarre sexual themes coupled with increasingly dull political ones, laminated together with a thin veneer of verbal scrimshaw.

The prose isn't particularly artistic. Soskis's criticisms of Tolkien's style, on the other hand, are right on target; his dialogue is wooden, his prose redolent of the Victorian schoolboy's history compositions. Yet I doubt that those who love Tolkien would disagree, much, with this verdict; his prose is hard going, and does not later reward you, as does James or Austen, with an appreciation of its subtle artistry. It is not to Tolkien's prose that we respond; it is to his fecund, delighted, heroic imagination, his unerring moral compass, his hold to the idea of the timeless struggle between good and evil which gave birth to an entire genre. But these are not the stuff of modern literature; for all their flirtation with magical realism, vivid imagination is not what the modern literary establishment truly values, and they are certainly not interested in absolutes of good and evil. They delight in exploring all the varations in shading in the grey areas, and while I find Tolkien's moral universe quite complex, it doesn't have a lot of grey in it.

I do want to defend Tolkien's dialogue a little bit, not because I like it, but because Soskis is so savage: "This is writing that aspires to be noble and philosophical, but its nobility seems to me gimcrack" Its nobility sounds to me a lot like medieval epics, and their later Victorian interpretations, to me. Given that Tolkien was a medievalist, I think he just wrote that way because he actually enjoyed it. Medievalists are very strange people. I dated one who used to wake me at three in the morning shouting things like "Hwaet we garde na in geardagum þeodcyninga!"

Nor can Soskis hang on me the charge he makes that those who really love the books read them as adolescents; I just read them last week. As I say, I found his prose uneven, but his imagination. . . that soars. . .

Soskis complains that Middle Earth is basically just Europe. It is. He doesn't say what is wrong with this. Presumably, the thing stands on its own, and I'm just too dim to see it.

Tolkien's popularity doesn't mean he's a great writer. Horsefeathers. I would argue, on the contrary, that any book that doesn't get decent circulation in the literate (not literary) community of its time is doomed to obscurity unless hauled out by some ethnic studies group of the year 2200. As exhibit one, I offer you William Dean Howells. William who? I hear you cry. Why, the most famous and successful literary author of post civil war America, that's who. Mark Twain, on the other hand, was considered a vulgar popular figure, the Dave Barry of his time. Making predictions this early about which works will stand the test of time is a sucker's game -- but I'll go ahead anyway and say that anything made deliberately difficult, like James Joyce, will go away because as the language changes in a hundred years it will be just too damn difficult to read.

I suspect Soskis' verdict about the book is much influenced by the fact that apparently any old person can read and enjoy it -- which he backs up by rejoindering the claim that readership equals greatness with the example of Danielle Steele. I would argue that the cases aren't the same, because Steele's readers are prolific readers who will consume anything as long as the plot is sufficiently romantic and the prose sufficiently simple; they rarely re-read her books, and easily substitute other books for hers. Tolkien fans pore over his books repeatedly. I am willing to state that any book that a lot of people buy as a "lifetime" book -- one that goes on the shelf instead of getting thrown away, so that you can read it again 5, 10 and 20 years from now; a book that people look forward to passing onto their children -- any book that meets those criterion is a candidate for being a classic.

Soskis says that the literati don't dislike Lord of the Rings because it is popular: "think of the cartloads of highbrow praise justly heaped upon jazz or Elvis or The Simpsons". Disagree. The literati like jazz because it is black, don't particularly like Elvis but tolerate him because he is poor, and like the Simpsons because it makes fun of the middle class, and many of them have a lingering horror of their roots in the bedroom communities of New York and Los Angeles. They aren't rebelling against popular culture; they're rebelling against pole lamps and Mom's book club. They do not like things that the vast middle class, middlebrow population likes. LOTR falls into this category.

Soskis undercuts his argument thoroughly in the final paragraphs, where he tells us why he is so hard on Tolkien: because he doesn't deserve to top the list of best book of all times. My question: why on earth should Soskis care? And what hill was he standing on when God handed him the list of the best books of all times?

This attitude is the reason that so many people hate reading, including people who teach and study it. They've been told that there's a list of books that they should like, and if they don't, then they don't like reading. I recall vividly an English class at Penn where I managed to shock into silence 40 sensitive suburban types merely by saying that I didn't like Wordsworth, and I thought his poetry was bad. (I've revised this opinion somewhat since then. But only somewhat.) The idea that one could challenge the canon for any but political reasons was entirely alien to them. Little wonder that so few of them evinced any genuine love of books or words -- they were far too busy trying to figure out what books they should like, to ever discover which ones they did. Saying that you're not allowed to like Tolkien, or like Tolkien better than other authors, because he doesn't add up well on the hierarchy of literary traits that Soskis has assigned is no better than declaring that you like a writer merely because he does.

From the desk of Mindles H. Dreck:

A goody from the archives

This letter to Matt Welch is a classic:

What should we do about a repressive regime?

Option 1) Military Aid. Obviously wrong. We are providing the weapons that kill the innocent. See Israel, Turkey, Columbia, Reagan-era Iraq, etc.

Option 2) Economic Aid. Wrong. We are financially propping up the regime. See Egypt, Indonesia, etc.

Option 3) Humanitarian Aid. Still Wrong. By relieving the regime of its financial duty to feed its people, we free up their money for military uses. See Afghanistan, where the US supported the Taliban by providing $43 million in humanitarian aid in exchange for the Taliban not exporting Heroin, thus sacrificing 12 million women to the alter of the failed War on Drugs.

Option 4) Trade / Constructive Engagement. Wrong. This is merely an excuse for US corporations to profit off of the regime's repression of its own people. See China and Reagan-era South Africa.

Option 5) Economic Sanctions. Wrong. The economic sanctions in Iraq have killed 6,000 people a month for the past 11 years, or nearly 800,000 victims of US foreign policy.

Option 6) Military Attack. Wrong, wrong, wrong, wrong, wrong! War! What is it good for? Absolutely nothing! See every military conflict that the United States has every engaged in. (Caveat: There may be a possible exception for the US Civil War, which will be considered obviously justified if you are talking to any white person born in the former Confederacy.)

Option 7) The Prime Directive. Wrong. It is intolerable for the most powerful nation in history to sit by and do nothing while thousands die. It probably stems from a racist lack of concern for people of color of persons of other religions. See Rwanda, Bosnia (not to be confused with Kosovo, which falls under Option 6, above).

Must be Option 8 - Exploit the lack of reasonable alternatives by writing articles for the Gaurdependent and getting interviewed by the Digital Freedom Network.

From the desk of Mindles H. Dreck:

401K Choice

Sophismata was first, but the Wall Street Journal does a more complete job on the non-scandal of Enron's 401K today:

Enron's pension plans followed standard practices of most big, publicly traded firms. Enron offered several arrangements -- from employee stock-option plans to defined benefits -- but the one that has everybody outraged is its 401(k).

Enron's employees could set aside up to 15% of their pretax salary in a 401(k), up to the IRS limit of $10,500 last year; they could put the cash into one of 20 different investment vehicles, including mutual funds and a brokerage account. Workers controlled this money in their own self-directed accounts and were free to switch among investments or even cash out (with a tax penalty).

Enron had about 24,000 workers world-wide before bankruptcy and about half of them participated in the 401(k). So we're talking about 11,000 employees and a plan with about $1 billion in total assets, of which from $500 million to $600 million was invested in Enron stock.

Enron also matched up to half of these worker contributions, up to 6% of base pay. But it matched in Enron stock, and employees were required to hold this matched stock until age 50. That limitation has come in for criticism, but keep in mind the stock was free. Some politicians want to stop companies from matching in stock, but the danger is that they then won't match at all.

This arrangement is also fairly typical of big plans. About half match with company stock and half with cash. General Electric's plan offers a cash match, for instance, but about three-quarters of its workers use that money to buy company stock.

Contrary to the headlines, Enron employees were not forced to watch helplessly as the value of their stock cratered, trapped by a malicious "lockdown."
A lockdown, more properly a "transaction suspension period," occurs when companies change record keepers. Transactions are barred for a time so the new record keeper can verify account accuracy and make a reconciliation. Lockdowns can last anywhere from a few days to two months, depending on the size of the plan, its complexity and the sophistication of the record keepers. Last year, 24,000 private investment plans changed record keepers.

Most important, Enron notified employees of the coming lockdown several times -- first by mail and then by four separate e-mails. Enron shares were still trading in the $30 range at this time, when workers had ample opportunity to sell. The lockdown itself started Oct. 26 and ended Nov. 13, so workers were locked out for only 11 stock-trading days. And during that time Enron's stock fell from $15.40 to $9.30, a rather small decline for a stock that had already lost almost 70% of its value during 2001.

401(k) plans do not promote dangerously undiversified portfolios. Diversification is an important financial tool, permitting investors to reduce risk without reducing expected returns. In long-term financial planning, it makes excellent sense to hold a portfolio that is diversified across a range of assets.

But diversification is also a highly individual thing. Strategies depend mostly on age; a person nearing retirement should hold fewer risky assets than one starting a career. But after adjusting for age, all assets should be considered together. For example, a person who is heavily invested in real estate might want to achieve balance by a single-minded approach in other vehicles, like ginning up her 401(k) for equities.

That doesn't mean holding 100% of equities in company stock is a great idea. But then again if the rest of an investor's equity portion is well-diversified, such a concentration isn't crazy. In hindsight, a 100% concentration in Microsoft made a lot of sense and lot of millionaires. A 100% concentration in Enron also made sense for a while; from January 1998 to January 2001, Enron's shares increased fivefold.

Enron's 401(k) experience does not indicate that the plan is fiendishly flawed and government must step in to correct it. If workers knew Enron's true condition, they would no doubt have declined to invest in company stock in their self-directed accounts. The problem is that they didn't know the true condition of Enron, but then neither did the credit rating agencies, various federal overseers, stock analysts, auditors and (possibly) even much of its senior management. This was a failure in truth-telling and truth-ferreting out and it was system wide.
All of which means that while the Enron pension story is tragic, it's more about specific corporate blunders and wrongdoing than it is about flaws in pension law or in 401(k)s. It's certainly no excuse for Congress to lobotomize a private pension system that has given millions of Americans a comfortable retirement.

Posted by Mindles H. Dreck at 08:04 AM

From the desk of Jane Galt:

Regarding the issue of commercials

Regarding the issue of commercials on television for non-consumer products, Rand Simberg makes another excellent point -- that for those of us who, like Simberg and I, listen to the television while doing other things, those television commercials were an even more colossal waste of money, because most of them were so oblique that the only way to even know what they were advertising was to watch the damn things. Given that the last time I sat there and just stared at the idiot box was when I was about twelve, and that routers and energy derivatives are not usually purchased by pre-pubescents (although to be fair, given the nation's mood at the time, the companies in question may not have realized this), one wonders who the hell was in charge in their marketing departments.

From the desk of Mindles H. Dreck:

Sophis-wha?

One of my new links (over there on the left) is Sophismata, whose mission appears to be railing against arrogant innumeracy. This, folks, is another blogger who knows math and statistics (as confirmed by the uneven spelling...), so handle with care.

Anyway, Sophismama does a risk-aware takedown of Times reporter Gretchen Morgenson's angst about 401Ks. It illustrates the pitfalls that reporters encounter when explaining risk measurement concepts that they..are still having trouble grasping themselves.

But it also points out a problem that I have seen in many articles about this subject. 401Ks are self-directed defined contribution plans. In English, this means the participant (the employee) directs the investments from a menu of choices, and the amount put in the plan is determined by that employee. The amount that comes out is a function of the performance of his investment choices and his contribution levels.

So why do so many people seem to think the employees were forced to buy Enron stock? A company can't offer its stock as its sole investment option, and any company that offers overly limited choices is exposed to a whopper of a lawsuit.

It is possible that workplace pressure was placed on people to put more of their 401k in the company. This would be an interesting angle to cover. I know a senior executive at a regional bank who was told he couldn't sell his ($18 million worth of) company stock and keep his position. No tears, please, he's gonna be OK.

If you are wondering, here's a definition of Sophismata:

There are several important characteristics of sophismata. First of all, a sophisma is a sentence rather than an argument. In particular, a sophisma is a sentence that either:

-is odd or has odd consequences,
-is ambiguous, and can be true or false according to the interpretation we give it, or,
has nothing special about it in itself, but becomes puzzling when it occurs in a definite context (or "case," casus).

Raghu also provides groundbreaking coverage of the Vietnam Fish Wars, which have for some reason been ignored by much of the mainstream press - oh, except for the Times.

From the desk of Mindles H. Dreck:

A Treasure Trove of Weird and Bloggable Stuff

Whilst googling for an interview of Robert Scheer I heard on the radio, I happened upon The Institute for Psychohistory.

WARNING: This is a dangerous site. It has been known to cause long episodes of scrolling accompanied by giggles, frowns, and rapid intake of breath. There is no known cure, but saying "Penis envy did not cause the Korean War" and "The Invasion of Normandy was not staged to alleviate homosexual pressure in the military" several times in rapid succession has provided temporary relief in clinical trials. The treated population was compared to a control group that was shown a placebo site designed by a well-known behavioralist and asked to identify the GST and PST sales tax rates repeatedly. This resulted in involuntary arm spasms and compulsive checkbook balancing.

The Institute's website includes online books and essays with such "come hither" titles as:

The Phallic Presidency
"The Gulf War as a Mental Disorder
Reagonomics as a Sacrificial Ritual - cut! slash! chop!
The Childhood Origins of Terrorism

Let me offer some choice quotes:

It is no coincidence that of the thirteen womanizer presidents listed above, all but two also commanded major military ventures, while the twenty-eight other presidents who were not unfaithful were more peaceful. It is useful to ask the obvious question: might nations, when they are ready to go to war, unconsciously choose their leaders as some primitive tribes do--for their ability to conquer both women and enemies?

Indeed, the Clinton scandal wasn't "all about sex," it was "all about loss." Clinical studies of sex addicts find they aren't "expressing their drives" so much as combating desperate inner feelings of maternal abandonment, impotence and self-fragmentation through their repeated conquests of women. Feelings of impotence, not excess potency, is (sic)the source of all sex addictions. And wars.

Quite a leap, those last two words.

During the first few weeks of Reagan's presidency, the imagery of the bloody axing of people and their coming howls of pain seemed to be just what we needed to embody our growing rage. Only occasionally could we allow ourselves to feel our guilt about taking out our violent feelings on scapegoats. "Some of what Reagan is doing is great and some of what he's doing just scares me half to death," said one person interviewed, as he wondered how he felt about having voted for Reagan and about the prospect that "a year from now you're going to have people freezing and starving to death."

The New Republic captured the new mood perfectly in its article on "THE NEW BRINKSMANSHIP":

For the first time since the 1950s, the possibility of nuclear war with the Soviet Union appears to be seriously accepted by key figures inside and outside the US government. what long have been unthinkable thoughts now are entertained by in-fluential men and women in Washington... .A senior white House foreign policy specialist says: "In 30 years, I never thought war was really possible: now l think it is possible... "

It was left up to the women's section of the N.Y. Times to express directly our deepest feelings about "thinking the unthinkable" once again. Maggie Scarf, reviewing the literature on the "increasingly threatening reality" of engaging in atomic war, said simply: "I'm getting scared again."

Oops - same old poor predictions.

Of course, most adults did not openly cheer when they heard the news of the shooting (Hinkley's assassination attempt). Yet even they could admit, if asked directly, that some surprising feelings had gone through their minds when first hearing of the shooting. The only poll to actually ask people precisely what the first thought was which occurred to them after they had heard about the shooting found that about half admitted that their first thought was one of relief,(34) thinking "good" or "I laughed" or "I felt relieved" or "I wished he had had better aim" or some other identification with the shooting. The other half of those polled said the first thing that went through their minds was some form of conspiracy theory, such as "Haig did it" or "Bush did it" or "somebody wants to get revenge for the cuts he's made" or "the Russians did it." All responses, in other words, indicated that the shooting was equally wished for, but the wish for the second half of those asked was attributed to some person other than the respondent. No one answered the poll by saying that they were surprised at the shooting.

In fact, what psychologists actually call the "free floating anxiety" which people feel as a result of too much success is guilt, guilt about the success itself. And the "something bad which is about to happen" is actually the wish that something bad might happen to punish us for our growing success and pleasures. It was as though in the middle of our prosperity during the Carter period a vindictive parental figure awoke in our collective heads, begrudging us our happy families and prosperous work. The more our lives became successful, the more a ghostly conscience disturbed us in the middle of the night to remind us that we should not enjoy more happiness than our parents had enjoyed during our childhoods. Statistics confirmed what our consciences felt: in 1978 we earned double the real income our parents had earned, on the average,(9) we had better health, more personal freedom, more sexual enjoyment, in fact, more of everything worth striving for . . . and it was making us feel terrible.

Here are the root causes of the Falklands War:

Most modern nations keep several impulsive "children" around to be able to use when they need a blood sacrifice. England kept her dispute with Argentina over the Falkland Islands alive for decades for just this purpose, since a simple "leaseback" compromise had been worked out some time before which negotiators admitted made the problem one which "would take ten minutes to solve if both sides were willing."(2) Through a series of hidden messages suggesting that they were emo-tionally abandoning the islands-actions ranging from the denial of British citizenship to the Falklanders to the abrupt removal of the British ship Endurance(3) - Argentina was unconsciously invited to occupy the tiny islands, while being led to believe that England would take no military steps to oppose the occupation.

Some of this makes thought provoking reading, other parts sound like the crazy aunt in the cupboard. Personally, I don't buy the idea that the U.S. can be collectively diagnosed like a single patient on a couch, and I certainly don't think we act out our "issues" through the press and the voting booth. In fact, I think the Press often has their own issues to work out. But this is 'bloggertainment' for sure.

These are all creations of the psychoanalytic mind of Lloyd deMause. For tonight, at least, I think this is "de site".

Blog away, comrades!

From the desk of Jane Galt:

This post from Dale Amon

This post from Dale Amon Libertarian Samizdata points out that, as despicable as the Northern Irish terrorists on both sides are, they generally target military or paramilitary targets. Their civilian casualties are collateral damage, rather than the purpose of the excercise. So while I am glad, glad, glad that my fellow Irish-Americans are finally taking a hard look at Sinn Fein's practices (it would also be nice if they took a look at Sinn Fein's politics, which are a little bit to the left of Ho Chi Minh), I must point out to my English friends that no, it's not quite the same. And to a couple of former Limey aquaintances, no, the Irish-American fireman did not deserve this because some of them gave to Gerry Adams.

As to the question Dale Amons asks about why we don't have casualty reports from the WTC, it's because unfortunately, there were very few injured to add to the death toll. The hospitals here were flooded with volunteers preparing for the onslaught of wounded, and none showed up. The empty halls were a terrible symbol.

From the desk of Jane Galt:

OpinionJournal has a horrifying portrait

OpinionJournal has a horrifying portrait of the way the asbestos litigation industry is expanding to threaten what seems to be every company founded before 1990.

From the desk of Jane Galt:

Patricia Small issues a clarion

Patricia Small issues a clarion call for accountability at the top of corporations and better corporate governance. It seems to me that conservatives have, in many ways, been more hawkish on the auditors and corporate governance than have liberals. I think that this has two causes:

1) Conservatives are generally more sympathetic to, and therefore understand better, private retirement savings
2) Liberals want this to be a systemic, or political, failure, so that they can hang it on Bush.

From the desk of Jane Galt:

BEAUTIFUL ARTICLE IN THE WSJ

BEAUTIFUL ARTICLE IN THE WSJ highlights exactly what I've been saying about Enron (subscription required) -- that while the economic failure was bad, it was the ethical failure that was catastrophic. He also compares Enron to LTCM, and not in Enron's favor:

At first blush, the two cases seem much alike. Both LTCM and Enron were big, complex and secretive. LTCM's traders cut their teeth in financial derivatives, when those markets were new, inefficient and ripe with opportunity. Enron, somewhat similarly, was a pioneer in energy derivatives.

Over time, and largely thanks to LTCM's success, bond arbitrage became crowded and hedging opportunities narrowed, leading LTCM to branch into new arenas, including equities. Enron, similarly, forged into virgin markets, including fiber-optic bandwidth, data storage and snow protection for ski resorts -- the latter reminiscent of LTCM's monster trade in "equity volatility" (stock market insurance). Each firm was held in awe by investors and creditors and by legions of worshipful admirers until -- quite suddenly -- it collapsed.

But these similarities shouldn't blind us to the fact that Enron and LTCM were wholly dissimilar in their degree of moral culpability. LTCM's results, when the firm was making money, were genuine, and its traders were the biggest losers in the firm's downfall. That they went down with the ship tells us they genuinely believed in the product.

Enron's managers, on the other hand, unloaded bucketfuls of stock even while they were publicly touting it. That's why a criminal investigation is warranted, and why conflict of interest is at the heart of the Enron case.

Posted by Jane Galt at 02:25 PM | Comments (0) | TrackBack

From the desk of Jane Galt:

READER ROBIN BROWN shows why

READER ROBIN BROWN shows why it is that arguments like Richard Cohen's about corporations paying their "fair share" sell so well:

Part of why the left gets away with this is the difference between the way corporations and individuals are taxed. (Forgive me any errors in knowledge, but I'm writing from Canada, and I'm assuming the way individuals are taxed in the US is similar to Canada) When and individual is taxed, they are taxed on their entire income, as you mentioned. I don't think people generally notice a difference between their making $50K a year in earnings, and a corporation making $10 million in gross earnings. Most reason that if they pay 30% income tax on what they earn, then the corporation should pay tax in a similar way. People are not aware of that the taxes are handled in completely different fashions and commonly apply their own experience to thinking about corporate taxation. Thus, outrage when they are told that a company paid what seems like an infintesimal amount of tax on profit. They don't compare it to the profit the tax is based on, but to gross earnings.

Robin thinks Canada is doomed. But as Grandma likes to say, "it's always darkest just before the dawn." If the US can stay the course towards deregulation and (faint hope) start shrinking the compendium of special interests that is our government, it could provide a sufficiently powerful example to push other nations in the right direction.

From the desk of Jane Galt:

Netscape and AOL are suing

Netscape and AOL are suing Microsoft for anti-trust, claiming competitive pressures hurt them. Now, I'm not a lawyer (although I fervently hope that the assertion I'm about to make isn't as ignorant as the ones generally following "Now, I'm no economist") but my understanding of anti-trust law is that its purpose is to protect consumers from suffering, under a monopoly or near-monopoly, higher prices and lower quality than they would otherwise get. I don't think that it is supposed to protect companies from competition, no matter how strenuous or unfair.

It was widely believed in the tech community -- at least, in the small portion of it that I occupied -- that the DOJ suit was entirely the product of a dark coalition of Sun, Netscape, and Apple, who wanted to use the suit to either destroy Microsoft or provide them a guaranteed sinecure as part of a government sponsored market carve-up; and states attorneys general, who hoped to get money out of any settlements. I consider myself Microsoft neutral (although, of course, Tom Brokaw also considers himself moderate, so perhaps I'm a lackey of the Evil Empire without quite realizing it), but the sight of the buzzards circling to carve up the carcass of a once successful company did not inspire in me any great confidence in the merits of the suit. I also know quite a few people who outright hated Microsoft, but thought that the anti-trust suit would be bad for the industry by injecting the government into a dynamic market it couldn't possibly regulate effectively, and thereby placing an enormous risk premium on success.

Well, now it's out in the open -- the Microsoft suit wasn't about protecting consumers, but about protecting Netscape's right to sell browsers, whether consumers wanted 'em or not. In the spirit of Robert Heinlein, if this suit succeeds, I shall open an oil-lamp factory and sue GE for irreparable harm to my business.

From the desk of Mindles H. Dreck:

Advocate Nomenclature

Best of the Web has uncovered CNN's description of Ramsey Clark as a "civil rights advocate". Having plowed through Ramsey Clark's lunatic ravings, I am sympathetic to the Journal's suggestion that a more accurate label would be "anti-American advocate". It's true, he spends most of his time "indicting" the U.S. for war crimes in his little mock court. IAC's sustainable yield of useless propaganda has little to do with civil rights per se.

Why is it that the left's lunatic fringe get to be cause oriented, even when the description barely fits, but the right's more extreme members are invariably labeled "conservative", even if, in fact, they advocate radical change? Andrew Sullivan et. al. have made a big deal about selective application of labels, but what about the choice of labels to apply?

Perhaps a blogger with a "critically rational libertarian perspective" might some day be called an "individual rights advocate" or an "anti-idiotarian advocate".

From the desk of Mindles H. Dreck:

Fever Pitch

Peggy Lee lived a long rich life, but her passing is still a sad milestone.

I don't listen to Peggy Lee recordings much, but those I have heard revealed that she was capable of really putting herself into the lyrics. Her personality came through in her singing. she was so expressive and conveyed emotions easily through song.

Hers was an unusual and rare ability. I once had the privilege of listening to Yo-Yo Ma play live in someone's living room. We all sat in a circle around him in a kind of trance. If you've ever seen him play, you know he goes into a kind of trance. His eyes narrow and his breathing patterns change. It's almost like his whole body becomes part of his instrument and they are possessed together by the music. Yo-Yo has an infectiously exuberant personality, which comes through in his playing and sucks you into it.

Like Yo-Yo Ma, the greatest musicians transcend technical proficiency and reach this emotionally charged plane. There are too few who can do that, and Peggy Lee was one.

From the desk of Mindles H. Dreck:

Derivatives and Regulation

Pundits continue to link the Enron debacle to a need for increased regulation, especially of derivatives. What most of these people (like the linked William Greider, who's finance background includes writing for Rolling Stone) don't appreciate is that regulation and/or accounting rules are the most fertile breeding ground for derivatives and synthetic or packaged securities. Regulations and accounting rule-inspired transactions describe the bulk of the well known derivative-related blow-ups of the last two decades. Proscriptive regulation and the derivative trade have a symbiotic relationship.

Investors and operating companies buy derivatives for two basic purposes: speculation and risk transfer. A derivative, (a financial contract based on the price of another commodity, security, contract or index) either eliminates an exposure, creates an exposure, or substitutes exposures. That last one, substituting exposures, is important to heavily regulated investors.

For example, insurance companies were a goldmine for derivatives salespeople in the last two decades, only slowing down in the late 1990s. The fundamental reason for this is not because insurance executives were stupid, but because they manage their investments in a thicket of proscriptive regulation. Insurance companies have to respond to their national regulatory organization (the NAIC), their home state insurance department and the insurance departments of states in which they sell or write business. They file enormous statutory reports every quarter using special regulatory pricing, and calculate complex risk-based capital reports and "IRIS" ratios regularly.

Even though the insurance industry has been heavily regulated throughout the entire post-war era, the incidents of fraud and financial mismanagement have been numerous and spectacular. Remember Marty Frankel? Mutual Benefit Life? For each of these cases that are in the news, there are many smaller ones you don't hear about. Some of that may be the nature of the industry, but it doesn't make a prima facie case for more regulation.

Regulators appear to spend far too much time looking at the instruments in insurance company portfolios instead of the portfolio as a whole. The rules vary by state, but insurance regulations generally penalize or forbid investing in lower quality corporate bonds and often equities. Generally, they distinguish between credits based on their S&P; or Moody's rating (The NAIC has its own rating system, but it is about 95% consistent with the big agencies' ratings).

Insurance companies often need the yield of less creditworthy obligations. So derivative salesmen see an opportunity to engineer around the regulations. They package securities that substitute price volatility for the proscribed credit risk. Then the investor can be compensated for taking some additional risk, and the banker can be compensated for creating the opportunity. A simple example of this is the Collateralized Bond Obligation (CBO). A CBO is created by buying a bunch of bonds, usually of lower credit quality, putting them in a "special purpose vehicle" (SPV) and then issuing two or more debt instruments from the SPV. The more senior instruments can obtain an investment grade rating based on the "cushion" created by the junior debt tranche. The junior bond absorbs, for example, the first 10% of losses in the entire portfolio and only when losses exceed that amount will the senior obligations be impaired. The junior instruments, known as "Z-Tranches" become "toxic waste", suitable only for speculators and trading desks with strange risks to lay off (or, in a famous 1995 case, the Orange County California Treasurer).

A CBO is just one example of a credit rating-driven transaction, but most of them achieve the same thing - they decrease frequency of loss but increase the severity. So they blow up infrequently, but when they do it's often a big mess. Ratings-packaged instruments are less risky than the pool of securities they represent but often riskier and less liquid than the investment grade securities for which they are being substituted. As a result, they pay a yield or return premium (even net of high investment banking fees). That premium may or may not be enough to pay for their risk. But they pass the all-important credit rating process and are therefore sometimes the only choice for ratings-restricted portfolios reaching for yield. Therefore, these transactions enrich bankers and can often lower the risk-adjusted returns of constrained investors relative to those who can purchase credit risk directly.

Frank Partnoy's book F.I.A.S.C.O. describes many such transactions in gory detail. It also discusses similar transactions driven by accounting rules, including one that purportedly earned Morgan Stanley $75 million for deferring billions of dollars of losses on Japanese Banks' financial statements. That transaction, as described by Partnoy, is not dissimilar from the CBO described above, although it sliced the bond tranches differently for accounting effect.

Partnoy is a former derivatives salesperson, and he clearly suggests that regulation is often the derivative salesman's best friend. Complicated rules encourage complex transactions that seek to conceal or re-shape their true nature. Regulated entities create demand for complex derivatives that substitute proscribed risks for admitted risks. If a new risk is identified and prohibited, the market starts inventing instruments that get around it. There is no end to this process. Regulators have always had this perversely symbiotic relationship with Wall Street. And the same can be said for the ridiculously complicated federal taxation rules and increasingly byzantine Financial Accounting Standards, both of which have inspired massive derivative activity as the engineers find their way around the code maze.

Regulations that focus on complete disclosure are much more effective than those that attempt to dictate behavior, and they impose less of a burden on the regulated entity. The SEC has been constructive in this regard. Their disclosure requirements assist the existing private sector watchdogs (e.g. Morningstar, Fitch, buy-side analysts, the press, etc.), and make useful qualitative information available to everyone. If Enron had to disclose the books of its many affiliates, they never would have entered into all of these accounting-driven transactions. Contrary to many pundits assumptions, weather and energy-based derivatives don't seem to have brought down Enron (nor did similar transactions bring down LTCM). The catalysts for Enron's downfall are as old as the hills: Leverage and Deception. In fact, many of the scandals that involve complex finance come down to some combination of those two ancient perils.

So the answer is not to add one more vaguely described activity to the long-as-your-arm list of "no-nos", but to shine an ever brighter light on the books and let the buyer discriminate. To paraphrase Churchill, it's an imperfect system, but its better than the others.

There are issues with disclosure regulations when the regulated entities' trading strategies are proprietary and constitute a competitive advantage - trading desks and hedge funds for instance. In other circumstances, however, more disclosure seems benign.

From the desk of Jane Galt:

Benjamin Kepple not only explores

Benjamin Kepple not only explores in greater detail the mystery of non-consumer corporations making commercials, which I touched on yesterday, but also identifies the mystery commercial -- it was Cisco, which ALSO doesn't make consumer products. As someone who used to BUY Cisco products, I can attest that not once did I think "Hey, you know they make those great commercials with the kid reciting all those internet statistics -- I bet they make a great router too!". Thanks a billion to Benjamin, who must have an even better memory for trivia than mine. Somehow in my brain all those vaguely hip commercials had been schmooged together into one giant montage, so that after I heard that kid shouting "aaaaaare you ready?" I immediately heard a fade into that synthesized-echo "Why. . . " from the Enron ads. Which just goes to show you what a great job those commercials did at building a brand.

From the desk of Jane Galt:

Blogger Wierdness Not only did

Blogger Wierdness

Not only did Blogger eat my brilliant thoughts on E.J. Dionne's editorial on the Democrats chasing Republicans over Enron, but also, it now refuses to let me delete the post. Ah, well. . .

From the desk of Jane Galt:

Update on Geraldo Rivera: Part

Update on Geraldo Rivera: Part III of the War on Terror

We were the first to bring you news that Charles Johnson is attempting to foment war between the United States and Geraldo Rivera. Johnson not only doens't deny this; he reports a "groundswell of support" for the campaign, though he shares my concerns about the improbability of success given the stronger-than-titanium helmet of hair. Let me go on record as saying that I do not support consideration of the nuclear option at this time.

Mr. Johnson also provides a working link to the actual poll, so that readers can see for themselves what he is up to.

From the desk of Jane Galt:

VIA WILLIAM QUICK comes Mark

VIA WILLIAM QUICK comes Mark Steyn's latest column on everyone's favorite pious professor. He cuts to the heart of what's wrong here:

Now it's true there are enterprises where one can find oneself in a position to acquire 50,000 bucks for doing zip -- movies, Broadway, rock'n'roll and other activities that defy the constraints of more earthbound economic activities. But Professor Krugman is not Mariah Carey. As Virginia Postrel (on her dynamist.com Web site) points out, "No well-managed company would dole out that kind of cash just to get access to Paul Krugman's name. The payment wasn't a consulting fee, and by Krugman's account Enron did not require any of his time in exchange. Forget Krugman's potential conflicts, the huge payment should have set off alarms about Enron management's lackadaisical attitudes toward its fiduciary responsibilities." In other words, if the producer's girlfriend gets $50,000 for being "script consultant" on a movie (as happened to a friend of mine), she can be forgiven for not knowing about how any of this icky money business works. But, if an economist gets offered 50,000 for nothing, he should at least understand it doesn't come out of thin air -- down the line, it might even come out of the pockets of all those little people he bleats on about.

So on what high moral ground is Paul Krugman standing when he criticizes Republicans for taking Enron's money -- especially as he, like all others in the know, has carefully refrained from making any allegations. I assume this is because he knows that there are not allegations to make. As has been said elsewhere, how dare Paul Krugman assert that he can remain untainted by such money, but politicians who take money are invariably bought?

From the desk of Jane Galt:

Le Boom est Mort! Vive

Le Boom est Mort! Vive la Boom!

From the Wall Street Journal comes this eye-googling news: Amazon is profitable And using real GAAP accounting, not the "My First Accounting Principles" kind by which internet firms got financing:

Amazon.com reported a surprise fourth-quarter profit using standard accounting principles. Record sales of over $1 billion helped the online retailer beat even the most bullish estimates. Its shares surged.

.
I have loved Amazon ever since I bought my first book there, and I'm overjoyed that it's actually turning a profit. Still, I feel a little sniffle coming on. . . our little baby's all grown up. . .

From the desk of Jane Galt:

Tax Law Update I just

Tax Law Update

I just had a flash, and wanted to share it.

Argument #6 for Abolishing the Corporate Tax
It's taxation without representation. Corporations can't vote, because as I point out in the screed, they're not people. (For which we may humbly thank God. Can you imagine dating Microsoft?)

From the desk of Jane Galt:

AS FRIEND TAD POINTS OUT,

AS FRIEND TAD POINTS OUT, the last five or so posts have been "Angry Megan", and while there's certainly a place for Angry Megan, there's also a need for my kinder, gentler side, the side that enjoys long walks on the beach and makes "torrents of delightful baked goods", which I darkly suspect may be merely a hint for same. So on the softer side, kudos to Rand Simberg for his glorious site redesign. And for Tad, who was disappointed to find that baked goods probably wouldn't survive the trip to Dublin unless what he wants is biodegradeable hockey pucks, the recipe for the pumpkin fruit bread you so crave will be on the web this evening.

From the desk of Mindles H. Dreck:

Foreign Aid: MTZ bets ours is bigger than theirs...

It seems to me that many critics of our foreign aid policies fail to take the time to understand us (wry smile). More importantly, they are probably 180 degrees from the truth.

In responding to the outraged accusations of foreign aid stinginess, Steven Den Beste points out the various forms of non-monetary aid, or at least service, the U.S. provides constantly, such as the Navy keeping shipping lanes open, weather, seismic and geological assistance. He could also add the economic stimulus from our military bases and outright military aid. Our critics think that's dirty money, but I think we can all see force is necessary every now and then.

Also, the IMF, the IADB, The World Bank, OPIC and other organizations that provide economic assistance (such as it has been), are creditworthy primarily because of the U.S.'s funding and backing in the form of unfunded commitments. All this off-balance sheet exposure means nothing? Well, Enron had some off-balance sheet commitments as well....

When criticizing the percentage of national income given as aid, let's not lose sight of the actual amounts. The United States still gives out almost twice as much official aid as countries like France, Germany and the United Kingdom. (that link is part of consultingbase, which is a great source on offical aid, cutting it every which way).

But the most important statistic, and the one I have thus far been unable to find, would be the level of privately funded aid coming out of the United States.

It is not suprising that European countries tax their citizens more heavily and have the government assume a large part of the burden of foreign aid. If you know something about the U.S., however, you know that we still believe in the power of the individual. Our individuals give big time. Look at the quote below and see the $300 million from Bill and Melinda Gates! In fact, If the figures can be found and compared, I'll wager a few CDs from Amazon that our name goes to the top of the list of total aid - government and private. here's a list of non-governmental organizations that receive large amounts of private funding from the United States. In addition, look at this fact sheet from the Department of State that attempts to inventory the private aid provided just for health-related issues:

Some examples of foundation support include:

--The MetLife Foundation: $9 million since 1987 for AIDS awareness and education

--The Gates Foundation: Over $300 million ($201 million for HIV/AIDS, $10 million for TB, $90 million for malaria)

--The National AIDS Fund: Nearly $80 million over the last decade

--The American Foundation for AIDS Research (amfAR): $3.2 million over the last two years for vaccine research and immune reconstitution projects

--The Rockefeller Foundation: $3.45 million in 2000 for 14 domestic and international projects related to combating HIV/AIDS and a wide range of programs in TB control

--The Soros Foundation: $14 million for international TB programs, including special attention to multi-drug resistant TB

--The Kaiser Foundation: $10 million for the HIV/AIDS "Lovelife" program

--Lutheran Missionaries Foundation: $200,000 for TB laboratories

--MacArthur Foundation: $570,000 for a variety of HIV/AIDS programs

Private sector companies and corporations provide funding for product-related research (i.e., pharmaceuticals) and for treatment and care programs.

Some examples of private companies' support include:

--Abbott Laboratories: "Step Forward ... for the world's children," a multi-year program offering aid to orphans with AIDS and vulnerable children throughout the world

--Bristol Myers Squibb: $115 million through its "Secure the Future" program, which supports orphan and home-based care for women and children with HIV/AIDS in sub-Saharan Africa, medical research and educational exchange programs

--Merck: Donates funding and medicine to the "Botswana Comprehensive HIV/AIDS Partnership" to improve HIV/AIDS education and care

--SmithKline Beecham: Supports malaria vaccine pediatric trials in Africa

--Exxon/Mobil: $1.3 million to support the accelerated development of malaria drugs and vaccines

--Coca Cola: $20 million for HIV/AIDS

I know some people like to believe that the only way to do good deeds is to have the government take your money, blow half of it on some junkets, studies and permanent bureaucracies, and then provide foreign aid with the rest. But while France is the leading development aid provider to Sub-Saharan Africa (and they've really been effective, I see), we provide enormous amounts of entrepreneurial aid by cutting out the middleman. Vibrant growth in our own economy, including our "crass consumerism", gives birth to enormous philanthropic initiatives that serve larger and more diverse humanitarian ends than governments can reasonably pursue.

UPDATE: Leonard Dickens dug up a recent analysis of the (2000) ratio of private and official aid and posted it in the comments thread Jane Galt's site . Yup, U.S. is tops. Only Ireland is in the same ballpark (see page 26 of the link). Interestingly, this paper claims to quantify the "crowding out" effect of official aid on private aid (although the author suggests the resulting total aid may or may not be larger, depending on the nature of the donor economy).

One precious footnote from the paper:

Net private aid from France is almost non-existent

From the desk of Jane Galt:

The Little Green Footballs Poll

The Little Green Footballs Poll purports to show that only 34% of Americans favor taking the war on terrorism to the Middle East. This is just the kind of disgusting, shoddy statistical work that biased media likes to use to make their pet political points. Mr. Johnson's trick? He offers readers the alternatives of attacking France or Geraldo Rivera, without ever telling the reader that these are not among the potential targets listed by the State Department. In the same way that my former boss on the marketing committee used to show overwhelming consumer preferences for our services by making up questionnaires like "Would you rather use our services to install your network, or allow trained monkeys to be loosed in your comm center with a wrench and a pile of rotten bananas?", Mr. Johnson is obviously using these trumped up figures to push his own agenda, a la William Randolph Hearst: fomenting a war between the United States and Geraldo Rivera. It is not that I am against such a move, but I have questions as to whether even the legendary American military can stand up against the unknown substance making up Mr. Geraldo's hair, which is so tough that it has not moved or changed in any way since 1970. Can anyone say "Quagmire"?

Update
I can't make the link work directly to the page, probably because my html skills are entirely minimal, so I've just linked to Mr. Johnson's excellent page.

From the desk of Jane Galt:

Hot debate here as to

Hot debate here as to whether that commercial that had the kid with the English accent shouting "Aaaaare you ready?" was an Enron commercial or not. No one can remember, which just goes to show -- WHAT THE HELL WAS ENRON, WHICH SOLD NOTHING TO CONSUMERS, DOING MAKING COMMERCIALS?

Anyway, does anyone out in Blogland remember what non-commercial product that "Are you ready?" was supposed to advertise?

From the desk of Jane Galt:

The piece on the corporate

The piece on the corporate income tax has sent my traffic through the roof. If I can convince just one liberal that we should abolish it. . . well, actually, there will still be 50,000,000 more Gore voters out there. Nonetheless, I continue to tilt at my windmills in the hope that one will come down.

Most of the traffic seems to come from Samizdata -- welcome, libertarians! -- where I am told that when the revolution comes, my back will be against the silk sheets instead of the wall, as the future belongs to the evolutionaries. I couldn't agree more, and snigger every time I think of the paleo-communist poli-sci major at Penn who, despite being a Poli-Sci major, couldn't correctly define capitalism, imperialism, communism, socialism, Thatcherism. . . you get the idea. Note to undergrads: when a political science major tries to tell you that the Roman Empire was a capitalist system, stop the argument. You are trying to fight a battle of wits with an unarmed opponent.

I also see a smattering of hits from More Than Zero, who honored me with a sidebar quote (the opening bit about the copy repairman), after which he leaves a single word: Right! By which I don't know if he is agreeing that we should abolish the tax, offering sarcastic disbelief in same, or merely offering a salute to the universal human experience known as Waiting for the Repairman.

I've also, via the hits page, been introduced to Random Jottings through the hits page, which I very much enjoyed, although John Weidner takes me to task for calling it "the Pile":

is this blogger chic, or what

To which I must offer the slightly defensive explanation that as disrespectful as it sounds, that's what all the guys here call it, and I was merely repeating verbatim what I'd heard, to wit: some of the guys on the pile say they're getting sick.

Anyway, thank you to all my new linkers, welcome to all my new readers, and hope you enjoyed.

From the desk of Jane Galt:

VIA INSTAPUNDIT comes this gem

VIA INSTAPUNDIT comes this gem from Dreaded Purple Master Blog pointing out that while we know we don't understand Europe, they think that they understand us because. . . they watch our television. This is the same school of thought that lead many of my classmates at Penn to decide that they were actually European in outlook because they enjoyed Gauloise cigarettes and Monty Python reruns. They would have been actually European in outlook if they'd been willing to forego the jeep, put the thermostat to 55 in the dead of winter, and give up ice cubes and working plumbing. But that's another rant. . .

From the desk of Jane Galt:

DOC SEARLS wonders why no

DOC SEARLS wonders why no one is covering the volcano in the Congo; Instapundit says it's because no one can think of anything to say but "those poor bastards". I'll tell you what I thought when I read this heartbreaking report of the tragedy: thank God for Western Civilization. Thank you for buses that come and take you away from the volcano before you're melted by lava flowing at 40 mph. Thank God for food that is available in every supermarket along the way. Thank God for medicine to treat the burns and the noxious gas poisoning. Thank God for cell phones to call people and tell them where you are trapped and what is going on. Thank God for insurance to replace the things we lost in the flames. Thank God that I live in the first moment in history when a disaster means I lost my kids baby pictures, not the kids. And all those overgrown adolescents protesting in Seattle can damn well remember that the only reason that disasters aren't like this everywhere, every time, is that global capitalist culture they're always whining about. The problem in the Congo is that it isn't global enough.

From the desk of Jane Galt:

I'm a little tired of

I'm a little tired of hearing how run-away capitalism caused the Enron debacle. And while I agree in essence with their content, I am also tired of defensive editorials from the business pages on how Enron wasn't really capitalism. First of all, I don't care whether or not it wasn't really capitalism, because the fact that a capitalist system works 9,000,000,000 times better than any other system that's been tried for improving people's lives, doesn't mean that it guarantees that everything will always work out perfectly every single time. The genius of capitalism isn't that it always gets everything right -- it's that when it gets things wrong, the damage is relatively limited, so you get to try again. When a centralized system gets things wrong, the Four Horsemen grab their scythes and get ready to rumble. No matter how nasty the fallout will be from Enron, it will be infinitessimal compared to, say, Mao's Cultural Revolution.

More importantly, the failure wasn't in the system, because Enron and its auditors weren't working within the system. I don't know why I have to keep repeating that. The root cause of Enron's failure was not thievish: it was a starry-eyed willingness to believe that technology and new knowlege about financial instruments had changed the world -- and if you want to condemn the managers for poor thinking, you'll have to throw everyone who bought Yahoo at 200 into the dock along with them. The criminal matter isn't that Enron failed -- it's that Enron took so many people along with them by conning investors and employees into believing that they were profitable. This is not an indictment of capitalism -- it is an indictment of fraud. Which already stands indicted by the criminal code. Blaming the Enron failure on capitalism is like blaming the O.J. murder on democracy. No.

It was not the fault of the knife.
It was not the fault of the store where he bought the knife.
It was not the fault of the grindstone he used to sharpen the knife.
It was not the fault of the National Football League
It was not the fault of the guy who sold him the Ford Bronco
It was not the fault of the institution of marriage.
It was not the fault of his ugly-ass shoes
It was not the fault of the LAPD, even though the world might be a better place if Mark Fuhrman were not in it.
It was not the fault of a hegemonic patriarchal structure that forced him to beat his wife.
It was the murderer's fault. He's a really, really bad guy.

The devastating effects of Enron may have been aided and abetted by the market bubble, by the proliferation of poorly understood complex financial instruments, by energy deregulation or the recession. The effects were caused, however, by the crooks who cooked the books. None of those other things would have mattered if Enron had not deliberately hidden the risks it assumed and the losses it took from investors eyes, because no one would have lent the company money, or invested in its stock, had they known the true state of the firm's books.

No system on earth is so perfect that it prevents criminals from violating its integrity. Expecting otherwise is the childish fantasy of undergrads who have never tried to run anything more complicated than the prom committee. Far from being an indictment of capitalism, Enron is proof of how beautifully it works. The criminals were caught -- and though the damage was bad, imagine how much worse it could have been if the crooks were the head of the nationalized US Utility Company.

From the desk of Mindles H. Dreck:

Wisdom From the Noodle Box

I haven't had time to read anything constructive this weekend, what with family duties and site machinations. At some later date, you will learn more about the hostile takeover of More Than Zero by the Tyrolian folk hero pictured to the right.

So all I've really read today is a macaroni box, which I glanced at while making lunch for the kids. It turns out to be sort of interesting (no, really):

"BE GREEN" simply means you want to help the earth live. There is no "BE GREEN" organization, or corporation or politician. But if a politician or corporate executive sees your "BE GREEN" bumper sticker, they (sic)may think twice about trashing the Planet.

I had been planning to spend my afternoon burying some cadmium in a local aquifer. Now that I've seen that pasta box, I have re-considered.

I turned the box around and scanned the ingredients. A careful look at the Nutrition Facts of "Annie's Homegrown, Totally Natural Macaroni & Cheese" made me think twice about trashing my family's arteries.

I also noticed that "BE GREEN" has the same address as the company. You know, if more cholesterol-loaded fast food manufacturers were like Annie's, perhaps more corporate executives and politicians would develop a conscience.

Gag me with an Earth Shoe.

From the desk of Jane Galt:

It's a little behind the

It's a little behind the times, but I just found this item about happiness research and its implication for economic policy on Catallaxy Files.

From the desk of Mindles H. Dreck:

Krugman and Enron

Andrew Sullivan and Virginia Postrel are going back and forth about Paul Krugman's position at Enron, in light of the positions he's taken in articles like this.

Virginia is right to point out that the New York Times' rules, if applied consistently, will imperil Mr. Krugman's column.

I haven't had time to read the 1999 Krugman piece Andrew Sullivan dug up. But my conclusion is pretty simple. It doesn't mean Krugman's corrupt, it means his judgement is easily clouded. Which, as you all know, is my big problem with him. Krugman obviously understands (understood?) economics, but he too often throws well-supported economic theory out the window if it doesn't serve his partisan pundit agenda.

One other thing - he should have disclosed his involvement in this Op-Ed, although it certainly didn't stop him from criticizing his benefactors.

From the desk of Jane Galt:

APPARENTLY THERE'S SOME argument as

APPARENTLY THERE'S SOME argument as to whether or not the Taliban prisoners at Guantanamo are entitled to Geneva Convention treatment. As I understand the law, the answer is no, for two reasons:

1) They didn't act according to the convention.
2) More importantly, they aren't signatories to the Geneva Convention. The Convention isn't like the White Ribbon Pledge -- it's a treaty, and applies only to member nations. Which the Taliban, so far as I know, isn't.

From the desk of Jane Galt:

THIS REVIEW OF A MANAGEMENT

THIS REVIEW OF A MANAGEMENT BOOK on the salvation army mentions the incredible work the Salvation Army is doing down here at WTC. Amen. Not showy, like the Red Cross, but effective, omnipresent, and marvelously efficient. The Red Cross came and packed up shop, but the SA's still here, giving the workers a warm place to go and get a snack or -- if they want it -- some warm words from the volunteers. Meanwhile, their CEO makes less than a mid-level accounting manager at most firms.

From the desk of Jane Galt:

THERE ARE RUMORS flying that

THERE ARE RUMORS flying that the guys on the Pile are getting sick. A lot of it seems eerily reminiscent of Gulf War Syndrome -- several aneurysms, a guy with spots on his lungs given five years to live, and reports of mysterious green vomit. (My guess: broccoli for lunch.) Not that I doubt that there are noxious things coming out of that hole -- it's just that I think it takes more than 3 months to develop lung cancer. The one thing I can confirm is that my asthma is awful -- I haven't been able to go to the gym in weeks -- and an extraordinary number of previously clear-skinned people seem to be developing acne. I will skip the obligatory jokes about finding a date for the prom.

From the desk of Jane Galt:

ANDREW SULLIVAN slams Paul Krugman

ANDREW SULLIVAN slams Paul Krugman for taking Enron's money while waxing self-righteous about Bush. He also links to an article Krugman wrote for Fortune in 1999 discussing Enron's business model, which Sullivan calls a puff piece, citing this section:

The retreat of business bureaucracy in the face of the market was brought home to me recently when I joined the advisory board at Enron--a company formed in the '80s by the merger of two pipeline operators. In the old days energy companies tried to be as vertically integrated as possible: to own the hydrocarbons in the ground, the gas pump, and everything in between. And Enron does own gas fields, pipelines, and utilities. But it is not, and does not try to be, vertically integrated: It buys and sells gas both at the wellhead and the destination, leases pipeline (and electrical-transmission) capacity both to and from other companies, buys and sells electricity, and in general acts more like a broker and market maker than a traditional corporation. It's sort of like the difference between your father's bank, which took money from its regular depositors and lent it out to its regular customers, and Goldman Sachs. Sure enough, the company's pride and joy is a room filled with hundreds of casually dressed men and women staring at computer screens and barking into telephones, where cubic feet and megawatts are traded and packaged as if they were financial derivatives. (Instead of CNBC, though, the television screens on the floor show the Weather Channel.) The whole scene looks as if it had been constructed to illustrate the end of the corporation as we knew it.

Personally, I don't think it's a puff piece; it looks like the same kind of idiotic millenial blather that convinced my co-workers, who couldn't read a balance sheet, that they were stock-picking geniuses, and my classmates, who could, that they were better off borrowing money to pay for school than selling any of their precious Webvan stock.

Sullivan's point, however, is well taken: for Krugman to criticize the administration for doing pretty much what it would have done anyway after taking money from Enron is the height of hypocrisy, the more so because Krugman admits straight out that he couldn't figure out any legitimate reason for Enron to give him that $50K.

From the desk of Jane Galt:

IN LATE SEPTEMBER Ken Lay

IN LATE SEPTEMBER Ken Lay told his workers Enron stock was a bargain. As this great article by Michael Lynch shows, it's improbable that he didn't know something was seriously wrong. I'm starting to revise my opinion on those legendary Texan "he needed killing" defenses.

From the desk of Jane Galt:

Why I'm in Favor of

Why I'm in Favor of Abolishing the Corporate Income Tax

Bloggers note: This is a long explanation about tax policy. You should not attempt to read it if you have some reason that you must stay awake: for example, if you are cooking dinner or operating heavy machinery, or your husband expects you to pick him up at the airport and doesn't have much of a sense of humor about things like spending an extra couple of hours at the arrivals terminal.

How many times have we heard columnists or activists foaming at the mouth about those evil corporations that don't pay their "fair share" of taxes? Well, since I have to wait for the copier repairman to finish up some work, I'm going to take this opportunity to plug one of my pet causes: abolishing the corporate income tax.

Now, I know what you're thinking. If you're a conservative, you're thinking "Right on!" If you're a liberal, you're thinking "typical pro-business yuppie." (You make more money than I do. Trust me. I'm currently the executive copy girl in a construction trailer.) If you're one of those activists, you're thinking "When the revolution comes, she'll be the first one with her back against the wall." Too true, and it will save me a lot of time waiting for common sense to wither away and true Naderism to arrive. And probably I'm not going to convince you. But the rest of you, listen up, because I've got compelling arguments with which to convince you, or your friends, if you're already a believer.

Background: How the Corporate Tax Works
Corporations are taxed on their revenue minus their expenses. This is different from the way people are taxed, because the government assumes that the expenses necessary to operate a person are roughly the same from person to person. You may think you need a widescreen TV with picture-in-picture and dolby surround sound in order to support basic life functions, but the government doesn't. Therefore, it taxes you on your revenue -- the money you make for selling your services -- and leaves it to you to figure out the expense part.

The problem with doing likewise with corporations is that they are very different from each other. An aluminum smelter, for example, may have very high revenues, but because there is a lot of competition in the market, it may cost the smelter 99.5 cents to make every dollar it earns. Since the corporate tax rate is 35%, the aluminum smelter would be making an after-tax profit of -34.5 cents for every dollar in revenue. This would quickly put the smelters out of business, and we'd all have to go back to shingling our houses and desperately gulping Mountain Dew out of our hands before it all ran through our fingers.

My old consulting firm, on the other hand, by my rough calculations experienced a 450% return on the cost of my labor and associated overhead (although that figure leaves out the various layabout nephews, current and former mistresses, and assorted friends' children employed by the owner of the company to write reports nobody read. I view those as a personal expense, although the IRS, unfortunately, did not.) 35% of revenue hardly makes a dent in the profits. That is why the government takes into account expenses as well as revenues when calculating taxes.

Argument One: Corporations aren't People
As my favorite macroeconomics professor pointed out, it is impossible to tax a corporation because the corporation is just a fictional entity designed to pass profits back to its owners. When you say you're going to "tax a corporation", the corporation doesn't go to the money farm to harvest some more cash to give to the government so we can expand job training for unwed mothers -- some real person is going to pay that tax. When you put a tax on wages, such as social security or the unemployment tax, the employer doesn't say, "oh, well, profits dropped 15% this year; better tell Merrill Lynch to issue a 'sell' rating" -- they pay their employees less, both to lower the tax burden and to recover the lost profits. They hire fewer employees, because each employee is now more expensive. This costs real people money. When you up the corporate tax, either the employees pay, because the firm can't afford as many of them; the customers pay, because the firms have to raise their prices to cover the taxes; or the shareholders pay because dividends are lower and the company is worth less. And before you liberal types start rubbing your hands in glee at the thought of those pained shareholders, keep in mind that the largest shareholders in companies are insurance companies, which invest in stocks in order to make the money they need to pay off when your house burns down; and pension funds, making the money to take picketing US Steelworkers off the streets and put them into good homes. The other big holders are mutual funds, which is what most of us have our 401(k)'s in. So when you say "I want to tax corporate profits", try silently saying to yourself "so that Mom can sell the condo in Florida and move in with me."

Argument Two: The Corporate Income Tax Costs the Economy More than it Earns
The Corporate Income Tax brought in $204.9 billion in 1998. My tax professor (a Democrat) estimated the cost of corporate compliance in that year to be $300 billion. That's just the direct cost -- what corporations paid tax lawyers and accountants.

This labor is unproductive. It adds no new wealth to the economy; we are paying people simply to transfer money from one place to another, a net economic loss. Particularly so because the money isn't being transferred into any sort of wealth producing investment, such as a store or manufacturing plant. This doesn't mean that we shouldn't have any government or regulations -- the police add no new wealth to the economy, but I still want them around. It just means that we have to weigh the cost of the regulations against the benefit we get out of them. In this case, we make $204.9 billion off the corporations, but at the expense of taking $300 billion worth of resources out of the economy which could have been building widgets or thinking up a new recipe for fat-free muffins.

Nor is $300 billion the only cost. Remember, those corporations won't stump up on their own: you need IRS agents to check on them. And congressional staffers to write laws closing "loopholes". And courts to take corporations you think aren't complying. And reporters to write foamy-mouthed editorials about how corporations aren't paying their "fair share". More importantly, there is a hugely distortionary effect on the economy, because corporations spend an enormous amount of time and money trying to structure transactions to get around taxes. All of this activity is economic dross, and its so widespread I've given it its own section.

Argument 3: The Corporate Income Tax is Extremely Distortionary
I've talked elsewhere about the lengths that companies go to in order to avoid, among other things, taxes. One of the most egregious of these is the way that taxes favor debt. Now, corporations prefer debt to equity anyway, for the same reason that you'd rather take a loan from your parents than sell them part of your house. What makes this preferance so compelling, however, is that while corporations have to pay dividends or repurchase shares out of their after-tax profits, they can deduct any interest on debt. Suppose I have a project that is projected to return 8% -- every dollar I invest yields me $1.08 at the beginning of the year. We'll posit 0 inflation and a risk-free environment so that we don't have to get into tiresome concepts like the time value of money. Now assume that I don't have the cash to make the investment, but I can borrow money at 9%. In a tax-free world, this would give mea return of -1%, and I would pass up the opportunity to own my very own fur-bearing trout ranch. However, if I am a corporation, I can deduct that 9% -- call it $9 annual interest on a $100 loan. Since the corporate tax rate is 35%, I have just lowered my tax bill by a little over $3. Add that $3 to the $8 I'm getting off the trout, and suddenly it's an attractive business opportunity. The trout are no more fruitful, their pelts no more soft and lustrous -- the tax status makes all the difference.

So why is this bad? Partly because it encourages companies to make investments that have a negative economic return -- the actual economic return of 8%, with an actual economic cost of lending the money of 9%. (Yes, this is simplistic. Work with me.) But mostly because it allows companies to take on more risk than they otherwise would. As I said in the above-referenced post, debt makes the company riskier in ways that equity does not, because corporations, not being people, can't borrow money from their parents and therefore get into real trouble when they can't meet their interest payments. The tax exemption, added to the innate preference for debt, means that companies will leverage themselves right up to the point where Moody's threatens to drop their rating to "run for the hills!". People are always over-optimistic about the outcomes of the projects they are pursuing, as you know if you've ever attended a budget meeting or a bridal shower. Add in a little shoddy accounting and you get Enron.

There are numerous other ways in which companies engage in distortionary behavior; entire firms exist for the sole purpose of arranging asset swaps between firms or entities that can't deduct the assets, and firms or entities that can -- every major investment bank has several groups pretty much solely devoted to this purpose. This makes money for the corporation, but it doesn't create new wealth; it merely transfers money from the government's pocket to its own. Meanwhile, all those people and resources that could be utilized to actually produce something are paid instead to engineer the transfer.

The standard activist response is to close the "loopholes." This is discussed in our next section:

Argument 4: It is Impossible to Close the Loopholes
I am all for closing loopholes that are special breaks generated by friendly legislators. Most loopholes, however, do not fall under that category. Most loopholes have to do with items that are legitimately treated as expenses for some purpose. For example, if you eliminated the debt deduction, you would get rid of a lot of fur-bearing trout ranches -- but there are companies that require a high level of capital investment in order to operate, such as automakers. They finance their physical plant with debt, partly for the tax break, but also partly so that they can match the financing cost of the equipment to the life of the equipment. During a bad year, with those debt payments coming in, it wouldn't be a good idea to slap them with an enormous tax bill too -- not unless we've decided as a nation that we'd rather drive Yugos. Many of the "loopholes" decried by Nader and his ilk fall into this category -- corporations engaged in clearly distortionary, but legal behavior, in order to minimize their taxes.

So why can't we eliminate this? There are several reasons. The first is the same reason that it's impossible to entirely eliminate computer hacking, or burglary -- they've only got to find one way in, while you have to close all the doors. As fast as you write the new laws, an army investment bankers, accountants, and tax attorneys will get busy seeking a way around it. I'm sure Nader would like to outlaw this as well, but since this would amount to a law against thinking, it would be impossible -- although he may not realize this, given how successful he's been at implementing such a plan among his own followers.

The second reason is that there's a fine line between necessary and unnecessary transactions, and picking where that line falls will remain more of an art than a science. The harder we try to crack down, the more time and money we waste arguing whether the trout pelts really need to be stored at the dry cleaners before they're sold.

And the third goes back to those costs we talked about in Argument 2. The more laws we write to try to close loopholes, the more congressional staffers we need to write them, judges to interpret them, IRS staffers to enforce them, tax lawyers to brief companies on them, etc. And the effect is geometric, not arithmetic -- the more tiny, specific laws we write, the more impossible the tax code becomes to comply with, as complexities generate ever more conflicts and gray areas, and the code itself passes beyond the comprehension of a single person, thereby making it impossible to completely tell whether or not you're in compliance. This unpredictability adds risk, raising the cost of capital and reducing the willingness of companies to invest. This latter cost is impossible to quantify, but we could quantify most of those direct compliance costs -- and I would be willing to bet that they far exceed any revenue generated by "closing the loophole".

Argument 5: Eliminating the Corporate Income Tax Makes Corporate Welfare Harder
At last, an argument even a Naderite could love. Much of that corporate welfare consists of tax deductions, credits, or what have you, that the public perceives as "free" because we're not handing them a fistful of cash. Eliminating the corporate income tax will force voters to ask themselves whether we actually like Chiquita bananas enough to hand them a wad of our hard earned cash every April 15. When we think about all of the unproductive activity we'd be eliminating by eliminating the corporate tax, lets not forget all those high-priced lawyers eating tax deductible dinners with your congressman in order to convince him that his latest client desperately needs a tax break for the Good of the Nation.

Summary
The corporate income tax costs the economy much more than it produces in revenue. Eliminate it and watch a flood of economic activity be unleashed as all those unemployed accountants, tax lawyers, and IRS agents get to work inventing the next Furby. Recoup any lost revenue by eliminating the capital gains tax and treating capital gains as ordinary income in order to equalize the tax treatment of debt and equity, and it will be a long time before we see another Enron.

Summary for Those Who Started to Nod off in the Third Paragraph and Skipped to the Bottom
The corporate income tax is very bad. You should be against it. Email this link to any of your friends who question this.

From the desk of Jane Galt:

THE WALL STREET JOURNAL says

THE WALL STREET JOURNAL says roundabouts (traffic circles, for Americans) are a no-go in the United States. I don't see why -- I love roundabouts. They keep the traffic moving, reduce accidents, and prevent frazzled ENTJ types like my ex-boyfriend from tapping maniacally on the steering wheel at intersections. Yet the journal reportst that in America they caused more accidents than they solved because people couldn't figure out how to use them. Is the nation that gave the world the first man on the moon now so stupid that they can't figure out "inside lane to drive, outside lane to exit"?

From the desk of Mindles H. Dreck:

Reasons for Enduring Freedom - Intelligence

A reporter observed on NPR this morning that one of the benefits of military victory is an abundance of new intelligence. Apparently, our intelligence services have been inundated with computer files, videos and original documents from Taliban and Al Qaeda hideouts, such as the ruins of Mohammed Atef's house. That's where the video tape of these aspiring terrorists was found.

Opposition to this war has come on several fronts, but one of the persistent arguments is that we have not significantly improved our security through military action.

While it's true that armed pursuit may not pacify terrorists (although it sure preoccupies them), neither will turning a blind eye or attempting to submit them to an international justice they have always rejected.

The next best thing is to know who they are and what they look like. We are demonstrably safer with that information, and that is a direct result of our victory in the war.

Good intelligence is costly, not only in monetary terms, but in human and sometimes ethical terms. If you want to maintain a deterring "threat power", potential enemies must see you as ruthless in your acquisition of and action upon intelligence information. The intelligence we have gained in Afghanistan came cheap relative to much we gained during the cold war. It's just that the costs were sudden and in our face every day instead of buried in a file.

From the desk of Mindles H. Dreck:

Browser incompatibilities

I have received several notes complaining of this site's appearance in IE6. The thing that's bothering me is that I use IE6 and it looks fine. I am assured by Charles that I am covered for the Mac version. I run Windows 2000. Could there be a difference if the user is running XP or ME? I think it's reasonable to question the Microsoft folks QA if that's the case.

From the desk of Mindles H. Dreck:

Bonds, bonds, those musical notes

I have one simple thing to add to Chris Pellerito's comment on Bonds and the deficit (Daschlenomics). Chris says:

The US does not finance much of its debt with 30 year bonds. In fact, the duration of the national debt (a fancy way of saying the average time to maturity) is just under 5 years.

Absolutely right. The Treasury actually stopped issuing 30 year bonds in November of last year. Both the fact and the way that they did it were highly controversial.

A few points of information (OK, I lied, several not-so-simple things):

1)30-year conventional mortgages are priced off the 10 year Treasury Note (it has to do with the expected duration of a mortgage - you probably don't want to go there if you don't know already). So if you want to get a sense of how mortgages fluctuate, look at the ten year Treasury Note.

2) Chris says "lower yields mean that it would cost more to retire long-term debt from bondholder' hands." True, but at any point in time, the price to retire the bond is higher by the present value of the amount by which the coupon exceeds the current market rate for an equivalent bond. So you either pay the extra amount out in coupon over time, or you pay it now and lower your coupon payments going forward. So the decision to run old, high-coupon debt out vs. retire it is neutral in present-value terms (unless you know something about interest rates the market doesn't know)

3) Chris says there is "no historical relationship between federal borrowing and mortgage rates." This is true only in a narrow sense - there have been many factors affecting mortgage rates (or, if you like, the 10-year Note) other than the deficit, but government borrowing is important. If the government went out and borrowed an amount equivalent to 100% of GDP (i.e. a huge amount), yields across the curve would jump because a) the market would expect dramatically higher inflation, which erodes the price of bonds and b) price has to react to the increased supply of debt, unless the demand for Treasury debt is completely elastic, which it clearly is not. The price of the 10-Year would likely decrease (the rate would increase) and the mortgage market would react. So, as much as I hate to affirm any part of Daschle's ill-informed diatribe, There is truth to the statement that increased federal debt can increase mortgage rates.

I think it would be more accurate to say that within the amounts of deficit and surplus we are talking about, the effect on interest rates would be negligible. The U.S. is in very strong fiscal shape, and borrows substantially less than our OECD brethren. Expected inflation can remain low at borrowing and spending levels that keep us in this very strong relative position. If we woke up tomorrow with Spain or Italy's balance sheet and future fiscal profile, interest rates would go up. For sure.

Here is a quick link on why interest rates change. One of the very important statements here is -

People who study interest rates find that it is as difficult to forecast future interest rates as it is the weather.

I'll take that one step further. Professionals in general have predicted interest rates with far less success than your local weather man. Which is another reason why it's funnny that Daschle is trying to reduce it to a one-factor model based on relatively modest changes in government borrowing.

I love the bond market myself, but not for the reasons discussed here. For some reason I don't think I won any converts with this post.

I made some slight edits to avoid misinterpretation

From the desk of Jane Galt:

WILLIAM SAFIRE on the birth

WILLIAM SAFIRE on the birth of patriotic schmaltz. He explains elegantly why those commercials on the History Channel make me choke up even though, like sausage, I know exactly what goes into making them.

From the desk of Mindles H. Dreck:

For Religious Speeders

Pursuant to the prior post on Swedish speeding, a friend sends in the following image (popup) entitled "How to tell if you're driving too fast..

From the desk of Mindles H. Dreck:

Post-Mortem on Stuart Buck

I just stuck a long quote from Stuart Buck's website over in the Bullpen. I don't have time to comment on it now, so perhaps more later.

But for those of you who didn't know him or are new to these parts, Stuart kept a really interesting weblog but was forced by his employers (judges, mind you) to shut it down in October. I have always kept his link over to the left in case he came back. I missed the post he made on December 17.

In early October, Stuart posted a hilarious series of interoffice memos between Cornel West and another member of the Harvard faculty. I think I actually saved them to disk somewhere. I shall try to find them, as they are more topical now than before. Instapundit commented on them at the time, so somebody's got to have 'em.

From the desk of Jane Galt:

Bi-Partisan Enron Update Mickey Kaus

Bi-Partisan Enron Update

Mickey Kaus reports that Lieberman also has ties to Enron, via an ex-staff member who lobbied him on Enron's behalf. Says Mickey: "Lewan's revolving-door mendacity sharply limits Lieberman's ability to unctuously condemn the Bushies' Enron 'ties.' " Democrats may be learning the lessons Republicans got -- fast -- during the Lewinsky scandals: if you want to crticize that mote in thy neighbor's eye, be prepared for some careful scrutiny of the beam in thine own. The question is, will the Democrats follow the Republicans' lead in having the integrity to boot but good anyone found to be breaking the rules they're howling about?

From the desk of Mindles H. Dreck:

Speeding Back from the Circles of Doubt

No posts yesterday, I was trapped in the seventh circle of doubt. Well, actually, I was traveling by commuter plane in upstate New York, which is similar.

I heard on the news yesterday that some fellow in Sweden (see erratum at bottom)has been fined over $100,000 for speeding. Apparently, the fines are proportional to income in Sweden, calculated as 14 days pay (a paycheck here).

Wow, I thought to myself, if Bill Gates were caught speeding in Sweden he could easily pay a seven or eight figure fine. Wouldn't that be a handsome addition to the state's coffers! The same might go for one of the Wallenbergs or the royal family, but somehow I doubt they've had to pay such a fine...

A quick search, which revealed nothing about the fine, shows that the King of Sweden does have a bit of a heavy foot on his Ferrari's gas pedal. But he was nabbed in Denmark so the royal trust fund is safe.

I object to this less than you might think. If speeding only involves a fine, it doesn't make sense that the fine is trivial to some and back-breaking to others. There are some moral hazards, however. It would be hard for the authorities to resist the temptation to nail a billionaire. At the opposite extreme, I don't know whether folks with no income get away free. Then I remembered, Sweden pays its citizens for doing nothing, so there's no problem there.

There are other incentives at work here in the land of "regressive" fines. Three significant offenses in a few years will get your license suspended. So no matter the size of your income, you wouldn't be able to hustle the kids into the Ferrari and burn rubber for Queen Margrethe's birthday party.

Just an aside: I don't think it's a good idea for stewardess' to complain loudly about how "these ATR Turboprops are falling apart" and "it's a good thing they'll be retired next week." I like the new Embraers as much as the next guy, but I was in the ATR at the time.

Erratum: No wonder I wasn't able to find this. It actually happened in Finland, as Brian Carnell points out in the comments below. I should stop trying to blog on things I hear on the radio while stuck in traffic yelling at the other cars...

From the desk of Jane Galt:

Department of Non-Leading Indicators The

Department of Non-Leading Indicators

The market's tanking and my classmates are sending out emails advertising sublets in NYC, SF, and other high-end meccas. It's hard to cry for MBAs, of course, but it does not bode well for recovery.

From the desk of Jane Galt:

Leaping Lizards Redistributionist balderdash from

Leaping Lizards

Redistributionist balderdash from the Washington Post in the form of an article on why poor children do worse in school. The cause, according to the article: summer vacation.

During the school year, the students in all three status categories gained the same amount on the tests. The difference between the three groups is what happened during summer vacation. When the kids came back in the fall, the tests showed that over the summer months the poor kids lost ground in reading the first two summers, then held their own, but sank in math. The middle-class kids gained in reading and held their own in math. The rich kids gained in both reading and math, but a lot more in reading

Fair enough -- seems methodologically sound, and it sounds like a new insight. Quick as a flash I thought, "well, let's make the school year longer." But the authors have anticipated this, and are quick to caution against such simplistic solutions:

The researchers, Karl Alexander, Doris Entwisle and Linda Olson of the Johns Hopkins University, are quick to point out that what poor kids need is not necessarily more school: "We found that better off children in the [study] more often went to city and state parks, fairs, or carnivals and took day or overnight trips. They also took swimming, dance, and music lessons; visited local parks, museums, science centers and zoos; and more often went to the library in summer." They also were more likely to participate in organized sports and in more types of sports.

Computation drills and work sheets in August are probably not the answer.

No, more school isn't the answer for poor kids -- they need to be sent to camp.

Notice that there is absolutely no correlation offered between any of the activities cited and reading or math skills, which are the metrics we are supposed to be discussing. No, these are just a grab bag of activities that high-culture types consider "enriching" and therefore force on their children. Not that I am against any of these things, mind you, but I am hard-pressed to identify in what way swimming improves your math skills, or taking overnight trips helps you to read. (All the children in my family spent those overnight trips reading like mad, but since we were also known for reading while walking down the street, that's not very good evidence.) Its possible that trips to the zoo, etc. have a measurable effect in stirring interests in children that they then develop reading and math skills in order to pursue -- but I want to see some data, please, not a blanket assertion. As someone who was dragged to every activity on that list on a regular basis, I have a feeling that the books piled on every flat surface in our house and the relentless math and spelling bees to which my father subjected us had more to do with our academic prowess (such as it is) than our junkets to the Planetarium.

From the desk of Jane Galt:

Locking the henhouse after the

Locking the henhouse after the fox has been stolen

THE WASHINGTON POST says the SEC and the Big 5 are redrafting the audit rules. Good for them, but I'm willing to bet two things:

1. The rules will sound big and scary to non-accountants.
2. The banks and auditors will take about 3 seconds to get around them.

From the desk of Jane Galt:

KEN LAYNE goes Steve Jobs

KEN LAYNE goes Steve Jobs one better with the iLayne Future Computer. Tee-hee -- I may be his first customer.

From the desk of Jane Galt:

HOLMAN JENKINGS AT THE WSJ

HOLMAN JENKINGS AT THE WSJ says the real problem is that we expect more from accountants than they can provide:

This train wreck has been 65 years in the making, since 1937, when pharmaceutical maker McKesson & Robbins went belly up and congressional investigators were flummoxed to learn that the SEC laws they passed didn't mean accountants were supposed to be in the business of detecting fraud.

Let's not pretend to know more about Andersen's destroyed documents than we do. But still: When auditors have reservations about a large and successful company's books, they don't blab to the press or shout an announcement from the rooftops, blowing a hole in a stock owned by thousands of investors. No one would ever hire them again. The missing emails may well contain a record of Andersen wringing its hands hopelessly over this dilemma, as accounting firms have done since time immemorial.

This is an impossible bind, made more so because accountants have been prepared to live with cognitive dissonance rather than give up a federal meal ticket. . .

The profession's drippy rhetoric would have you believe accountants work for the public good or the Gods of Absolute Accounting Purity (GAAP), but this is silly. They make a living selling a service to involuntary customers who are going through the motions to satisfy a federal mandate. The annual audit is a service truly valued by no one: It doesn't catch crooks and it doesn't benefit honest companies either, because it provides no proof or assurance to investors about the accuracy and completeness of a company's books. Had it been otherwise, Enron might have been more inclined to listen to Andersen's advice, in which case Enron would still be around.

From the desk of Mindles H. Dreck:

Doogie Blogger

I'm sitting here happily thinking through my keyboard when suddenly this image pops into my head, and I'm sort of projected into it.

At the end of every episode of Doogie Howser M.D., Doogie types a short and sacharine self-help entry into his computer diary. Example:

"Sometimes life can throw you some curves. You can face them or you can avoid them. Today I learned that facing them can result in great things. Isn't that what life is all about?"

That does it, I'm going to bed. I may never blog again.

From the desk of Mindles H. Dreck:

Fact-checking Clinton

The point of Bjorn Lomborg's book is that scientists and environmental advocates exaggerate the dimensions and threat of environmental problems to call attention to the issues and themselves. If his critics would bother to read the book, they'd see he doesn't trash the underlying science, in fact he uses the same data sources that the most alarmist advocates use, such as the IPCC.

So our former president is making $130,000 per speech (and publishing it as a column) saying, among other things, the following:

And global warming is going to wreak devastation. If the Earth warms for the next 50 years at the same rate as it did in the last 10, we will lose whole island nations in the Pacific and 50 feet of Manhattan Island in New York. We will create tens of millions of food refugees, leading to more violence and upheaval.

Let's contrast a summary of the IPCC's views:

According to the IPCC, sea levels have risen by 10 - 20cm during the twentieth century, and are currently rising by about 2mm a year. The generally-accepted prediction is that sea levels will rise during the twenty-first century by between 10cm and 1 metre - with a 'best guess' of about 50cm.

There is a big difference between 50 feet in as many years years and about 19 inches over the next 100 years.

Do we have to parse Clinton's words to infer that he meant fifty square feet of total land area? Or that a few inches of sea-level rise will actually submerge 50 feet of shoreline (I'd like to know which part of the island he's talking about). What does he mean?

If he was so concerned about this, why the utterly feckless effort on Kyoto? More disturbing (to me), why didn't he end the National Flood Insurance Program (more)? This program has been subsidizing coastal living for decades, and will hand the rest of us landlubbers the tab if Clinton's predictions come to pass. Actually, it hands us the tab every year, but we won't be able to pay it if the seas rise 50 feet.

I guess it depends on the meaning of the words "environmental crisis".

From the desk of Mindles H. Dreck:

Bjorn Lomborg and the Scientific Method

For all the shrill accusations and puerile or Ad Hominem attacks against Bjorn Lomborg, few people have pointed out really serious flaws in his methodology. Most are obsessed with his purported lack of establishment credentials. Many of his critics winge on and on about how he's wasting their time with his uncredentialed prattle.

But he's not. I can think of no better way to further the the state of knowledge on the subjects in Lomborg's book than to air the debate in public. In that spirit, Lomborg takes on every single criticism on his page. Have a look, it's a good read.

Regardless of what you think of Lomborg, he's doing the scientific method a service. E.O. Wilson's complaints (linked above under "winge", if that's how you spell it) sound hollow indeed.

And what is with the pie throwing "journalist"Mark Lynas? It says something about the deep insecurities he's feeling that he had to to heave a pie into Bjorn Lomborg's face at a book signing. Lynas should lose his ticket to the discussion for that one. Apparently he did it out of enraged solidarity with the supposedly soon-to-be-submerged people of Tuvalu. One small problem is their island isn't sinking and they know it.

From the desk of Mindles H. Dreck:

The Lake Wobegone Salary Plan

The headline reads All should be paid at least the average U.S. salary.

If we are looking for a place to start, let's start with what the average hourly pay is in America and see to it that this is the minimum wage for all full-time employees.

Dang, it's so simple! Why didn't I think of that? While we're at it, let's bring all the schools "up" to average.

There's more though:

And before you say it can't be done, look at what welfare, and other public assistance including health care and having the thousands of not-for-profits cost us each year.

Of course. We can just take what we spend on welfare and charities and "spend" it on making everybody pay the average wage.

I was trying to make this post as many words as the average of this and the last three posts. Oops, need to add a few words. Nope, one more. just..

Wait a minute, where did that average go? It was here a minute ago.

(from Best of the Web)

From the desk of Jane Galt:

EXCELLENT ARTICLE from NRO explaining

EXCELLENT ARTICLE from NRO explaining the mechanics of Enron's collapse. It points the figure to a common pattern in the development of new financial instruments: high profits for the inventor, then declining profits as competition enters the market. When the firm that enjoyed those windfall profits tries to protect them by leveraging up to expand the scale of their operations, they become exposed to the possibility -- nay, the probability -- of disaster.

From the desk of Mindles H. Dreck:

Auditing vs. Consulting

Steven Den Beste writes:

One thing which is clear is that accounting companies are too much in bed with their clients. If an accounting firm is both a company's auditor and also has other business with the company, the conflict of interest is too great. It may be necessary to ban that, to force companies to specialize only in auditing and to make it illegal for them to have any other relationship with their clients beyond that one function.

That would certainly create some substantial changes in the shape of the accounting market. Auditing has become a commodity, and companies put immense price pressure on providers. In general, there is little or no margin in the auditing business so firms view it as a foot in the door to create consulting work.

This was the fundamental problem that caused the rift between Andersen Consulting (now Accenture) and Arthur Andersen & Co. years ago. Andersen Consulting developed a lucrative practice in technology consulting. They are one of the premier names in large systems design and installation. Accenture is a great consulting business developed on the back of the accounting business - albeit years ago. Andersen has done this a few times - they have a strong wealth management practice that handles investments and taxes for many celebrities as well. After a while, the consulting (or wealth management) guys look at their 60% profit margins and compare them to the auditing business, which often just breaks even on a fully-costed basis. If the consultants have a self-sustaining franchise (i.e. they don't need the auditors to generate leads), as Accenture did, they don't want to pay their accounting partners anymore and off they go. If you run a search, you'll find some descriptions of this. Here's one. Here's another that describes Accenture's history.

That solution, of course, solves the conflict of interest problem. But wait - Andersen continued to be a consultant! Of course they did. Any business called "justaudits" is unlikely to make money or attract top talent today. The only way to increase the margins of auditing is to send the most junior people on the job and wrap it up quick. Which can lead to situations like Enron (it doesn't explain destroying documents, of course).

Steven's "golden parachute" is an interesting idea:

It may require a certain amount of creativity here to figure out what is to be done. Here's an unhatched idea (perhaps a cracked one): how about a legally-mandated "golden parachute" for auditors? Suppose that a corporation was required to pay five extra years worth of auditor fees to any auditor discharged after issuing a negative report?

This could lead to a rash of negative reports from any auditor whose business is failing. As we've seen, the auditing business model is already failing.

The fault for this lies with the consumer - shareholders, money managers, etc. Officers would happily pay for more for more differentiated auditing if they felt it made a material difference to their appeal to investors. Unfortunately, an audit is often viewed as binary. You either have one from a recognizable firm, or you don't. It strikes me that this is where things have broken down.

In theory, auditors are chosen by boards, not executives. They are supposed to represent the stockholders, not the officers. Corporate boards do have audit committees, and they often exclude officers from seats on the committee. Yet, Enron's stockholders were certainly not well represented here.

I think the market will adapt. Those of us in the business have seen more blowups in the last few years than in any comparable period. Equity managers call them "torpedoes", as they have defined relative performance in equity management in 2000 and 2001. Any phenomonon that defines performance gets a lot of attention in our hypercompetitive industry.

The role of the audit committee will be strengthened by shareholder pressure (as it already has in many companies). Audit committees will require clearer auditor independence, perhaps separating consulting and auditing by fiat. Initially, this will cause more exits and consolidation in the audit business, as the larger firms elect to keep the consulting over the audit. The market needs some more names that are "blue chip" practices focused exclusively on audits. Over time, however, audit fees should rise and more companies will enjoy independent audits. It will be a bumpy road, however, as markets tend to be.

Take a look at the signature on this auditor's report of a S&P; 400 (Midcap) company. Recognize them? My guess is this firm does nothing but auditing and they are fully independent. But the fact that they aren't a widely recognizeable name gives you pause, doesn't it? And if an auditor is small, do you wonder how much of their business is the client being audited? This highlights the problem - we want the auditors to be big, profitable and independent so the companies can't really push them around. But a "big and profitable exclusively auditing business" sounds like an oxymoron. Until Wall Street wakes up and properly values auditing.

From the desk of Jane Galt:

THE INCOMPARABLE Rand Simberg takes

THE INCOMPARABLE Rand Simberg takes me to task for using the "have your cake and eat it to" cliche. Now, normally I spring to the defense of my cliches -- cliches may not be original, but they are often useful shorthand. However, in this case, Simberg is pointing out that the cliche stinks because it's incomprehensible. Which it is, as evidenced by the fact that I, who am of normal intelligence, didn't figure out what it meant until I was a junior in college. So I hereby retract "have their cake and eat it too" and replace it with "eat their cake and have it too".

From the desk of Mindles H. Dreck:

Gold and Inflation

Here is a graph (pop-up)of Gold prices (the PM, not AM London Fix - oops) alongside the values of the Consumer Price Index (CPI) and Producer Price Index (PPI).

What the gold bugs (most prominently Jude Wanniski and Jack Kemp) haven't answered is just how gold is the best measure of economic value. It has no statistical relation to an industrial or consumer basket of goods (PPI and CPI). For you numerate types, the R-squared of the CPI and gold series in the graph is 0.54, well below the 0.75 that might suggest a relationship. The picture indicates as much.

If gold is to be our anchor, we need to know why our gold reserves should determine the amount and value of dollars in circulation. We can't just embrace some religious concept of its price as the true measure of economic value. And if it's not the measure of economic value but the discipline of a gold standard that's important, why choose a commodity whose supply is under the control of others?

If I lose my neo-con ID card over this I'll just have to live with that!

From the desk of Jane Galt:

BOB HERBERT'S A LITTLE DESPERATE

BOB HERBERT'S A LITTLE DESPERATE SOUNDING on this Enron thing. His op-ed today tries to pin it on the Bush Administration, but succeeds only in confirming that the Enron execs were a bunch of jerks. This is Herbert's brilliant attempt to make the fact that the Bush Administration didn't act sound criminal:

Bush administration officials are making a big deal out of the fact that calls from Mr. Lay did not result in a bailout or, presumably, any other assistance to Enron. The truth is that Enron had already gotten just about everything it wanted from the federal government. It walked right into the heart of the Bush administration and helped shape its national energy policy, even as consumer representatives and environmental advocates were largely frozen out.

I see. Enron didn't make that call in a desperate attempt to stave off bankruptcy -- it was only to thank the administration for a job well done. Which is why Enron investors and employees are enjoying what we may properly term uncharacteristic returns on their stock today.

From the desk of Mindles H. Dreck:

Enron (Oh No, not again)

Andrew Olmsted says the Bush administration shot itself in the foot with the Enron affair.

I agree. You can't play the morality card in your campaign or run as if you were "squeaky clean" and not expect to be examined for your money ties to an ethically-challenged benefactor. Just because they can point to the prior administration, Schumer et. al. and say they took wads of Enron money does nothing to excuse the republicans.

It's the answers in all of this that bug me - the calls for increased regulation and strengthening of the mainstream media through ill-considered campaign finance reform. Those ideas have little merit with or without the Enron Necktie.

From the desk of Jane Galt:

VIA INSTAPUNDIT a truly must-read

VIA INSTAPUNDIT a truly must-read article about the future of globalisation:

Peter Jay pegs the current situation as step two of a waltz motif: economic success creates envy and draws predators. In the next step, either a compromise is reached whereby most of the wealthy party's money is protected with enough going to the rest of society to smooth things over or the whole enterprise breaks down. He worries that in this new, well-connected world, "the South" —that is, the poor nations mostly of Africa, South America, parts of Asia and Eastern Europe—might follow the lead of the Seattle/Genoa anarchists and gang up on "the North"—the wealthy nations—cramming a version of global governance down the North's throat that effectively shuts down a process that began with the industrial revolution: "a truly Malthusian denouement." Lest we doubt that could happen, Jay reminds us that "even in the United States primitive superstitions and ethical blindness can afflict broad swaths of an immensely affluent and educated society, not least constraining the nation's lawmakers to adopt barbaric postures.

For those who, like me, think that globalisation is on the balance extremely good for the world, this bears thinking about.

From the desk of Jane Galt:

The Enron Wave As readers

The Enron Wave

As readers know, I think that predictions of political fallout from Enron are grossly exaggerated, largely because I think that journalists understand political processes very well, but economic processes barely at all, because English and Communications majors tend to fall asleep if you even mention numbers. For this reason, I also think that most journalists are missing the possible legal and regulatory fallout in the financial sector, especially as regards banks and audit firms. Professor Reynolds points to an excellent site containing some articles on the potential implications of the disaster for accounting firms. They indicate pretty clearly that Arthur Anderson's client relationships were excessively close, in part because they now sell so many services besides audit. Meanwhile, the Wall Street Journal exposes the extent to which the bulge bracket investment banks aided and abetted Enron's collapse:

"The upshot: Some of the world's leading banks and brokerage firms provided Enron with crucial help in creating the intricate -- and, in crucial ways, misleading -- financial structure that fueled the energy trader's impressive rise but ultimately led to its spectacular downfall"

I think the banks are going to take a big hit on this one, and here's why: a large part of their most lucrative business comes from selling new "structures". Some of these, like convertible debt and even, yes, junk bonds, are innovative ways for firms with unique or highly variable risk to get affordable financing. But many of these structures are simply innovative ways to get around taxes, regulations, or previously entered contracts.

But Megan, I hear you cry, didn't you just yell at Ralph Nader for saying pretty much the same thing? The answer is no. What Ralph is talking about is a firm retaining cash at the wishes of shareholders in order to avoid taxes. I don't like tax avoidance, which results in stupid transactions that destroy net economic wealth; this is why I am in favor of abolishing the corporate income tax. (More on this another time -- I've convinced even some dyed-in-the-wool liberals on this one.) On the scale of economic sins, however, its the equivalent of the 35-minute "shotgun rosary" perfected by longtime friend Tommy Meehan (that time includes all three Sorrowful Mysteries!).

Many of the structures the banks are selling, on the other hand, are aimed at one of two things: keeping liabilities off their financial statements in order to fool current and potential stockholders; or creating financial instruments that are legally equity (stocks, for non-MBA types) while behaving like debt (more on why corporations prefer debt to equity another time) so that they will not violate their debt covenants. Debt covenants are legal riders attached to bonds that prevent the issuer of the bonds from borrowing more money. This is done because the more debt a company has, the riskier each piece of that debt is. The riskier a company is, the higher the interest rate lenders (in this case, the purchasers of the bonds) demand in order to compensate for the greater risk of default. Since interest rates on bonds are fixed, a company could conceivably borrow money from company A at a low interest rate, and as soon as the check cleared, borrow MORE money from lender B. This makes the company much riskier than it was when lender A gave them the money. This effectively forces lender A to assume junk-bond level risk in exchange for AAA level (much lower) returns on their investment -- a sucker game. Debt covenants are written in order to prevent borrowers from doing this. Clear?

So investment banks are now getting a large part of their income by forcing those lenders to assume more risk, while staying within the letter of the law by calling the new financing equity. Another big part comes from innovative ways to hide liabilities from shareholders. The latter is what got Enron into trouble. The former. . . well, witness a conversation I had with a friend, unnamed, who works at a top-tier bank. We were talking about his projects, and he sketched out -- in very broad detail -- the financial structure he was pitching. It was -- surprise! -- a way to issue preferred stock without violating debt covenants. I had an epiphany.

"So you're basically stealing," said I, thoughtfully.
"No!" he said, stung.
"You're forcing current debtholders to assume more risk, in spite of a supposedly binding contract that you wouldn't." I pointed out. "All the downside goes to them, and all the upside goes to the stockholders." (In the interests of full disclosure, I should point out that I'd had half a bottle of wine and was nowhere near this lucid or concise. But you get the gist.)
"Well, it's legal," he said, a mite defensively.
"Legally, it may be in the clear," I conceded. "Ethically, its stealing."
"Well, I wouldn't point that out in any interviews," he said.

I think that we will be taking a very hard look at both these sorts of practices in the near future. If we look hard enough, a la Glass-Steagall (the law generated by the Crash of 1929 that created the SEC and otherwise radically transformed the financial industry), most of my friends will be out of work and the great investment banking boom of the 80's and 90's will be at an end. At the very least, I think that some types of banking jobs are going to be severely affected by all this.

From the desk of Mindles H. Dreck:

Pretzels and Miscellany

It appears that Reid Stott may have been right. All the Blogspot-based sites are loading like drunken snails this morning, so I can't check up on all the witty remarks about the pretzel story .

Apparently, like so many American glutton consumers, the prez stuffed his mouth with pretzels while watching a football game on TV. Being a teetotaler, he failed to moisten the mouthful with the requisite amount of Budweiser and began to have trouble breathing as the snack-food cement hardened in his throat. He subsequently fainted, obtaining scrapes and contusions on his face, and waking up a few seconds later eyeball-to-eyeball with his dogs. "He's OK" the news outlets hasten to add, and has not cancelled his critical trip to the Midwest today.

I think it's about time Congress woke up and began to pass those pretzel-diameter regulations I've been on about. Proper warning labels on the packaging (Warning: failure to lubricate with large mouthfuls of beer may cause choking and unexpected canine fellowship), as well as interspersed between the pretzel-pushing ads during the football game, could also have prevented this potential national crisis.

Wait a minute - were they "Lay's" pretzels? Any relation to Kenneth Lay? We must dig deeper.

From the desk of Mindles H. Dreck:

Economics, punditry and the "blog instinct" meet

Here's another interesting Book Review by David Brooks (of Posner's Public Intellectuals). I was struck, as I read the following, that it seems to throw all my recent blogging topics into a...well a pile, like dirty laundry:

A founder of the theory of law and economics, Posner conceives the world of the commentariat as a market and tries to uncover what economic flaw explains our lousy product. He constructs a supply-and-demand chart as it applies to intellectuals, and helpfully explains:

''Line S represents the supply of that work. It slopes upward to indicate that the cost of supplying public-intellectual services increases with the quantity supplied. The intersection of D and S determines the quantity of public-intellectual services produced (q) and the 'price' (p) in money and other (call it psychic) income that the producers receive.''

This allows him to point out:

''The reduction in the cost of supplying public-intellectual services could be shown in Figure 2.1 by rotating S downward from its intersection with the vertical axis. When this is done, S intersects D at a lower point, implying a lower market price and a greater output.''

In other words, there's an abundance of punditry and it ain't worth shit. Brooks has some fun with that. I especially like Brooks' ending:

In the end Posner is his own best refutation. He is not motivated by any impulse that can be captured through the reasoning of law and economics. No rational actor writes a sloppy book accusing the entire universe of American intellectuals of sloppiness; it's an act of reputational suicide. Posner wrote it, it seems, for the same reason the rest of the public intellectuals write their stuff: because human beings are social creatures who feel compelled to express their ideas. You might as well try to build an economic model to explain prayer. We express ourselves because of who we are, whether we do it on TV or in print or over dinner. Some are good at expressing ideas, some are not so good, and almost all of us, like Richard A. Posner, make asses of ourselves some of the time. Or at least we should.

Call it the "Blog Instinct". Readers of MTZ know they don't have to look far to affirm my agreement on that last point.

From the desk of Mindles H. Dreck:

Journalistic Ethics Dilemma:Whatd'ya Give This to Me For?

Ron Rosenbaum reviews Adventures With Extremists in the NY Times Book Review today. This is a book I will add to my wish list.

He makes some interesting accusations about how author Jon Ronson may have been used by the nuts he researched to spin their image. One of those nuts was London-based bin Laden sympathizer Omar Bakri, who has called for Tony Blair's assassination (seriously, not like the political assassination desired by the ailing Iain Murray). The extent of the author's involvement with his subject becomes an interesting choice at the end:

Ronson and one of Omar's aides are on the way to deposit money Omar has collected (a serious sum, more than $7,000) on behalf of Hamas, the organization that sponsors suicide bombers who blow up Israelis. Ronson ends the chapter by describing what followed when he was left alone at one point with the money -- implicitly inviting the reader to judge his choice.

''What the hell was I doing, guarding money that would be used to kill the Jews? And then I understood that I had to take the money . . . and make a run for it.'' (Note Woody Allen allusion.) ''How many lives might that save?'' he asks himself. And then he concludes: ''But I didn't do it, of course. I just stood there. And then . . . Omar returned, thanked me for my help and took the money to the bank.''

Ugh. What would you have done?

From the desk of Mindles H. Dreck:

Why Not the Gold Standard?

Eric comments on my prior post:

Dear 'Mindles', before we had the floating currency regime, these countries could repatriate the dollars at the Fed's gold window. The closing of that part of the feedback loop was what led to the inflation of the 70s, as the Fed printed money to meet monetarist targets.

There was also an oil shock, as I recall. But Eric's comment begs the question why not the gold standard? Well, I can be lazy tonight and just point to Brad DeLong's web page on that very question. I don't know much about DeLong, but his main page also looks promising.

I have one thing to add to the gold standard question: In the "good" old days when the gold standard exacerbated the depression etc., everybody sort of accepted gold as a store of value, and its supply was only beginning to fluctuate based on new mining technologies. Gold has a few industrial uses but a large part of demand comes from jewelry and decorative uses. Furthermore, like oil, the supply of gold is subject to large influences from extraction technologies. It is no longer the universal store of value it was more a hundred or more years ago when governments were more likely to disappear.

I think the situation I described in the prior post, where there is a demand for dollars in other parts of the world, could cause all kinds of problems if we were on a gold standard. The dollar could get incredibly strong if other governments were not also on the standard. In addition, if there were major innovations in gold mining or big changes in demand for the metal, the dollar could plummet.

I just don't see the linkage between economic value and gold anymore. More important to a "store of value" in a currency are reasonable fiscal policies, a functioning debt market and a government that constitutionally refuses to take private money away from its citizens and lenders in the form of over-printing (intentional inflation), excess taxation or freezing bank accounts.

Credibility is "as good as gold".

From the desk of Jane Galt:

I've gotten some good emails

I've gotten some good emails about the blog over the last couple days, & I'll be responding tonight or tomorrow, if the Time Gods are willing.

From the desk of Jane Galt:

A MOST CHARMING intro to

A MOST CHARMING intro to the blog on Benjamin Kepple's blog, to which I have linked at left not because he is laudatory, but because the site is interesting and concise, much more than can be said for my own rambling style. (I'm working on it, I'm working on it -- us Creative Writing majors aren't supposed to be able to say it all in 500 words). He's especially good -- and concise -- on Enron.

He makes reference to the Janegalt name, so let me make it clear now: I am not now, nor have I ever been, an objectivist. I have read most of what Ayn Rand wrote, and I agree with some of what she said. But the name is less a tribute to her than a mildly interesting username that's almost never taken, plus it annoys the hell out of a lot of people who annoy the hell out of me.

From the desk of Jane Galt:

What's Wrong with This Picture?

What's Wrong with This Picture?

I'm currently helping one of the office workers, a very nice engineering student, with a project that involves, among other things, entering dates in military time. This engineer (who shall remain nameless, genderless, and otherwise unidentified) just walked in to show me the key he/she had made for converting regular time to military. I can think of no greater indictment of our educational system than that it produces engineering students who require visual aids in order to add 12 to single-digit numbers.

From the desk of Jane Galt:

LOTS OF PEOPLE HAVE WRITTEN

LOTS OF PEOPLE HAVE WRITTEN up Victor Hanson's article in the new City Journal but few have commented on this gem by James Q. Wilson on the state of marriage in modern society, which can be summarized in this elegant quote:

"Marriage was once a sacrament, then it became a contract, and now it is an arrangement."

As always, Wilson stands on rock-solid methodological ground, yet brings clarity and insight to a murky topic, rather than merely regurgitating arithmetical proofs of points already obvious to anyone with common sense, a practice which Patrick Ruffini has skewered. Wilson evaluates the social costs, as well as benefits, to the Enlightenment approach to social benefits, and suggests that some social disorder may be the inevitable by-product of the same forces that created our economic and political gains.

It may be that our differences with the Middle East are irreconcileable: we may stand on opposite sides of a vast divide, and as determined as we are to stand on the side of economic, scientific, and political liberty, they may be equally determined to stand on the side of social order. This thesis was just developed recently, so feel free to disagree on the grounds that families/fathers aren't really as important as we think they are, or there is no such gulf, or any other reason. But I think I may be onto something.

From the desk of Mindles H. Dreck:

Dollars Held Abroad

Steven Den Beste makes some interesting observations about dollarization. Among them, he wonders whether an increase in dollars held abroad could be inflationary. The short answer is probably not, as long as the central bank pays attention to the changes in demand for dollars and has the resources to act.

The problem of dollar reserves kept elsewhere has been with us for a while. For a long time the Eastern block countries' black markets were dollar currency markets, and this formed a permanent part of the most restrictive definition of money supply (M1). It's akin to the part of the money supply sitting in safes, mattresses and penny jars around the country. It's out there, it's hard to quantify, but it's velocity in our economy is low to negligible.

Oops - "velocity". As important as the actual supply of currency is how fast it moves, or how many transactions are made with it in a given period of time. Additional money is only inflationary if it has some velocity. The gold in Fort Knox doesn't reduce the value of gold in circulation much because it isn't circulating. If you buried a trillion dollars in the ground where nobody could get it, you'd need another trillion dollars to keep the value of the dollar constant (all else being equal, the economist says). Force = mass times acceleration, if you will.

Back to Steven's point. If the demand for dollars abroad suddenly changed, if we stopped exporting dollars, then the Fed would have a money supply problem. The value of the dollar in trade would decrease, which is inflation, by definition.

Have you noticed the piles of freight containers springing up in seaports around the country? There's a pile the size of a fallen skyscraper just off the turnpike extension bridge in Jersey City. It's there because goods are shipped here, and it's too expensive to bring the empty containers back (they would be empty because we aren't sending goods the other way). They just buy new ones abroad. So shipping containers are approaching "negative cost" - they will pay you to take them away. Some of them are even being rented as temporary office space (yuck). There's a business in here somewhere.

If foreign countries ever lost their appetite for dollars (if, for instance, they converted to Euros as a reserve currency), the Fed would have to be able to mop the dollars up like those freight containers. Right now they have plenty of resources to do so. Which is one of the reasons, ironically enough, that the bucks aren't coming back.

By the way, did you know that those Coinstar machines have actually materially changed money supply by putting those penny jar collections back in circulation? The Philadelphia mint has layed off a bunch of people and they aren't making pennies anymore, or so I've heard.

From the desk of Jane Galt:

Postcards from the MBA Wars

Postcards from the MBA Wars

Accenture has pushed back the start dates for its New York MBA's yet again, this time to some fuzzy time in the fall, provided that the stars line up and the gods of Mammon do not further punish the service economy. A classmate who had been waitressing to pass the time until her start date (previously pushed back twice, from September '01 to May '02, and now to Don't Let the Doorknob Hit You on the Ass on Your Way Out), tells me that the recruiters she went to told her that she'd be better off looking in strategy consulting than in Investment Banking (her former trade). Since I can tell you from personal experience that the strategy consulting biz is in approximately the same shape now as the buggy whip industry was in 1910, this is Extremely Bad News both for yours truly, and for the economy. Why? Because if strategy consultants are in the toilet, the restructuring pain that usually accompanies recessions has not yet begun, and firms are still more focused on staving off bankruptcy than building new markets. I can also tell you that the Investment Bankers I know are not doing deals -- they're pitching like hell, but nothing's going live. Which means that the pain of bankruptcy sell-offs and distress mergers that usually accompany a recession haven't yet begun, and people are more focused on avoiding risk than building new businesses.

Lesson: we ain't going back to the 90's any time soon. Stock valuations, IMHO, are totally insane, because people are still thinking, in the backs of their minds, that 90's valuation levels represent some sort of a baseline. I have said it before, and I will say it again: corporate earnings cannot possibly support current valuations, even at very low levels of inflation. That means that a significant portion of current stock prices represents the buyers belief that it will experience capital appreciation independant of any future earnings.

So Joe Investor, perhaps in his twenties or thirties -- perhaps older -- sees the current prices as a temporary aberration from normally high valuations, rather than seeing the high valuations as an aberration from normal PE ratios between 10-20. That investor is still expecting those valuations to come back. Perhaps wishing will make it so. But there is no historical precedent that I can think of for a permanently overvalued asset, except maybe insurance.

From the desk of Mindles H. Dreck:

Another voice on T, G & H.

Matt Welch tips us off to the blog of Harvard Independent editor, Matthew Yglesias, who also noticed the Keller column:

PARTISANSHIP IS BACK -- BIG TIME as the usually dull Bill Keller slams retiring Senate Republicans Thurmond, Gramm, and Helms. I don't have any sympathy for these guys either and I'm glad to see them taken down a notch, but there doesn't seem to be any peg for the story whatsoever. Keller also trots out the "Taliban wing" of the Republican party line that had been gaining popularity in liberal circles before the 11th. The opportunist in me is glad to see it back...

....I strongly considered sending this in to Andrew Sullivan as a Begala Award Nominee, but at the end of the day, I just agree with Keller too much to do it.

Yeah. That's about right, except he forgot to become overwrought about that one sentence that makes an erroneous assumption about regulatory oversight...

Mr. Yglesias is now ad-free by the way. I hope I was first this time. I think it's pretty large for a Yalie to step up for someone from...that place.

Incidentally, I posted on Keller before.

From the desk of Mindles H. Dreck:

The Absence of Regulation is Not a Scandal

Thomas Nephew takes issue with my criticism of Bill Keller's New York Times piece below:

Briefly, it seems to me something went wrong at Enron, more oversight was needed, and Gramm had a hand in preventing that oversight once upon a time. That need not have been with "malice aforethought" to merit Keller's takedown.

Thomas and Ginger apparently are worried that I'm some sort of religious right type, so let me clarify my views on this.

I'm the sort of person who reacts negatively when people say "there ought to be a law". All things being equal, I'm in favor of fewer laws and maximum personal and commercial freedom. I think the idea that the presence of fraud (which is already a crime, folks) is no way prima facie evidence of the necessity of government oversight.

It's the idea that the absence of regulation is a scandal that gets my blood boiling. It reminds me a bit of the "absence of intervention" criticisms used by the Chomskies of the world to condemn the U.S. As a rabid free-marketer (and rabid individual rights proponent), I'm much more worked up about the stupid assumptions about the false panacea of regulation than the nastiness of the article. These guys had a lifetime in power, they can take it. And in two cases they deserve it anyway. I've gone that low a few times myself, and its here for all to see. (Of course, I was entirely justified....)

But I asked out loud as I read it, "is the failure to regulate any business that is not yet accused or proven guilty of fraud a scandal?"

In my book, refusal to regulate should be the norm. There are thousands of bankruptcies every year - in unregulated industries like textiles (Burlington Industries),and in regulated industries like telecommunications, insurance or finance. In fact, anecdotally, my impression is there is more fraud and failure in regulated industries than unregulated, at least on the financial side. Many of them, unfortunately, involve fraudulent accounting. I was a banker once upon a time, and I can tell you every business that is failing attempts to cook its books. Cooking the books actually has little to do with regulation, as practiced by those who might have regulated Enron.

The CFTC, which regulates trading in commodities, futures and options on futures, is there to keep a liquid market and protect investors. They regulate Futures Commissions Merchants (FCMs), the New York and Chicago-based futures and options exchanges (CME, CBOT, NY Mercantile etc.) and other organizations involved in these markets to make sure that customer funds are segregated and properly accounted for, and that sufficient capital is maintained to protect customers and counterparties. I hate to break it to all you fans of regulation, but FCMs fail from time to time. Despite regulation. Can you imagine that? Actually, the industry has its share of scandal, including the trade-allocation swindle that Hillary Clinton benefited from. I don't automatically look at the industry's record and think "can you imagine how much worse it would be without regulation?

Generally speaking, institutional over-the-counter trading is exempt from much of this regulation. There are exemptions for securities sold to sophisticated or institutional investors (hedge funds fall under this exemption usually). A firm does not have to register with the CFTC if it buys futures only for certain exempt classes of clients, such as foreign governments and certain corporations and pension funds. Generally speaking, Enron's derivative trading business was with institutions. They weren't selling energy derivatives to individual investors. By the way, your local heating oil company is, without regulation. They all are, in the form of fixed price or capped contracts, an innovation sparked by Enron and others wholesaling the risk. Perhaps your local heating oil company should have a visit from the CFTC. That would only take a million new examiners, at a cost of...oh forget it.

It was Citibank, JP Morgan and others that were the largest ($) counterparties to Enron. They lost hundreds of millions of dollars. Fooling JP Morgan/Chase may not be as hard as it should be, but its harder than fooling regulators. Morgan has their ears in the market, and they pay to hire smart people, not all of whom are normally blinded by potential corporate finance fees.

Finally, Enron's biggest losses were in affiliates that would have been unregulated anyway. Regulated companies tend to separate their regulated businesses into subsidiaries - hence bank and insurance holding companies. Enron wrote all sorts of fancy derivatives contracts that leveraged their own stock price through affiliates. It was leverage of their own inflated market valuation that turned around on them when the bubble popped. If they were regulated their regulated subsidiary might have been more insulated. Which would have saved a few jobs for a few months.

Keller's Op-Ed, in a nutshell, says "thank God these scuzzballs are out of the Congress. In fact, to use his words, he accuses them of being part of the "Taliban Wing of the Right" and "debasing" the Congress, and, later, being part of the right wing "Mafia."

As I said, a good crack at Helms and Thurmond is worth reading, and I would only note with amusement the "Ad Talibanum" fallacy in Keller's article (I do in the Bullpen every time I see one) but for the poor job he does on Gramm. Likening Gramm to the two of them on the basis of pork and the Enron accusation struck me as a stretch. Pork is not a distinguishing characteristic in Congress. Regulation doesn't prevent financial accounting fraud. The idea that refusing to regulate is responsible for managerial fraud is silly, and deserves cries of indignation.

The rest of my comment was just a shot at Keller for doing such a poor job of "takedown" relative to the warblogging community. That part of my comments was the "era of good feelings" to which Thomas makes reference in his post.

From the desk of Mindles H. Dreck:

A Meaner, Rougher Times Editorial

In Mr. T., Mr. G. and Mr. H., Bill Keller has provided us with a down-and-dirty anti-eulogy. I'm a little surprised to see a sub-warblog level takedown of Senators Gramm, Thurmond and Helms on the top column of the NYT Op-Ed page:

I'd like to begin the new year by bidding farewell to three men whose departure will raise the median decency of the United States Senate....They will leave behind an institution they have helped appreciably to debase.

OK. I'm all for being direct, and at least two of these three are worthy of ridicule. But Keller doesn't start well:

Senators Helms, Gramm and Thurmond have in common the fact that they harnessed their collective century of seniority to the Taliban wing of the American right. Point to an act of cultural division, bullying unilateralism or anti-government populism committed in the Senate during their decades there and you will usually find these three men among the sponsors.

Ad Talibanum isn't enough, apparently. Towards the end of the argument he commits what I'll call Ad Sopranum:

As the senior Republican on the Senate Foreign Relations Committee for the past 15 years, and as the mentor of a right-wing mafia within the Republican Party, he (Helms) has been an author of much of what makes the world resentful of America..

Keller's problems with Thurmond are his age and that he's a leering groper who "made congress ridiculous". According to Keller, he's a kind of Sensei of the Packwood/Clinton/Condit school of..er.."swordsmen".

..Senator Thurmond did not invent the role of Washington lecher, but he helped cultivate the men's-club chauvinism in which Bob Packwood and Bill Clinton and Gary Condit operated.

I'll go along with the "ridiculous" part, but I hold the others responsible for their own actions. I didn't see Clinton studying under Thurmond. I did see Thurmond beg a hug from Hilary, which would bother any husband, but that was long after Clinton joined the club.

Keller saves his most dubious accusations for Gramm, pinning the Enron scandal on him before we have any evidence distinguishing Gramm from the rest of the congress.

One of Senator Gramm's most generous benefactors was Enron, which lavished money on his campaigns and paid his wife handsomely as a corporate director. Senator Gramm, in turn, had a hand in legislation that exempted Enron's explosive energy derivatives business from government regulation and oversight. How big a hand, and whether that legislation enabled the secret funny business that led to the company's collapse, may emerge in one of the many investigations under way. Enron's business was built on the premise that just about anything could be turned into a commodity and bought and sold. The beleaguered little taxpayers who lost their jobs and pensions in the Enron fiasco will be interested to know whether that included their senator.

Well, they'd also be interested to know if Bill Keller was involved, but don't you think it's a bit premature? For that matter, does deregulating an industry automatically convey approval of fraud? That's a bit of a stretch Bill, don't you think?

Oh, right, I forgot. It's the private sector. They're all criminals by definition. So every financial company starts scheming to rob us blind the minute the government stops warehousing a brand new set of "examiners" in their offices for a month every year and then sending them the bill. (Yes folks, that's how it works, ask an insurance executive).

Whatever the Times paid Keller for that article, it was too much. A shame, too, because Thurmond and Helms provide pretty rich material. Get yourself a Blogger account, Bill, and try to compete.

From the desk of Mindles H. Dreck:

German Bloggers

Thomas Nephew'sNewsrack Blog is reviewing the world of German Weblogs. He uncovers an unfortunate proto-warblogger who gets gazumped by the mainstream press.

Thomas also keeps an excellent list of links on Iraq Sanctions (Matt).

From the desk of Mindles H. Dreck:

Tim Blair = Funny

Read Tim Blair's "Luncheon Debate + 1". I laughed out loud:

MARION HALLIGAN: Can you be apathetic and noble at the same time?

MATTHEW REILLY: I think you can.

TIM BLAIR: I think you can be pathetic and in this room at the same time.

From the desk of Mindles H. Dreck:

Tattooed Baloney

Apparently, federal grants are available for tattoo removal in Lois Capps' (D) district in California, provoking a quote from an interest group's deli counter:

"Why should someone in Arizona or Wisconsin have to pay for this program?" asked David Williams, vice president of Citizens Against Government Waste. "That's our biggest beef with this pork. Let the local government or county pay for it."

I'm disappointed he didn't add a quote about "chickens in washington full of baloney."

From the desk of Mindles H. Dreck:

Productivity and Technology

As the recession that started last year unfolds, mostly predictable patterns have emerged in offical economic data. Jobless claims are up and the inflation, with the exception of medical costs and some tobacco and energy-related anomalies, is under control.

Productivity, defined as "output per hours worked", usually decreases dramatically during recession quarters. Two quarters of decreased output is a recession, so the numerator is going down. Usually, job or hours cuts lag and measured productivity dips before recovering with output (GDP). But the third quarter productivity gorwth statistics released in December were unexpectedly strong at 1.5% in the non-farm business sector overall, and 2.5% in manufacturing.

Productivity growth is critical. Any increase in productivity translates one-for-one into the inflation-adjusted ("real") growth potential of the economy. Every dollar of increased output that does not require a dollar of labor inputs is a "pressure-less" increase in growth. As I and many others have said, the solution to our fiscal and social security issues relies entirely on the highest possible rate of sustained real economic growth (not lockboxes or budget austerity in recession,Daschlenomics or backward-looking tax rebates). Furthermore, productivity growth also adds to our competitiveness with other economies, so it can have a positive impact on trade imbalances and job opportunities in the U.S. For those reasons, we watch productivity carefully, and debate it often.

From 1995-2000 the United States recorded productivity gains of 2.5% per annum, much higher than the prior long-term (1972-1995)average of 1.4%, and dramtically higher than the 1987-1995 average of 0.9%. Economists have sharpened their slide rules and entered a pitched battle to decide whether this was a one time phenomenon or a secular change in our economy. As you can imagine, the release of counter-cyclical figures on December 6 has all their tongues wagging.

"New Economy" types like to pin productivity growth on the application of information technology. Their critics say it was entirely a by-product of a stock-market boom, spiking demand for PCs due to the internet valuation bubble, or a problem measuring hours worked in the growing service sector. Nonetheless, the productivity numbers have been sticky even as the market is down 30% and internet executives can only raise money by stripping naked.

Enter the McKinsey Global Institute, known for funding exhaustive studies on these topics. McKinsey's response to the New Economy debate is "a little of both." But what's really interesting is their research defining the sector attribution of productivity growth - which parts of the economy were responsible for this economic gift we call "productivity growth"?

McKinsey's work suggests that only six sectors of the economy, Wholesale, Retail, Securities/commodities brokers, Electronic and electric equipment, Industrial Machinery and Equipment, and Telecommunications, accounted for all of the incremental productivity growth increase in the 1995-2000 period over the 1987-1995 rate. The other 53 sectors of the economy added nothing cumulatively and very little individually.

McKinsey examines the relationship between IT spending and productivity growth across all sectors and finds...none. Even in the magic six sectors they find an insignificant correlation. In the securities and finance businesses they correctly identify market valuation as accounting for half of the productivity growth (our revenues, in almost all businesses, grow directly with market valuation). Furthermore, the sectors that had the highest contribution are the largest employers (retail and restaurants), so any incremental productivity gain in these industries will have a large effect on national productivity.

The technologies McKinsey indentifies as having a major impact on are essentially 1980s technologies - warehouse distribution, electronic data interchange, and the like. The actual hardware for these techniques is not sophisticated and has become very cheap. Implementing these technologies requires not only buying them, but changing your business processes around them to reap the benefits. McKinsey estimates these sectors have further to go, as they estimate only 25% penetration of modern inventory and information management technologies in wholesale and retail.

The other major factor they identify is competition as a catalyst. Each of these sectors had major new, fast-growing entrants with radically different business models. Examples include Schwab and E-Trade, Dell, and AMD. The ultimate example of combining technology, process change and competitive stimulus is Wal-Mart, of course.

Which brings me to my point (at last, you say). I am much more impressed with the internet as a technology now than I was in 1999 and 2000, the years of peak investment. In my opinion, my industry is just beginning to reap the benefits of connectivity. Our productivity requires the rapid movement, filtering and analysis of information. While we have had this kind of information flow from most of the markets for some time, we are barely scratching the surface in customer contact. In my own business, it has only recently become economically worthwhile to use web-based technologies to deliver highly customized interactive information. A simple example -we use SAS technologies to slice up insurance industry data and deliver it in interactive graphical format to clients and prospects. This process used to take weeks and was delivered in a printed publication. Now it takes hours, and the user can easily filter the data that interests them.

In general, despite the "dot.bomb" critics, my sense is that many internet and other IT innovations are only beginning to deliver the goods. In 1990, one could have looked at all the innovations in warehouse technology (bar coding, etc. - remember Symbol Technologies?) and claimed it was all hype. These technologies only made their contribution starting in 1995.

There is a benefit curve in technology adoption. It may have been overstimated in 2000 internet valuations, and the current content on the internet may still be, like this site, a labor of love. But I still think we are just beginning to ride the curve.

From the desk of Mindles H. Dreck:

I Gave at the Capitol

To economists, the term "crowding out" refers to the problem of government expenditures substituting for private expenditures. In other words, when the government runs a huge deficit through spending increases, the money that would have been spent or invested by the private sector is transferred to government and sunk into bureaucracies and infrastructure (these are "investments" depending on your perspective). Since government expenditures tend to have less of a multiplier effect, this is generally considered a bad thing.

Daniel Henninger makes the novel argument in the WSJ today that the reason americans are supposedly less involved in charities and are spending a greater portion of their own (private sector) money on themselves is that government has crowded them out:

At its best, the criticism of all this (consumerism) is about the true shape of citizenship, whether it involves anything more than waiting for the next Lenny Kravitz CD to appear, or cheering when the U.S. wins a war. Maybe it does. But one may also ask: If the United States has no generalized habits of "otherness" among its people anymore, how did that happen? I doubt that either the power of marketing or a 5% annual raise is enough to explain why consumerism seems a higher social value than charity in this country.

I think American self-absorption is a legacy of the Great Society. Since about 1965, the biggest charitable organization in America has been the Congress of the United States. Americans donate to the Internal Revenue Service, and Congress, on behalf of us all, helps as many needy groups as anyone could ever imagine. Liberals make no apology for this. Doing good for the greatest number of people via taxation and federally-made entitlement programs for the elderly, disabled or poor is for them the perfect expression of the social contract.

In other words, we fulfill our obligations because we "gave at the capitol."

From the desk of Mindles H. Dreck:

Boo Hoo, poor Me.

Natalie Solent remarks at length on the economics of on-line content, blogging very much included:

I would point out here that there is recompense, in the pleasure one gets from blogging. The reason I would like to see some sort of frangible payment system is that, without it, direct publishing is more skewed than it has to be towards those with significant spare time or money. An awful lot of great student bloggers are going to - horrors! - graduate one day, and get jobs, and that's the last we'll see of them. Housewife bloggers like me are also at risk of this terrible fate. On other hand (I think I'm using up hands too fast, this is at least my fourth) some bloggers might graduate to the mainstream media. I sort of want to do this myself. But.. but.. what I really want to do is BLOG TILL I DROP BABY! Yeee-HAH!

I can relate to that last statement. You will notice no palm outstretched on this page. You would have to scour the archives of my old site to find my wishlist. I have a job. So it is all about the "love of the game", as Glenn said in his column the other day.

And sometimes I can't finish that post on productivity I was working on. I can't keep up the pace because I work and I have a cold. Id by dose. Yeee-HAH-choo.

From the desk of Mindles H. Dreck:

Defenders of the Downtrodden

Say you have a good job. One that provides you flexibility to pursue your interests, a very high level of job security and many opportunities to make extra money on the side. You've gained some fame and distinction in your field, some notoriety. You get to sit on some boards. People know who you are.

One day the CEO calls you in. "We're raising standards for the troops" he says. He expects you to participate. He questions some of your current priorities and suggests they might be re-ordered. He also has a major project he'd like you to work on. Standard boss stuff. But you don't like it, and you don't like him. You think your priorities are fine.

So, leveraging your reputation, you make a few calls. Within hours you have an offer to move. You can bring your colleagues. You'll get more money, a subsidized mortgage, all the same perks, assurances of flexibility, job security. Everything you have and more.

Well, this situation is really dire. Who you gonna call? How about Jesse Jackson and Al Sharpton?

From the desk of Mindles H. Dreck:

The Willie Sutton Rule

Willie Sutton robbed banks because "that's where the money is."

That's what immediately came to mind when I read about what could be a U.N. effort to create a supranational tax regime.

Posting way back on December 1, I provided some nicely-graphed evidence that many European economies have exactly zero chance of paying for the retirement promises made to their citizens, due to both demographic trends and a complete lack of current funding. This same data famously prompted economist Woody Brock to quip:

Better a future career as a Sicilian bisexual gigolo than as a continental European Prime Minister trying to please the voters.

France, Italy and Spain in particular have to keep every body they can in country and working in 30 years so every worker can support one retiree. Which will require taxing the bejesus out of them. No leaving for lower tax regimes you naughty productive people. No Atlas Andiamo.

So when I hear "strengthened international tax cooperation through enhanced dialogue" from Geneva or First Avenue, I am holding on to my wallet with a death grip.

From the desk of Mindles H. Dreck:

Breaking News on Enron

A short news item just came across Bloomberg:

Arthur Andersen LLP, Enron Corp/'s auditor, said employees disposed of or deleted 'a significant but undetermined number' of documents relating to its audit of the now-bankrupt energy trader

That, my friends, is big trouble, for Andersen and possibly others. A cover up.

Update:Here's one of the first news stories

From the desk of Jane Galt:

Chronicles of the 51st State

Chronicles of the 51st State

Earlier, I asked whether Canada would consider harmonising their immigration policy with ours in order to maintain open borders. Now from the New York Times, another reason to consider North American union: Canada's currency woes. Hmm. . . it's not exactly an original thought, but this is starting to sound like the world dominated by massive trading blocks about which we have intermittently heard for many years. Question is, would this make us more or less free?

From the desk of Mindles H. Dreck:

Flanders & Swann on PETA

Christine Lowell remarks:

Message to the PETA-philes: If God didn't want us to eat animals, he wouldn't have made them out of meat.

Hmm. Here's Flanders & Swann's The Reluctant Cannibal:

But people have always eaten people,
What else is there to eat?
If the Jou-Jou had meant us not to eat people,
He wouldn't have made us of meat.

Check out the comment on my prior PETA-post.

From the desk of Jane Galt:

KUDOS TO OpinionJournal for taking

KUDOS TO OpinionJournal for taking down Anthony Lewis' outrageous comment about the Wall Street Journal:

"The extreme critics, like the Wall Street Journal, really pine for the days when there were few or no blacks at Harvard, when the undergraduates were largely stamped from the same upper-class and middle-class mold. That's the way it was when I was an undergraduate. Believe me, it is much better now."

OpinionJournal delivers a biting rejoinder:

"How does Lewis come up with such a tendentious interpretation? Well, consider the era in which he came of age. . . When Lewis was a freshly minted Harvard graduate, and for at least two decades thereafter, it was true that many people who rejected the liberal view of racial matters did so for invidious reasons.

"But the world has changed since 1948. Elite opinion is now unanimous, and popular opinion nearly so, that black Americans are entitled to equality. Today's racial conservatism holds that the government and other institutions should be colorblind--a liberal view by 1948 standards. Today's liberalism holds that remedial measures are necessary to compensate for past injustices. That's a defensible view, but one that should be defended on its own merits. Instead, people like Lewis invoke a moral authority that began to become obsolete sometime around 1970."

This is the most succinct statement I have ever seen of the problem with the debate over racial politics. Bravo.

From the desk of Jane Galt:

Department of Mangled Metaphors From

Department of Mangled Metaphors

From a Columbia journalism professor who shares Mr. Shales' admirable lack of bias comes this article arguing that the media's just too darn patriotic for its own good. From which I culled this treasure:

"The budget surplus has disappeared down a rabbit hole of tax cuts and post-Sept. 11 emergencies that sprung the lock on the lockbox of Social Security."

From the desk of Jane Galt:

My Blogger Ad Appears to

My Blogger Ad Appears to Be Gone!

I assume this is because of the problem with the blogger servers. I tried to buy it the other day, but had some sort of a problem with PayPal. If I have a benefactor, thank you -- otherwise, look for the ad disappearance over the next week or so.

From the desk of Mindles H. Dreck:

Disraeli's Frightening Hair

Today's Fresh Air featured a full hour of Billy Bob Thornton. Just in case you didn't think he was odd, he has some phobias: He is afraid of antique European furniture and Benjamin Disraeli's hair.

He has apparently confessed this in other interviews. Here's one.

The phobia discussion starts at minute 18 or so.

From the desk of Jane Galt:

Doublethink In his review of

Doublethink

In his review of Bernard Golberg's Bias, Tom Shales doesn't just assert that there is no libral bias in th media -- he posits it, like one of Euclid's Five Axioms. "Goldberg has picked this moment in time to haul out the old canard about the media being "liberal" and the news being slanted leftward," he tells us. He doesn't actually refute the claim anywhere -- he simply acts as if its untruth were something so obvious that it needs no proof, like the shortest distance between two points. This frees up precious column inches for an unfettered personal attack on Bernard Goldberg.

But you decide how unbiased Mr. Shales' media is:

"It's the story of one man confronting awesome corporate forces and seeing his life all but destroyed for daring to come forward and tell the truth." -- Tom Shales, reviewingThe Insider, the Russell Crowe movie about a tobacco industry whistleblower.

"Bernard Goldberg, the one-time CBS News correspondent and full-time addlepated windbag who is trying to make a second career out of trashing his former employer." Tom Shales, reviewing Bias, a book by a media industry whistleblower.

But don't let the quotes, or the title of this post, fool you: Shales' work is not Orwellian; it's adolescent.

"Obviously hoping to follow in the footsteps of Rush Limbaugh and Bill O'Reilly, two intellectual giants by comparison, Goldberg has fashioned his rantings into a book succinctly titled "Bias," which, appropriately enough, won the dubious honor of a commendatory editorial from The Wall Street Journal. And we all know how unbiased those Journal editorials are. Gosh it is soooo hard to figure out where they're coming from."

It feels like shooting ducks in a barrel, but I can't resist this next quote:

"Goldberg's specialty is conjuring vast, sweeping generalizations that fit in with his own very obvious bias and are based on the tiniest of specifics rather than well-researched evidence."

Generalizations like, for example, "Liberal bias in the media is a canard". Or his next attempt at biting commentary:

"Quoting Engberg as having referred to one aspect of the Forbes plan as being its "wackiest," Goldberg then asked in rhetorical high dudgeon, 'Can you imagine, in your wildest dreams, a network news reporter calling Hillary Clinton's health care plan 'wacky?' Can you imagine any editor allowing it?' Well, frankly, yes."

After seven paragraphs of Shales, I have a temptation to say "Call me when the shuttle lands, Tom." But I will sit very still until it passes.

"But Hillary Clinton and Steve Forbes were not on an equal plane. She was first lady of the land and he was a national non-entity trying desperately to draw attention to his failing bid for a presidential nomination."

Okay, so we're supposed to take Hillary's health care plan seriously because she's the First Lady? Can I assume from this that Shales speaks equally respectfully of Nancy Reagan's astrologer? What the hell, I've already assumed there's no media bias.

The irony of Shales defending the 'wacky' quote by calling Steve Forbes a "national non-entity". . . it's the kind of quote that, were I to make it up, would have me laughed out of Freshman Creative Writing. Personally, I think Forbes is a wing-nut. Nonetheless, he owns one of the world's leading publications, and he staged a serious run for the presidency. On the "non-entity list", if such a thing is kept, movie critic for the Washington Post comes well before Steve Forbes.

But we're not quite done with the personal attacks. I'll skip the trivial whining about Goldberg's treatment of a review Shales wrote and skip straight to the vitriol:

"In his book, Goldberg bases his allegations of liberal slant not only on what he perceived as bias in pieces that aired, but also by jotting down small talk that he heard bandied about in the workplace -- or that we must take on faith that he heard bandied about -- and using these alleged remarks of individuals to paint the whole profession with his broad, broad brush.

"Goldberg was, let's face it, not a bright shining star in the firmament of CBS News. He usually looked disheveled and bleary-eyed on the air, and appearance does count in a visual medium."

So Shales is telling us that the small talk Goldberg reports isn't true because. . . he looked like a slob on air.

I can't go on. It's like playing pool with your four year old cousin -- you always win, but it's not something you can brag about. So I'll close with Shales' close:

"Goldberg is being assailed by former CBS News colleagues for failing so conspicuously (and for who knows how large a book advance) to be a 'team player.' Concludes the Journal. . . 'the TV networks could use a few more non-team players like Mr. Goldberg.'

"Oh really? Oh could they? And pray tell how many 'non-team players' such as Mr. Goldberg would [The Journal] like to have on the staff? How many would be richly praised and rewarded for, say, writing an op-ed piece in the Times complaining that the Journal's editorial about Bernard Goldberg was an embarrassingly transparent piece of corporate-dictated hogwash?

I do hope one tries. It could be such an inspiration to us all."

That Us presumably being Mr. Shales' famously unbiased media.

As Professor Reynolds says, "Not having read Bias, I have no idea if it's good. But after reading Shales' review, I still didn't. All I knew was that Shales didn't like it, and that I liked Shales a lot less than when I started."

Amen to that.

From the desk of Jane Galt:

Well, Justin Slotman disagrees with

Well, Justin Slotman disagrees with my assertion that the cartoon in the new Reason (the cartoon isn't online yet, but the site's great) is anti-redneck. Unfortunately, I can't find my #$%! copy. What struck me about the comic strip was not anything in particular that it said, but rather a tone with which I am all-too familiar as a child of Manhattan's Upper West Side.

Perhaps if I'd grown up in Alabama I would have found the cartoon deeply funny (as a dear friend said: "I'm not sure whether you're conservative or just ornery"). I confess, I know few people who listen to Christian Rock on a regular basis. I suppose I am hypersensitive not because I'm particularly religious, but because in the area I grew up, making fun of rednecks is the equivalent of Jewish jokes or minstrel humor in other times and places. People who would not dream of making any sort of an ethnic comment make shockingly ignorant assertions about rednecks (or, for a change, devout Catholics), whom they sneeringly regard as a formless, undifferentiated blob of horrible behaviors. That cartoon had the same tone to me. But I shall read it more carefully and see if I still agree.

UPDATE

I stick by my assertion: it's anti-redneck. Mildly so, anyway, though not as much as any other mildly hip publication.

Re-reading it, though, I realized that I was more struck by how out of place it seemed than anything else. Reason is usually a pretty one track magazine: they address issues of regulation and government intrusion. They do it in a thoughtful, informative, and interesting way, and I look forward to its arrival every month. But it's pretty focused on markets -- not usually a lot of commentary on what people choose to do in their private lives, unless the government is somehow threatening that privacy.

So why this cartoon? It was just a straight tale of a trek through the world of evangelical Christian products, might have been funny if I knew more people like that (unfortunately, Moscow-on-the-Hudson is diverse only in the University admissions sense of the word). But it didn't belong to my sense of what the magazine is about. Usually when Reason writes about people buying stuff they want with absolutely no government interference, they're in favor of it. The author of the cartoon is definitely not in favor of Christian publishing, music or otherwise. He thinks they're -- well, the mildest word is goofy. So I suppose my subconscious assumed that this was a case of coastal people making fun of the red states. Perhaps I'm wrong; perhaps this only represents a new editorial direction for the magazine -- but I don't think that the conclusion is necessarily unreasonable.

From the desk of Mindles H. Dreck:

The price of vanity

Welcome Netscape/Mozilla users to a (finally) readable site. I apologize for offending you with crap formatting these past few days. The offending code was in the hit counters! Now you only have to put up with the different margin and padding interpretations across browsers - which make these boxes appear closer together than in i.e.

A classic tragedy -- foiled by my own vanity.

From the desk of Jane Galt:

Verizon/Sauron: Separated at Birth?

Verizon/Sauron: Separated at Birth?

Consider the evidence: both dark forces that seek dominion over the entire earth. Both willing to accept any amount of carnage in pursuit of that goal. Both have immense power deriving from. . . a ring!

The ongoing saga of Verizon: my parents' phone lines aren't working, a fact which I discovered on Saturday, when I spent a seven frustrating hours wiring the house so all the computers could get high-speed internet access, and setting up various electronic components, including the TiVo I purchased for my mother. I called Verizon to attempt to get a service call, resulting in the voicemail message I reported earlier.

Well, we finally scheduled a call for yesterday afternoon, with my mother taking the afternoon off to wait for the repairmen. No repairman. I called Verizon last night (no, my mother's not infirm -- she just has an extreme distaste for all things electrical.) They told me they'd already fixed the line on Monday night at 6:00. No one came to the apartment at six, I told them. Quickly did the girl on the other end of the phone backtrack -- they didn't come to the house you see, they just "cleared the line" from outside the house. I've never heard of this procedure, although my knowlege of telecomm technology is by no means encyclopedic. Regardless, since I had already diagnosed the problem as stemming from the cables inside the apartment -- a fact which my invariably honest mother swears she relayed to them when she called for the repair -- there was no reason for anyone to do anything other than come into our apartment with a sniffer and figure out where the break in the line was. Moreover, even if they had fixed the problem, it seems reasonable to assume that they would call to check that it worked -- and to cancel the appointment for the following day. I freely admit that I may have gotten a little loud as I pointed this out -- somehow neither my mother's gentle lessons on manners, nor my conflict resolution classes, ever quite prepared me for The Ordeal of The Utility Help Line. The girl perkily offered to send someone tomorrow, requiring my mother to take another half-day off work, or Saturday, when the apartment would have been without phones for a week and a half. All right, I got more than a little loud.

Two supervisors and one hour later, I was presented with the following options: I could schedule that impossibly inconvenient four hour block, or I could have a foreman call my mother before 10:00 tomorrow (today, now) to schedule a slightly more convenient appointment, but at a time that could not be specified. I reached into my conflict resolution manual and tried to paraphrase what he was saying. "So if I'm hearing you right," I said slowly, "we have the choice of my mother taking another half day off work, at her expense, and hoping that you show up, or we can schedule a foreman to call, and hope that he can schedule something before the next time the comet Kehoutek is in the solar system. And the reason that we have to take one of these two expensive and inconvenient options is that you screwed up."

"That's about it," he agreed.

I was a very, very good girl. I did not swear or throw the phone.

The worst thing about it is that this is absolutely typical. I mean, I get better customer service than this from Microsoft. There, they charge rates that loan sharks would consider extortionate, but at least they're helpful and polite. When the cable company doesn't show up, I get a free month. When my mattress wasn't delivered on time, they gave me $100 off. When Verizon doesn't deliver they. . . schedule another appointment. Classic monopoly behavior, which as I said before, is another reason I'm almost a libertarian.

But now the bright light of competition is breaking into the marketplace! Slaves, you need suffer no more under Verizon's lash! There's an alternative. Now, the other company may suck too -- I won't know until we try. But there's comfort in knowing that they can't suck worse than this.

From the desk of Jane Galt:

MERRILL LYNCH is laying off

MERRILL LYNCH is laying off another 9,000 workers, perhaps because the economy isn't looking quite as perky as the media has been reporting. In an excellent column, Robert Samuelson points out that the forecasters are predicting the end of this recession based on previous post-WWII recessions, which don't necessarily have anything to do with this one:

"Truth be told, most economists don't understand this peculiar recession especially well. We know this because most of them didn't predict it, which wasn't surprising, because most didn't understand the preceding boom, either.

" . . . The standard post-World War II recession has followed a familiar pattern: (a) While the economy is expanding, inflation rises; (b) to dampen inflation, the Federal Reserve increases interest rates; (c) as the economy slows, businesses accumulate unwanted inventories (excess supplies of unsold goods); (d) to reduce inventories, companies cut production and lay off workers; (e) higher inventories and unemployment cause price and wage increases -- aka inflation -- to subside; (f) the Fed then trims interest rates, and the economy recovers. The process usually takes less than a year. Since World War II, the average recession has lasted 11 months.

"By this schedule, the recession must nearly be over. It started almost a year ago. Time for recovery. Unfortunately, this recession didn't follow the familiar pattern. True, inflation did rise (very slightly) in 1999 and 2000, and the Fed did increase interest rates beginning in mid-1999. But the economy's main problems weren't -- and aren't -- inflation and excess inventories, which could be speedily remedied."

He goes on to trace the roots of this recession to the speculative bubble in the late 90's, in which I absolutely concur. A speculative boom followed by a bust was also the cause of the Great Depression, Japan's current troubles, and many more. There is no reason to think that this recession will follow the Fed-driven recessions we're used to. Interestingly, the only other post-war recession which did not follow the normal pattern is the 73-74 recession, which was deeper, characterized by "stagflation", and lasted longer than other recessions. My Macro professor convincingly argued that the cause of that recession was caused by the oil shock, which caused a real decline in productivity.

Meanwhile, the empirical evidence rolls in: the Fed chiefs are much less sanguine about the prospects for recovery than the media, predicting that we won't rally until mid-year or later. Of course, since this agrees with my earlier predictions, I'll be vindicated if they're right -- but not too vindicated, as I'm still looking for that job.

From the desk of Mindles H. Dreck:

Hoffman-La Roche accountable for Teen Suicide Pilot?

According to A.P., the student pilot who flew into a skyscraper was prescribed a controversial drug, Accutane:

The Food and Drug Administration says 147 people taking Accutane, which affects the body's central nervous system, either committed suicide or were hospitalized for suicide attempts from 1982 to May 2000.

There has yet to be any conclusive evidence, however, that the drug causes depression or suicide, and the manufacturer maintains it is safe...
Accutane's link to suicide has been the subject of a congressional investigation, spearheaded by Rep. Bart Stupak, D-Michigan, whose 17-year-old son committed suicide while taking the drug. More hearings are scheduled this spring.

Depression has been listed as a possible side effect on Accutane's label since 1986, and the FDA in 1998 strengthened the warning to say suicide, too, was possible.

Since last year, doctors prescribing Accutane have been asked to have patients read and sign an informed consent form warning that some people have developed mental problems while taking the drug.

The makers of the drug, Hoffman-La Roche, have agreed to conduct a study looking at the link between the drug's use and depression, which will begin later this year, company spokeswoman Carolyn Glynn said.

Whenever a younger person does something this deranged, the search for the "truly responsible party" begins. The fact that he was taking Accutane is an apologist's dream. He's got a poor self-image because of Acne, he takes this suicide pill from Hoffman-La Roche and bango you just gotta spend your Saturday writing a note sympathizing with a mass-murdering terrorist, flying your prop plane into illegal airspace and slamming it into an empty office building.

This is going to make some lawyer rich.

From the desk of Jane Galt:

Macro 101 JOSHUA MARSHALL questions

Macro 101

JOSHUA MARSHALL questions Larry Lindsay's economic credentials based upon his appearance on Brit Hume's Special Report. Specifically, he takes him to task for denying that unemployment insurance helps the economy to grow during this exchange (as quoted on Talking Points):

* * * * * *

HUME: I want to ask you about something else Senator Daschle said . . ."We included unemployment and health benefits for laidoff workers in our plan because, as any objective economist will tell you, it's one of the most effective ways to boost demand and pump money into the economy quickly."

Setting aside "objective," can you think of any economist who would make that argument?

LINDSEY: Well, I think the president, as you know, is very much for health benefits and for unemployment, but not necessarily for the reason the senator said. He's there because these people need help, and that's why we...

HUME: Can you talk about the economic theory, if there is one -- do you know of any economic theory under which health care benefits and unemployment benefits are used to stimulate the economy?

LINDSEY: Our view is that paychecks are what the objective should be here and not simply bigger unemployment checks.

HUME: And the reason for that is what?

LINDSEY: Well, paychecks are what grow the economy. People who are unemployed need help and we're all for that. But unemployment checks don't grow the economy; paychecks do.

* * * * * * *

Marshall's response:

"Now, Talking Points is no economist, but he had always understood that unemployment checks not only create demand and stimulate the economy (which only stands to reason since you're putting money directly into the hands of people who immediately have to spend it) but that this is the point. Unemployment insurance is intended to be counter-cyclical.

"Exactly when the economy is contracting and people are getting laid off you have a roughly proportional, if lesser, amount of money being injected back into the economy. It's a bit like macro-economic shock absorbers. This isn't 'some economic theory', it's Macro-Economics 101. "

Er, no it's not. That is, it used to be Macro 101, before Kennedy et. al. proved in excruciating detail why Keynsian economics doesn't work.*(long explanation at bottom for those who are interested.) Larry Lindsey was right on this one. Of course, he didn't make himself look good by dancing around with sound bites rather than trying to explain the issue, but if you look at the lengthy explanation I'm about to offer for why it isn't true, you'll see that it would have been impossible for him to explain on an interview show. Since the press corps largely took their one or two economics courses during the reign of Keynsian theory, and on very liberal campuses to boot, it's not surprising that Marshall should think this: the consumer spending theory of economic stimulus appears all the time in the media, used to trumpet everything from increased unemployment benefits to the Gore tax plan.

So why is this wrong? The basic media understanding of how unemployment insurance works is that it puts money into the hands of needy people who spend it immediately instead of rich people or corporations. This was also Gore's favorite argument against tax cuts for the rich. But as Rand Simberg points out, rich people and corporations don't stick all their money in a vault so they can swim around in it. Either they spend it, or they put it into some sort of financial asset (bank, stock, whatever) where it goes to someone else who spends it. Spending money on new shoes for the kids, groceries, or a car stereo creates no more wealth for society than spending on concrete mixers or luxury yachts. (I'm talking GDP, not social justice.)

The idea that government spending could somehow create wealth was based on a concept called the "multiplier effect". This was the idea that when the government spent money on, say, Hoover Dam, that money turned into concrete mixers and executive salaries that rapidly turned into luxury yachts. The luxury yacht and concrete mixer spending was translated into spending on labor and raw materials, which spending turned into shoes and groceries and car stereos, creating a little extra demand as it went -- the multiplier effect. Well, let's think about that. Where does the money the government spends come from? George W. doesn't have a money farm he harvests when the need arises; he has to raise taxes, cut spending, or borrow money -- in short, take the money from somewhere else, where it therefore does not turn into salaries, luxury yachts, etc. Zero sum game. (Unless we sell off assets to the Japanese or another foreign nation, increasing our financial capital at the expense of our real assets. I don't think that this is what Mr. Marshall is advocating.) As a matter of fact, most economists would agree that government spending destroys wealth, because government is inherently less efficient than the free market.

Of course, there is one other source of that money -- the printing press. Which is one of the reasons that Keynsian policies are so inflationary.

In fact, unemployment insurance has some measurable negative effect on the economy, because it makes the labor market more rigid; the higher the benefit, the more it costs employers to hire each new person (because of the taxes), and the longer people tend to stay unemployed, seeking the perfect job instead of something to pay the bills. Think of it this way: some number of those people could be paid to do something that someone, somewhere wants; instead they're being paid to to breathe. But they don't want to work at McDonalds or dig ditches; they want to write a novel. No one wants a novel about refrigerator magnets. Labor input decreases; GDP shrinks. The argument in favor of unemployment is the one Lindsay in fact made: those people need help.

There are only two ways for economies to grow. The first is to increase the inputs: labor, via immigration, birthrate, or involuntary servitude; or capital, via aggressive savings (which temporarily shrinks the economy -- it's one of the problems with Japan) or the aforementioned asset sale to foreign nations. The second is to increase productivity via technology, deregulation or trade. This is, I think, what Larry Lindsay was trying to say, although as you can see from the transcript, he didn't say it very well.

* It doesn't have anything to do with John Kenneth Galbraith's explanation that while Keynes expected governments to run deficits during recessions, he expected them to pay down the deficits during boom years. Deficits are certainly a drag on the economy -- they divert investments from highly valued assets like metal pressing machines to less valued projects like the Trent Lott Memorial Hogback Research Center at the University of Georgia. But they are not the problem with Keynsian economics. The problem is that Keynesian theory is -- ahem, somewhat incomplete -- while Keynsian policy is madly inflationary. Keynes was scrupulously disinterested in the long run effects of his policies; "in the long run, we'll all be dead," he said, and how right he was, except that the long run in Keynsian economics turns out to be roughly eighteen months, which leaves most of us ample time to contemplate his folly. The one model he is still widely credited for -- the famous Liquidity Trap which brought you the Great Depression and Japan's current dire straits -- turns out to be immune to his spend, spend, spend! remedy. FDR enthusiasts will tell you different, of course, but while his spending may or may not have averted a revolution, it certainly didn't end the Great Depression, which didn't give up until WWII radically transformed the world's economy. It has proven similarly ineffective in Japan.

From the desk of Mindles H. Dreck:

Traffic watch

I have two hit counters and they both disappear from time to time. No matter how you count it, however, I am well on my way to 30,000 (gee, a whole day for Glenn Reynolds), with the record day of 2,415, when Instapundit, Virginia Postrel, Matt Welch and a host of others linked up the Quindlen rant.

So I've set all the page counters to about 27,000 and held a 30-second party. Thank you very much for reading and commenting (and I do mean all of you). I am truly honored.

From the desk of Jane Galt:

More Nader Dishonesty Tech Central

More Nader Dishonesty

Tech Central Station takes down Nader's idiotic comments on wind power. We'll get you, my pretty. . . and your little watchdogs too.

From the desk of Jane Galt:

EXCELLENT ANALYSIS of the technical

EXCELLENT ANALYSIS of the technical hole Apple has worked itself into by single-sourcing its chips from USS Clueless. There's a little technical jargon, but not much, and it highlights the behavior which has gotten Apple into trouble over and over. Which is to say, Steve Jobs. Without him, the company rapidly runs off track; with him, it is beset by the endless problems created by his monomaniacal obsession with controlling every single piece of the computer. Yes, they're easy to use and reliable as hell -- but they're expensive, underpowered (except for graphics design), almost unexpendable, severely lacking software due to Apple's lack of market share and extortionate negotiating strategies, and God help you if something does go wrong!

I love the Mac concept, but I wish the company could get it together on the business side well enough to keep from plowing into disaster every few years.

From the desk of Mindles H. Dreck:

Crown Heights Riots

Smarter Times

Double Jeopardy: An article in today's New York Times reports on the decision of a federal appeals panel to order a new trial for two men who had been convicted of federal civil rights violations stemming from their behavior in the 1991 Crown Heights riot. The Times manages to write the entire article without once calling the riot what it was -- a riot. Instead the newspaper euphemises, referring to "unrest" and "violence" and "events." The newspaper also dwells on the jury selection in the original federal trial, but it never once mentions the truly knotty constitutional issue involved -- double jeopardy.

NOTE: This would have been a Bullpen post, but Blogger is inaccessible again. I may have to "de-hybridize" my site.

From the desk of Mindles H. Dreck:

Him got two Jobs

Does the new iMac bear a resemblance to the trademark mascot for Pixar Studios? Who is the CEO of Pixar again?

From the desk of Mindles H. Dreck:

the unflappable pursues the unutterable

Is it hard for you to imagine Terry Gross saying "nigger" 80 times in 20 minutes? Imagine no longer, she did it in today's interview with Randall Kennedy. If you enjoy the awkward sound of a white liberal wrestling with the off-limit parts of street dialect, look no further. Ultimately, however, she does a good job with the interview, and provides an amusing look at one of only a handful of words that makes people want to get up and legislate.

Kennedy is the author of Nigger: The Strange Career of a Troublesome Word, and a professor at Harvard Law School. He once performed a Lexis-Nexis search on the word “nigger” and came up with 4000 cases. That, he says, is when this project “caught fire.”

In the first part of the interview, Terry Gross plays a series of rap songs, goes through a long list of Rap titles (chalking up about 30 of her furtive "niggaz" in as many seconds) and plays bits by comedians Richard Pryor, Lenny Bruce and Chris Rock. Kennedy talks about how great they are and how they've "made the word their own" or "made the word less harmful" in their work. Despite the age of the material, Lenny Bruce shocks more than Rock or Pryor. It’s interesting, also, that NPR censors "motherfucker" but not "shit" and, of course, not "nigger". The comedians may have been trying to dilute the word “nigger”, but when NPR lets it go by un-bleeped, you know that “shit” has lost its ability to provoke any feelings whatsoever.

Jut before 19 minutes in the interview, Terry Gross poses "the question". She will be interviewing Ice Cube, formerly of Niggaz With Attitude. Should she say "N-word" or "Nigger"? Kennedy sensibly advises her to go ahead and say it - “On the other hand, if you want to go through life never offending anyone, then say ‘the N-word’ instead.” There are also some funny moments when Kennedy describes people carrying his book around in another’s dust cover.

Kennedy describes two criminal cases where the use of the epithet was used as exculpatory evidence on behalf of murder defendants. In both cases, however, the jury didn’t buy it. We are left wondering if there are examples where juries did reduce the degree of the crime because of the use of the term.

Kennedy ducks quickly at Gross’ questioning about the speech code at Harvard, saying only that it is his understanding that Harvard’s code mirrors the First Amendment (I'm not sure about that). Instead, he brings up an example of a basketball coach who obtains his players’ permission to use the term “niggers” (playing "like a nigger" apparently means “playing with verve” in this situation – “verve”?). Ultimately the coach was fired, but the basketball team (!) won a law suit to eliminate the University’s speech regulations.

I'm not sure using the word helps us de-fang it, as Kennedy suggests. "Nigger" is not some magical incantation with transformative powers. In some ways, I think it perpetuates its meaning and usage to throw it around the way the Chris Rocks and Ice Cubes do. If, by convention, I'm not allowed to use it in conversation because I'm white, I don't really care. If by law, well then I would certainly object.

It sounds like an interesting book - but I'd need to borrow the dust jacket from The Fellowship of the Ring to carry it around....

From the desk of Mindles H. Dreck:

Therapeutic Nihilism

Dropscan's Shiloh Bucher discusses the dubious necessity of mammograms:

..many of the lumps that mammograms find are ones which will not turn into a deadly, fast-growing, metastisizing form of cancer. Before mammography, many women died at a ripe old age with a ductal carcinoma in situ in one of their breasts. Similarly, most older men get a type of prostate cancer, but this is not what kills them.

There are lots of docs in the Hofer Family. My father calls the above skepticism of testing "Therapeutic Nihilism". My brother, who likes to ask "compared to what?", advocates that very same "Nihilism".

My mother had a malignancy discovered in a routine mammogram last year. Funny, we don't talk about this stuff....

From the desk of Mindles H. Dreck:

Appearances Count

This is a low-res simulation of what this page looks like in IE 6/win2K and Opera 6 If it doesn't look like this for you, would you let me know? Just leave a comment below.

From the desk of Mindles H. Dreck:

Baloney on PETA

InstaPundit.Com says:

PETA's lawsuit against Ringling Brothers has apparently spurred a counteroffensive. Someone who I assume to be a Ringling Bros. PR person has emailed that Ringling Bros. will be taking out full-page ads in major newspapers denouncing PETA. The old "keep it quiet and hope they'll go away" approach -- which has never worked -- is giving way to a more confrontational strategy.

I hope so. Everything we say about the misplaced guilt and disguised misanthropy of some pacifists/defeatists goes double for PETA. They tacitly encourage terrorism (as Brian Carnell's animalrights.net will tell you), and they pursue an agenda based on ignorance ("all animal experiments can be modeled on computers")and random destruction (Bridgeport).

Animals are below us on the food chain. Get over it.

From the desk of Jane Galt:

IF YOU PREDICT IT, they

IF YOU PREDICT IT, they will come. In an earlier post, I asked how long it would be before we had calls for plane control. Even as I wrote, USA Today had already kicked off the campaign.

From the desk of Jane Galt:

PRICELESS takedown of homelessness activists

PRICELESS takedown of homelessness activists from Arnold Ahlert. The whole column expertly skewers the platitudes mouthed by New York liberals on the subject. I wish I could print the whole thing here, but here's a taste:

"If the only thing these "homeless" people truly lack is shelter, why don't New York liberals start a "Spend the Night at My House" movement? Give someone a cot or a couch. Let them sleep in your house, next to you and your family. Isn't that what real compassion is all about?"

I used to work for a homelessness organization, and the problem was not about unlucky people who had one bad break too many. For one thing, the people actually out on the street are usually people who aren't allowed into the shelters because they are violent, abusing drugs or alchohol, or stealing. For another, most of the "homeless" aren't people on the street -- they're people occupying temporary shelters, public or private. My organization mostly catered to the latter sort. Both groups have tremendous problems which they will probably only overcome with expensive help -- but most of those problems are behavior based. To wit: the largest problem that our job counselors had in placing women in the work force was not day care, transportation, job skills, or any other classical barrier quoted by activists, but (I swear, I'm not making this up) the refusal of the women to seek or accept work at the same time their soap operas were on. They had become so acclimated to the welfare system that they couldn't stop thinking of a job as optional, something to do if it didn't interfere with more important things. So theoretically, a large part of New York's homelessness problem could have been solved by giving them VCR's.

Personally, I think it will take time, money, and a lot of work to overcome the legacy of the old welfare regime. I am not unwilling to give it -- but only as long as its accompanied by a tough dose of common sense.

From the desk of Jane Galt:

HOW LONG UNTIL THE PLANE-CONTROL

HOW LONG UNTIL THE PLANE-CONTROL advocates come out of the woodwork to condemn the lax laws that allowed the Bishop kid to smack a plane into a building? Or, for that matter, the gun control advocates who tried to use Columbine to push through gun control laws that wouldn't have prevented the tragedy?

When I saw the news story, I wondered why the pilot had crashed the plane on a weekend, when there was no one around. The answer, I guess, is that grandma couldn't drive him to flying lessons on a weekday. Alienated, suicidal teenage kids are dangerous, and the media and the internet seem to be an excellent source of ideas for venting their rage on others. As a friend pointed out, if Dylan Klebold hadn't been able to get guns, his backup plan was to blow up the school -- and he apparently would have been able to do it. There is no easy solution for any of this (although I think that if the media adamantly refused to publish the names of any of these kids, it would help). Nonetheless, I suspect we'll hear a raft of ideas for quick fixes in the days ahead.

From the desk of Jane Galt:

THIS MONTH'S REASON has a

THIS MONTH'S REASON has a curious anti-redneck tone. Not against people trying to make laws favoring the religious right, etc, mind you -- against the rednecks themselves. There's a long cartoon sequence bashing Christian Rock (okay, I don't listen to it, but to each his own), and then a Jesse Walker piece on Charlie Daniels that's pretty harsh, until it closes by celebrating the fact that we live in a country that tolerates such wing-nuts. It just struck me as a little odd -- Reason usually confines itself to making fun of people pushing regulations in favor of their wing-nut ideas -- they like wing-nuts.

From the desk of Jane Galt:

WE MIGHT ALL BE being

WE MIGHT ALL BE being slowly poisoned here at the site. Or we might not. Article makes reference to Gulf War Syndrome, which as I know from Michael Fumento is not, to put it delicately, supported by any scientific study. Fumento, where are you now?

From the desk of Jane Galt:

Busybodies Anonymous Ralph Nader is

Busybodies Anonymous

Ralph Nader is suing Microsoft for not paying dividends (WSJ.COM subscription required). Because capital gains are tax favored over dividends, rapidly growing companies like Microsoft often choose to let the cash accumulate inside the company's coffers instead of distributing it to shareholders, which would force them to a) pay taxes immediately (bad because as any economist will tell you, except in the case of deflation a dollar today is worth more than a dollar tomorrow) b) pay taxes at a higher rate. Ralph Nader doesn't like this:

"It's a tax-avoidance scheme for the big shareholders," Mr. Nader said in an interview. He added: "This thing is out of control. Has any company in history ever accumulated so much cash?"

He has seized on an obscure law designed to punish companies who accumulate "excess earnings" in lieu of paying dividends, and is suing, although as far as I can tell he hasn't any standing to do so.

Where to start? With the personal hatred of Ralph Nader I nurtured after a 4-month stint working for PIRG, one of Nader's organizations, perhaps. The organization I worked for was one of the many -- Greenpeace, Sierra Club, Public Citizen, Clean Water Action, Citizen Action, etc. -- that send hordes of ignorant and untrained college students onto the streets each summer to "canvass" (solicit money) for the organization. A partial list of the dubious practices these groups embrace includes:

-- Lying to the people who give money about where the money will go (over half will go to pay the canvasser; the rest to pay the field managers, directors, and associated people who put the canvassers in the field, plus a big office in Washington with a lot of lobbyists. Any research they tell you they do is of the variety done by eighth graders for science reports -- culling of secondary sources, plus some simple and usually pointless arithmetic. They do NOT perform double-blind studies, regression analysis, or any other scientifically standard research.)

-- Calling the canvassers "volunteers" despite the fact that they are paid more than half of any money they get from you

-- Bizarre financial schemes designed to trick their employees into forfeiting part of their pay

-- Relentless discussions on how best to fleece potential members that would make a direct marketer blush

-- Total disinterest in teaching those college students ANYTHING about the project for which they are demanding money.

(Side note: GIVE THOSE CANVASSERS WATER. I passed out one hot day when my turf was deserted and the few people I talked to refused me not only money, but water. So offer them a paper cup, or a drink out of the hose. But don't give them any money -- any money you give them goes straight into their pockets, or the pockets of their bosses. This is -- as far as I have been able to ascertain -- true of every group that sends people door-to-door, and certainly of the big names like Greenpeace and Sierra club.)

These organizations pass themselves off as grassroots volunteer organizations doing valuable research, when in fact they are massive fundraising machines, with the sole purpose of the funds being to perpetuate the organization so that it can come back and ask for more money. All of these practices Nader is assuredly aware of, since they are standard at every group he has founded. Nader's suing Microsoft for avoiding taxes?

Let's go to the tape. "Tax avoidance" is legal -- it's tax evasion that's against the law. Avoidance is what you did last year when you closed on your house sale two weeks early so you could take the deduction in FY1999, or delayed a bonus payment to take advantage of the new lower tax brackets. And I'm sure that Nader knew this, and chose his words carefully -- it conveys to the uneducated that Microsoft is doing something illegal, but it is not libelous, because every corporation (and almost everyone else) avoids taxes. Yet if Ralph really though that they were doing something illegal, why didn't he call it evasion?

Because it's not illegal, and Nader knows it. "Paul Sax, a partner with the law firm Orrick, Herrington & Sutcliffe in San Francisco, said the tax is levied very rarely, usually against closely held companies that obviously have tried to avoid shareholder payouts by over-reimbursing employees for expenses or making lavish purchases, such as buying yachts. He said it was 'almost inconceivable" that Microsoft could face the tax.' " In other words, the law is designed to go after companies with a few owners who help those owners to avoid taxes by purchasing them lavish lifestyles with company funds instead of paying them income, on which they would have to pay taxes. The law is not designed to go after firms that are simply accumulating cash.

Yes, it benefits the shareholders. But companies are supposed to do things that benefit the shareholders -- and if they didn't, the shareholders would sue. Moreover, all that nonsense about "big shareholders" is just nonsense. Most of Microsoft's shareholders, big and small, are probably at LEAST in the 20% bracket -- the income point at which long term capital gains are a better deal, tax-wise, than dividend income. Finally, who cares whether or not other companies have accumulated this much cash? Most companies in history haven't created this much value, either. There isn't some historical baseline of cash accumulation on which the tax law is based.

If Nader consulted a tax lawyer before he initiated the suit, he knew this. If he didn't, he's an idiot -- or playing idiot so that he can look bewildered and hurt when he gets his ass handed to him in court. Because this isn't about winning -- it's about getting more famous tilting at windmills. The ignorant will applaud as Ralph Nader Quixote will paint himself as a good guy hamstrung by the system -- rather than the unethical, power-hungry opportunist that he is. (I give you that he lives a fairly modest lifestyle -- but I think that what Nader craves is not money, but power, fame, and adulation, all of which he gets in spades. Personally, I prefer nice clean money to that trio.) Meanwhile, shareholders suffer as the lawsuit causes a decline in the value of their stock, Microsoft pays some outrageous sum to defend this, and we tie up a civil court with a frivolous lawsuit. I think this would be an excellent place for Professor Reynolds' loser pays system -- especially if we could rig it to take away Nader's fame, power, and adulation instead of his money.

From the desk of Jane Galt:

Why we should try the

Why we should try the terrorists in Virginia

From the Dave Shiflett:

". . . the fact is, Virginians will cut you but so much slack before they hang you, and if Moussaoui is guilty, he's got as much chance of surviving in Virginia as a poinsettia has of surviving on the plains of Mars. We understand that killing him can hardly atone for the enormity of this crime, which is why one visionary has suggested we clone him 3,000 times and kill all his descendants. That's not going to happen, however. We don't believe in cloning down here."

From the desk of Jane Galt:

Homegrown Terrorism That nut in

Homegrown Terrorism

That nut in Tampa who crashed the plane into the building did it for Osama. Profanity is too weak.

From the desk of Mindles H. Dreck:

MTZ is the first hybrid Blog

You'll notice that the Bullpen is up and running!! If you look carefully, you'll see I still use Blogger for it. The reason is that the you simply can't beat the "blog this" command for making quick links. So I'm still, yes still supporting blogger.

So there to the anonymous chicken emailer (whose mail now goes straight to the bozo filter) who called me "girlish" & "bitchy" for leaving. Nyah-nyah. And I mean that to sting.

From the desk of Mindles H. Dreck:

stranger than true: A Beautiful Mind

Last night I started a post on Stephen Ambrose, but went out to see A Beautiful Mind and left it unfinished. Looking around in the morning, I saw that Glenn Reynolds had already discussed Ambrose (again, and again and so have Quick and Kaus). That's more than enough Ambrose discussion for anyone, so I've decided to tell you about why this movie bothered me instead.

This is a movie "based on" the life of John Nash, and the lead character is named John Nash, and he wins the Nobel Prize, struggles with Schizophrenia, etc. They use real names of real people and places throughout. Yet the writers have taken enormous liberties with the actual events and course of Nash's life. For instance -

1) The movie says Nash had one child. He had two, one by a woman he didn't marry, and another (the one in the movie) by his wife Alicia. Incidentally, both kids are named John Forbes Nash. The way the movie describes Nash, you can't imagine him having been with another woman before Alicia.

2) In the movie, Nash makes a tear-jerker emotional speech. In real life, I don't think the Nobel prize winners make speeches. If they do, the speech seems totally unlikely given Nash's real character

3) The movie creates an entire story line about the manifestation of his schizophrenia (I won't ruin it for you). Not one bit of it is based on any accounts of his actual demons, other than it is broadly paranoid.

There are various other "creative' changes, most of them omissions (for instance, the book covers several stories of bisexuality). The movie also romanticizes his Schizophrenia in a treacly Oprah kind of way.

This quasi-non-fiction bugged me throughout the movie. I kept turning to my wife and saying "they just made this up?" (don't I sound like fun at the cinema?). If you are going to take such liberties with the story, you should change the name of the main character. People might actually think this is the true story. In the words of Kevin Meaney, "That's not right!"

For more about this, read this New Yorker review, and Nash's Nobel autobiography.

Read the book, it tells a very different story.

From the desk of Mindles H. Dreck:

The End of "The End of"

Proclaiming "the end of" things is an occupational hazard for professional pundits. I guess it makes them more exciting to read, and easier for us to call them out as Pollyannas or Chicken Littles. Consider these two columns, which appear on the same day on the conservative forum "Town Hall":

Mark Tapscott - Is Media Bias Headed for the Ash Heap of History?:

By itself, Goldberg’s fascinating book might not mean much beyond a season of frequently heated interviews of its author by former colleagues and perhaps a bit of fleeting newsroom soul-searching. Viewed in conjunction with recent events and trends, however, Bias could be another sign of a revolution that is reshaping America’s newscape. Put another way, the end of the Liberal Media Establishment could be right around the corner.

Paul Craig Roberts - Daschle assaults majority rule:

The United States is on the verge of one party rule. Democrats believe fervently in their agenda and are willing to take risks in its behalf. Republicans believe in scarcely anything but compromise. Obviously, the stronger will of the Democrats gives them the edge. Republicans are willing to stand up to Democrats only when Republicans have supermajorities behind them.

Republicans will never again have a supermajority. The Democrats have imported an electorate that supports them. Our country has been flooded with tens of millions of poor uneducated immigrants from Third World countries who vote Democrat because of the income support programs the party champions. Republicans represent taxpayers who are now outvoted by poor immigrants and special interest groups dependent on tax revenues.

Republicans stood aside for 35 years while Democrats used immigration to refurbish their political base for class warfare. Only next time around, the warfare will be much nastier -- as the class differences are now racial differences.

Republicans will collapse, because whites have been demonized. In the demonology of Cultural Marxists who dictate the agenda of the Democratic Party, the "white race" is the real world equivalent to the Dark Lord Sauron in J.R.R. Tolkien's "The Lord of the Rings."

Both columns make excellent points. Tapscott is convincing about market pressures on mainstream media, and Roberts points out the underreported extremism (althought the Times would call it "bipartisan") of Daschle's novel interpretation of the constitution.

Those points aside, is it necessary or wise to predict the end of the world as we know it? Let a little time pass, and pointing out that these guys' predictions were as wrong-headed as, say, Arthur Schlesinger's, will be like shooting fish in a barrel.

NOTE ON DASCHLE: Chicken Little aside, Roberts is right on target about Daschle. How anyone can refer to Republican initiatives as extremist and partisan, and not cry "foul" at Daschle's new supermajority requirement is totally beyond me. Go read it. And thanks Kevin Whited, for pointing out a National Review article on the same subject.

From the desk of Jane Galt:

OUTSTANDING ANALYSIS of the Argentinian

OUTSTANDING ANALYSIS of the Argentinian Crisis from the Washington Times which correctly (IMHO) traces Argentina's problems not to currency woes, but to its politics:

"Since the end of World War II, when Argentina's treasury had accumulated an unprecedented amount of gold from agricultural exports, the government has routinely used public money to obtain political support from various constituencies".

Outstanding among all the bad practices they target is something I didn't know:

"more than half of Argentina's current foreign debt comes from a federal government decision in the mid-1980s to assume the foreign debt of inefficient private enterprises in response to pressure from an increasingly protectionist local business community — in return for political support.
Moreover, Argentina also had acquired a reputation of failing to meet its obligations. Creditors grew impatient with the country's noncompliance. In addition, tax evasion became "just another national sport, like soccer," said one Argentine economist."

Blaming the US currency is silly. With its history of hyperinflation, horrible debt levels, and inefficient economy; having tried any number of "works once" tricks along the lines of seizing bank accounts and nationalizing industries-- the only thing that could save Argentina was growth. MASSIVE growth. Politically, however, the government couldn't or wouldn't enact the kind of massive reforms necessary to bring on that tidal wave of growth. Of course it was possible, with luck, that half-assed measures would work -- but Argentina was in the position of a man who, faced with losing his house, bets his remaining savings on the roulette wheel in the hopes of forestalling his loss. Either Mercosur needed the Asian-Tiger type growth levels that supported Hong Kong's dollarization (and Brazil had to play very, very nice to boot), or the American economy had to move exactly in tandem with the Argentinian. Anything else spelled eventual disaster, which the government encouraged by continuing to borrow. Short of getting in their with some marines, a whisk broom and the extra-large sized bottle of Lysol -- exactly the kind of thing people criticising the role of the US in all of this don't want -- I find it hard to imagine what we could have done to prevent this.

From the desk of Jane Galt:

Why I'm (almost) a Libertarian,

Why I'm (almost) a Libertarian, Part II

This is the message (verbatim) I received from Verizon, upon attempting to call for repairs:

"Thank you for calling Verizon. Due to excessive volume, your call cannot be answered at this time. Our repair line can be called 24 hours a day, seven days a week."

This was immediately followed by a busy signal as the Verizon voicemail system hung up on me. Does anyone believe that the local phone companies would behave this way if they didn't have a government sponsored monopoly? Even Microsoft treats their customers better.

From the desk of Mindles H. Dreck:

Blog Universe Continues to Expand

A frequent and articulate blogcorrespondent of mine, Fritz Schrank, has started his own site Sneaking Suspicions, which will soon be available at www.sneakingsuspicions.com. Schrank is also a golfer, which, all else being equal, is in his favor.

From the desk of Jane Galt:

The Last Nail in the

The Last Nail in the Coffin of Clinton's "Legacy:

Via Andrew Sullivan: the Sunday Times of London says that Clinton turned down three separate offers from foreign governments to hand over Bin Laden. If I were him, I'd start brushing up on my typing skills.

From the desk of Jane Galt:

THIS OTHERWISE EXCELLENT editorial on

THIS OTHERWISE EXCELLENT editorial on the Enron debacle in the Washington Post just can't resist getting a dig in at Bush while refusing to take down the Democratic juggernaut preparing to sling mud at the administration:

"But its focus must remain on the regulatory failures that allowed the company to defraud shareholders and workers. Enron's links to the Bush administration, a tempting target for Democrat-controlled committees in the Senate, appear less salient for the moment."

Appear less salient for the moment? How about, appear to be totally unfounded, and concocted solely for the purpose of gaining political advantage? Don't get me wrong -- if you can find one iota of proof that the administration leaned on the SEC or otherwise attempted to use its influence to help Enron get away with this crap, I'll be among the first calling for their heads. But the two major accusations levied against the firm -- that it, and its auditors, conspired to cook the books; and that it encouraged its employees to invest an unhealthy amount of their 401(k)'s in company stock -- began years before Bush took office, and have little to do with the office of the president in any case. Unlike Whitewater, where the Republicans at least had a hope that the appearance of impropriety would turn out to be actual impropriety, the Democrats can't even realistically hope that they're pinning something on Bush that he did -- they're just hoping against hope that we're stupid enough not to understand what happened.

From the desk of Jane Galt:

LOOKS LIKE Argentinians are preparing

LOOKS LIKE Argentinians are preparing for hyperinflation. They Post admirably captures their firm belief that the government will inflate the hell out of their currency the minute they can. Not so admirable is the stupid economics espoused therein, such as this treasure: "Inflation -- and especially hyperinflation -- tend to hurt the poor the most. They are less likely to have banks accounts, which can somewhat shield the impact of inflation through adjusted interest rates. In Argentina, those living in poverty -- now a record 44 percent of the population -- are the least prepared for inflation's return, having less access to hard currency and no extra cash to stock up on goods whose prices might increase." Now it is fair to argue that the poor are hurt most by hyperinflation because the poor are usually hurt most by any prolonged economic trouble. But their lack of access to bank accounts is hardly the problem -- there's a reason that they're freezing the bank accounts, sweetie, and that's that they're a terrible hedge against inflation, and the Argentinos would vote with their passbooks if they were allowed.. Much better are hard assets, which the article gives a nod to, but like the Argentinos, who are buying record numbers of expensive appliances, the Washington Post identifies things like computers as hard assets. Repeat after me: rapidly depreciating electronics goods may be better than bank accounts for hedging inflation, but they are not hard assets. Practically no Argentinos have the cash to stock up on a little real estate or precious metal, which are the real inflation hedges. If anecdotal reports are to be believed, the Argentinos who do have that kind of cash are moving it out of the country as fast as possible -- if they haven't already.

Those hurt most by hyperinflation are pensioners -- people living off financial assets. The poor generally do not fall into this category, and as their wages (unless they are living on subsistence agriculture, in which case inflation is really besides the point) generally adjust more rapidly than savings accounts rates (although of course they never quite catch up), they actually don't fair particularly badly. Best off are debtors, at least until the capital markets are totally destroyed.

Interesting side note -- the Laffer curve, which I mentioned in another post, was originally developed to describe inflation. Inflation is, as economists know, a tax -- the government benefits from insider knowlege, getting goods in return for money which they are about to make worth less than the value of the goods suppliers give them. (Clear? Imagine you own the world's only diamond mine. Imagine you trade your diamonds for goods. Imagine now, that you know that you have just hit the mother lode, and that you are about to flood the market with diamonds, so that the diamond you just traded for lunch will be less rare and valuable. That's what the government does with inflation.) However, there is a point where people start factoring in inflation to their calculations, with two results: 1) You have to pay more for things because people expect the inflation. 2) The economy tumbles rapidly downhill. There is therefore a point where the income you gain from inflating your currency peaks, and then starts rapidly heading downhill. If you are on the wrong side of the curve, you could get more revenue with less inflation. The Laffer curve was originally developed (not by Laffer; by some guy whose name I don't remember) to show that Weimar Germany was on the wrong side of the curve, as of course were all those people trucking their lunch money around in wheelbarrows.

Whew! I feel better now that I've gotten that thoroughly useless fact off my chest.

Meanwhile, James Haney convincingly theorizes that the root cause of the rioting that ousted the last interim President was the bank-account freeze. He also says my page is hard to read on some computers -- will be investigating in the future.

From the desk of Jane Galt:

Is Bill Gates Autistic? Fascinating

Is Bill Gates Autistic?

Fascinating article on the rising tidal wave of autism in Silicon Valley and what that may mean about the origin of genius.

From the desk of Jane Galt:

Why I am a Libertarian

Why I am a Libertarian (almost)

This hilarious article from the Weekly Standard on the apparently real potato cannon community (people who use homemade cannons to shoot vegetables at things) contains the line that sums up almost everything abhorrent about government in one sentence: "1998, the Bureau of Alcohol, Tobacco and Firearms released its official position on potato cannons." When our government has nothing better to do than formulate an official policy on spud guns, its time for the revolution.

This reminds me of a story my Aunt Betty, who works for the state of New York, told me. It involves douching, and I'm afraid I don't have any way in print to emulate those fuzzy Massengil commercials where they might be advertising white flowing dresses or vacations on the beach for all you can tell. So here goes.

The State of New York self insures its employees. Apparently, one of its employees, whose name I thankfully do not know, injured herself while douching. How she injured herself was a subject left blissfully unexplored. Anyway, during the course of her claims, a memo was forwarded to someone on how the injury had happened, and what the proper procedure should have been. Can anyone who's worked for the government guess what happened next? That's right -- a memo to employees on correct douching procedure was generated. Well, now that there was a memo, the next step was practically inevitable -- The Official State of New York Douching Policy. Which, according to Aunt Betty, endures still.

Now, I have no idea whether this story is true or not. But the fact that it COULD be true tells us everthing we need to know about the efficacy of Government.

From the desk of Mindles H. Dreck:

Supporting Blogger Again

Happy Fun Pundit is now ad free (or will be soon). Who says I don't support blogger?

From the desk of Mindles H. Dreck:

Fatwas Concerning...life

Bjørn Stærk has pointed me to this extraordinary compilation of "Fatawas Regarding Women". Try this one:

Divorce that takes place while the woman is menstruating is disputed among the scholars. Indeed, the discussion over it is quite lengthy. The question is whether it was a divorce that took place or a divorce with no meaning to it whatsoever. The majority of the scholars say that it is a divorce that takes place and has legal effect. That is, it is considered a divorce but, at the same time, the person is ordered to take her back and to not touch her until she becomes pure from the menses and then gets her menses a second time. Then when she becomes pure after that second period, he may either keep her or he may divorce her. This is the approach of the majority of the scholars, including the four Imams, Imams Ahmad, al Shafi'i, Malik and Abu Hanifah. However, the strongest opinion, we feel, is the conclusion of Shaikh al-Islam ibn Taimiya. This is that the divorce said during the menses does not take place and has no legal effect. This is because it goes against what Allah and His Messenger (peace be upon him) have ordered.

Is it me, or does it seem like these marriages (or divorce proceedings) don't last very long?

From the desk of Jane Galt:

Feral Sponge Attacks New Zealand!

Feral Sponge Attacks New Zealand!

There's a strange new sea creature in a New Zealand harbor. It certainly looks disgusting enough; if it gets a little bigger, I think it might get itself a movie contract.

From the desk of Jane Galt:

SPEAKING OF JUNK MAIL, can

SPEAKING OF JUNK MAIL, can someone please explain to me how hotmail's junk mail filter lets through emails advertising all sorts of unlikely propositions, but decided to kibosh my email subscription to SmarterTimes?

From the desk of Mindles H. Dreck:

Old site update

The index page on my old site now automatically sends you here. Thanks for coming. Not to worry, though, my archives are all still there so your links aren't dead. Click Here if you don't believe me.

Thanks for your patience.

From the desk of Jane Galt:

COLBERT KING has an exhaustive

COLBERT KING has an exhaustive description of the events surrounding an Arab Secret Service Agent's being asked to leave Flight 363. It looks like the airline screwed the pooch -- one report says that the flight attendant who reported his "suspicious Arabic print book" rifled the guys stuff until she found an English-print book (the agent doesn't read Arabic) on the Crusades. On the other hand, it was a middle eastern guy with a gun who said he was a Secret Service agent. I've seen Federal Government ID's -- give me half an hour, a computer, and a substandard laminator, and I could make one. Nor, if I were suspicious, would I want to call any number he gave me.

I feel about this the way I feel about racial profiling by cabdrivers -- I'm against it, but then I'm not the one who has to get behind the wheel. One of my dear friends' husband drove a cab while he was in law school, and she couldn't go to sleep until he got in ca. 4:30 am. During that year, he was robbed at gun or knifepoint something like seven times. Would I be courageous enough to stick to my principles? I can't say -- I live in the least physical danger of any generation in history. So I find it hard to judge others in that situation, even though I think that they were wrong.

From the desk of Mindles H. Dreck:

Vagaries of Style Sheets

I apologize for the lack of better content. I am mired in browser compatibility issues.

Riddle me this: How can the exact same file be read differently by Internet Explorer when it is local as opposed to on the internet (and all the links and references are appropriately placed)? (see "update" below)

I don't want to alienate Mac users, so I'm sweating this. IE5 on a Mac (my son's iMac as well as Charles Johnson's) refuses to honor my center block. But if I view the file off my local site backup it looks fine. If you think it's some weird tag or reference in my index, try loading "www.janegalt.net/plaintest.html", which doesn't using anything but the block styles. Same problem - the mac reads it locally but not off the internet site.

Style sheets are a wonderful idea. One update and all your site files change. It holds tremendous promise, but it seems that even within IE there is no consistency from one version to the next.

To say nothing of the minor differences in margins and paddings inflicted by various browsers.

I admire, but do not envy those of you who do this for a living.

UPDATE: duh! Because deep in my son's preferences it loads from the cache even when you refresh. How'd that get set that way? What's interesting is that it read the style sheet from the cache and it applied it to the new test files. Learn something every day.

From the desk of Jane Galt:

Patrick Ruffini notes that I

Patrick Ruffini notes that I haven't any email address on the page, so I've included it on your left, in the recommended format to evade spammers -- although I already get so many emails wanting to refinance my mortgage, offer me a sure-fire way to make money working out of my own home, or show me FREE pictures of hot! hot! hot! teenage girls that I'm beginning to wonder if I'm not somehow sending secret messages to the spammers via my holiday shopping. (Hmmm. . . she ordered a men's extra large heather tweed sweater from Land's End. THAT must mean she wants to see dirty pictures!)

From the desk of Jane Galt:

Argentina: the Continuing Saga The

Argentina: the Continuing Saga

The Economist has its typical thorough and insightful analysis of the Argentina problem. It brought to my attention something I had known -- but not really thought about -- before: most Argentinians keep their long term debt in dollars, since banks (correctly, it turns out) don't trust the government not to impose a little ad hoc debt relief via hyperinflation. Thus, all the ranting about how the United States is crippling Argentina's capital markets is wide of the mark; those markets trade in dollars. Yes, the Government could follow Paul Krugman's advice and convert all those loans into pesos so that the magic of inflation can make all those voters' debts disappear. But like everything else the Argentinian government has done to its economy, these things are one trick ponies -- how will you build any sort of capital market if lenders think that the government will seize investments at will?

"The Operation was a success, but the patient died." Converting debts to inflatable pesos (sounds like a not-very-successful children's game) would solve the immediate problem of stagnation due to crippling deflation only by replacing it with an equally immediate problem: cobbling together any sort of working economy. Economies above the level of agrarian thugocracies are dependant on a functioning capital market of some sort. If the government changed dollar debts into pesos, the capital flight would make the '98 Asian crisis look like a day in the park. Restoring sufficient confidence to build a functioning, entrepreneurial economy after such a step would take exactly the sort of drastic steps that Argentina's political class has been previously unwilling or unable to make -- which is what got the country into this mess in the first place.

The Economist article offers this and several other key insights, but its typically understated style gave me a belly laugh. "They face some tough decisions," says the Economist. Why, yes they do: "The economy is on the brink of collapse and the country is divided by political factionalism and social strife. Since July, Argentina’s economy has contracted at an annual rate of 11% according to one estimate. Nearly a fifth of the workforce is unemployed. The informal economy was also hit by the unpopular decision to limit the amount of cash which savers could withdraw from banks. Unless Mr Duhalde acts decisively, there is a risk that Argentina could slide towards anarchy and mob rule." Impossible choices might be a little closer to the mark.

From the desk of Jane Galt:

Another Link As I was

Another Link

As I was cruising around Patrick Ruffini's excellent site, what did I see but my name in the links section! It was the first time (as far as I know) that someone's spontaneously linked to the site, and it was quite exciting. So thank you, Mr. Ruffini, if you're reading this, and I hope your readers are enjoying this half as much as I've enjoyed your site.

From the desk of Jane Galt:

Why does a Week Have

Why does a Week Have Seven Days?

Cultural Imperialism, says the Economist. I've always wondered, but assumed it was because one week is a quarter (almost) of a lunar month. Turns out the explanation is much more interesting than that.

From the desk of Mindles H. Dreck:

Quoting Quindlen in a Querilous Daze

Anna Quindlen's remembrance of the World Trade Center is over the top. She seems to think that living through this event makes boomers like us the Greatest Generation:

The Twin Towers were as much creatures of the baby boom as we, conceived in hubris in the halcyon days after World War II, developed during the optimistic ’60s, launched in the ’70s, bigger, better, more. The children whose progress mirrored the towers’ own were forever young, a generation who had neither the tests of mettle of their predecessors, who knew about war shortages and bread lines, nor even the shadowed existence of their own children. The last generation of kids to ride bikes without helmets or pagers, we had childhoods before crime and sex before AIDS. We believed drugs could be recreational and drinking social and the great formative trauma for those who evaded Vietnam was waiting in long lines for gas. What a charmed, deluded life we led!

"Conceived in hubris in the halcyon days." Don't you love it?

No misanthropy in this column, but a whole lot of strange and atmospheric babbling, and way too many one-word sentence/inventories:

Gone: that is what death is. Disappeared. Erased. In its usual places the beloved object cannot be found. Rector Street. West Street. Park Place. The skyscrapers all around make the vast hole seem larger and more unnatural. Without the behemoths at their center they seem strangely denuded and vulnerable, or perhaps that is only projection on my part. The spire of Trinity Church seems taller now without the Trade Center as its foil. The rounded headstones in the old churchyard behind its iron fence, worn and blurred by the passage of time, are instructive.

Boring. That's what uninteresting is. Not holding interest. Reading column. No point. Depressed. Metaphors and similes compare things to other things. How young I was before I started reading this column....sigh.

From the desk of Jane Galt:

Moral Dilemma of the Minute

Moral Dilemma of the Minute

One of my guilty pleasures is reading the Amazon customer reviews of controversial books, such as Michael Bellesiles' Arming America. The pro-book posts, while heavily larded with fulmination about right wing gun nuts, seem to have some good points, notable among them that the controversial research is actually a small part of the book. So the moral dilemma: do I pay money to find out for myself, thus lining the pockets of someone who has, to all appearances, committed massive scholarly fraud, or do I paddle along in ignorance?

From the desk of Jane Galt:

First US Soldier Killed by

First US Soldier Killed by Afghan Enemy Fire

Straight from the Washington Post, a Green Beret was killed by small-arms fire near the Pakistan border. They're witholding his name until they can notify the family. I don't want to hear any more from the supporters of Taliban Johnny that he wasn't there to kill Americans. That's exactly what he was there for, and I have little doubt that he knew it.

From the desk of Jane Galt:

THE NEW YORK POST SAYS

THE NEW YORK POST SAYS that if the government gets involved in the WTC reconstruction
all we'll be left with is a hole in the ground.. That being what we have now: I took my first walk through the site for a couple of weeks today, and the scope of the progess is breathtaking; a huge multistory culvert has been revealed, while the rest of the site looks like an enormous quarry. While my personal preference is for a memorial park, such a thing would almost certainly destroy the lower economy of lower Manhattan. Which may be the point for many groups; the article points out that the environmental interest groups would like to see "lower Manhattan returned to its natural state". Which is a joke, since the portion of lower Manhattan in question's "natural state" is the Hudson River Estuary -- the entire thing is built on landfill. The article gives an excellent overview of all the various interest groups that will conspire to see nothing gets built (no, not on purpose -- think gridlock) should the government take over the project.

From the desk of Jane Galt:

ALL RIGHT, ENOUGH OF THIS

ALL RIGHT, ENOUGH OF THIS WAR STUFF -- let's talk politics. In the New York Post, Jonathan Podhoretz posits that 2002 will be s surprise to everyone due to gerrymandering, which Mickey Kaus takes down in his latest assignment desk. Meanwhile, Patrick Ruffini brings us Bush/Rice '04. What I want to know is who the Democrats will put up? I've said for a long time that the Democrats would never nominate Gore again, and the numbers seem to confirm it. It seems clear that John Kerry is out of the running. Daschle? Gephardt? The one's too far to the left; the other, IMHO, just shot his campaign in the foot by arranging for the stimulus bill to fail. (For which I humbly thank God every day. Nonetheless, it won't do him any good -- and you can tell he knows it, from the desperate, pleading tone in his voice when he says "a bad stimulus bill is worse than no stimulus bill at all". I'm not sure Daschle will work out in the majority as well as he did in the minority; as Grandma says, "if 'no' is all you have to peddle, go knock on someone else's door.")

This leaves you know who -- the one who looks like she's laying the groundwork for a run the same way she did for her Senate race -- slowly and carefully. I can't stand the lady, kept my voter registration in New York during my years at school solely so that I could vote against her, and doubt that she has the charisma to be elected president. But looking back on the masterful way she built up to victory in New York, I have to give her credit for having a great deal more political savvy than she lets on.

From the desk of Mindles H. Dreck:

Jacobs on Klein

Joanne Jacobs, who still eschews permanent links, slams Naomi Klein.

Bjoern Staerk unearthed an odd column by Naomi Klein, who seems to think everything -- the Cold War, Islamic terrorism, computers -- is about shopping. Which --unlike evil -- is evil.

In her world, nobody wants a new sweater without ineptly darned holes in it. No, we sheeplike consumers go to the mall in search of mythical grandeur, ideological victory, metaphor and meaning. Not a navy blue crew neck on sale.

During the Cold War, consumption in the U.S. wasn't only about personal gratification; it was the economic front of the great battle. When Americans went shopping, they were participating in the lifestyle that the Commies supposedly wanted to crush. When kaleidoscopic outlet malls were contrasted with Moscow's grey and barren shops, the point wasn't just that we in the West had easy access to Levi's 501s. In this narrative, our malls stood for freedom and democracy, while their empty shelves were metaphors for control and repression.

But when the Cold War ended and this ideological backdrop was yanked away, the grander meaning behind the shopping evaporated.

Leaving us with a wide choice of goods at affordable prices.

From the desk of Jane Galt:

A Legend Ends The Philly

A Legend Ends

The Philly Inquirer reports that Bookbinder's closed. The Philadelphia of my youth is passed.

From the desk of Mindles H. Dreck:

Eric Burdon on Gun Control

I'm not particularly interested in guns and the Second Amendment, but I know several of my favorite bloggers are. So I offer up to them the views of Eric ("Please Don't Let Me Be Misunderstood") Burdon, former lead singer of The Animals on All Things Considered last night.

They come towards the end of the segment. I won't ruin the fun.

From the desk of Jane Galt:

Some guy I've never heard

Some guy I've never heard of thinks that the anthrax letters were sent by a bio-defense specialist in order to raise the profile of bio-weapons. The evidence seems a little thin -- the anthrax was well-weaponized, of the same (extremely common) type the US bio-defense program worked with, and the envelopes were tightly taped. While he sounds a little like those guys in Idaho ranting about the black helicopters, I suppose it could be true.

From the desk of Jane Galt:

Where is the center of

Where is the center of American Politics?

Krugman (natch) says that it's where the democrats are. He bemoans the (well, let's posit it, anyway) fact that the Republicans have shifted to the right while the Democrats have stayed put. This is the same phenomenon that plagues the liberal camp in so many quarters -- choosing your baseline year with exquisite care in order to bolster your position. To wit: the Crusades were a religious war during which we tried to steal land from its rightful owners, the Muslims. Baseline Year, ca. 700 AD. But let's set our baseline year 150 years earlier. Now we note that the Muslims stole that land from its rightful owners, the Christians. 700 years earlier: Rightful owners, the Greeks. Before them, the Persians, Babylonians, Jews, Canaanites (from whom some have argued that the Arabs are descended). . . you get the picture.

Similarly, Paul Krugman is saying that in the 70's, the political spectrum was considerably skewed to the left. He calls that center the "real" center. But I don't like that baseline year. I prefer 1920 (since it's older, it must be more authentic, right?). In which case Krugman is a red-loving nut and I'm a libertine radical. An excellent article linked from FrontPage attributes this to lack of self-reflection or coherent philosophy on the part of liberal intellectuals.

From the desk of Jane Galt:

Instapundit can't get to Andrew

Instapundit can't get to Andrew Sullivan's new website from Netscape, only Explorer. I can't get to it at all, which leads me to believe that the problem is not the browser. I think I'm starting to go into withdrawal. . . the snakes! the snakes!

From the desk of Jane Galt:

Let's Vote Ourselves Rich! The

Let's Vote Ourselves Rich!

The New York Times says that the most important thing Argentina's new president must do is build consensus. Not find a way out of the currency crisis. Not meet the challenges the nation faces in the wake of its foreign debt default. Not, God forbid, liberalize its moribund regulations, regularize its tax system, and provide the framework for stable, entrepreneurial growth. No, what Argentina really needs is a big bipartisan hug, cuddle, and smooch to get itself out of this mess.

What's particularly odd to me (although not, I admit, to the editorial board of the Times) is that the article takes no interest in what this consensus would enable the new president to accomplish. While there is an argument to be made that the president will require as broad a coalition as possible in order to avoid rioting following the strong measures necessary in order to put the economy in order, the Times scrupulously avoids making it. No, consensus is an end in itself, like peace on earth or chocolate ice cream.

From the desk of Mindles H. Dreck:

Cybersquatters and their dotcom booty

Maybe the guy who owns morethanzero.com will give me a break now:

Cybersquatting, the speculative registration of Internet domain names which turned into a cottage industry at the height of the dotcom boom, appears to be dying as demand wanes for names, industry experts say.

From the desk of Jane Galt:

THE WALL STREET JOURNAL offers

THE WALL STREET JOURNAL offers Six signs to look for that the recession is coming to an end.

1. Businesses start investing again, especially in technology

Mmm. . . yes and no. Certainly we won't see the recession end without a pick up in investment. But looking for technology to end the recession may be a mistake. Software, maybe -- but my professional judgement is that the heydey of firms turning over their technology infrastructure every two years are over.

2. When companies start warning of better, instead of worse, profits.

Sounds good to me.

3. When stores and dealers start complaining that inventories are low

Okay. . . but while the tone of the article is optimistic that the end of the recession may be near, here the authors admit that in fact the only business where inventories are currently tight is autos. As I've said elsewhere, 0% financing is not a reliable guage of where the economy is.

Interesting side note -- Just-in-Time production was supposed to reduce the role of inventory in the business cycle. Turns out inventories still play a big part -- but I suspect that if this recession is short, a lower build-up of inventory due to JIP will be part of the reason.

4. When sales of high-end homes strengthen in high-tech hotbeds.

Er -- not. Those homes were MONSTROUSLY overvalued. Friends on the west coast report that many owners are stuck in an equity trap, where the mortgaged value of the home is higher than its current value, and owners are grimly holding on to avoid losing everything -- a fate avoided in Manhattan only because co-op boards usually won't allow you to mortgage up more than 25%-50% of the value of your home. If they were sensible, of course, they'd let the homes go -- but then the raft of defaults would make it hard to get a mortgage in the Bay Area anyway, not to mention the damage to credit ratings. . .

This article is terribly sure that the next boom will be as tied to technology as the last one was. Follow this logic too well and we'd all be plowing our money into whalers and railroad stocks.

5. When aluminum smelters start making aluminum again

This is a reference to the California energy crisis, which drove prices so high that aluminum producers with long-term contracts found it more profitable to shut down their smelters and resell the power than to make aluminum. Now that energy prices are falling, they still aren't -- because the global recession has left aluminum prices weak. Seems a minor point, but it's certainly an interesting one.

6. When Gary Condit returns to the Headlines

I don't even want to discuss this one. The only way I want to see this man in the headlines again is if he's arrested or dead. (No, I am not wishing for his death. May it be many years off and may I never hear his name again until that sorrowful day.)

From the desk of Mindles H. Dreck:

No Famine in Afghanistan

The Omaha World Herald breaks some news this morning that ought to get wider play:

Catherine Bertini, executive director of the United Nations' World Food Program, declared: "There will be no famine in Afghanistan this winter." Her organization has been trucking food, much of it supplied by the United States, into Afghanistan from five surrounding countries since the Taliban were defeated and a new Afghan government was installed. Sufficient supplies of wheat - an important staple for Afghans - have reached even the mountainous areas of the country.

A distinctly pessimistic voice has changed its tune, too: Andrew S. Natsios, administrator of the U.S. Agency for International Development, said: "I thought and feared earlier I would be facing a famine next spring, but now I believe we will not. It was caught at an early stage, despite the war."

Aid officials agreed that even if many of the 4 million Afghan refugees in surrounding countries begin to return, there will be enough food.

I hope somebody tells the people at Common Dreams.

Of course, proceeding from the premise that we're aid-stingy non-humanitarians, it just couldn't possibly be so.

From the desk of Mindles H. Dreck:

The new, peaceful Sean Penn

Noted non-violent star Sean Penn apparently objects to the implied violence of Fox News' Bill O'Reilly:

"He's a grumpy, self-loathing joke. There's a long history of people who capitalize on the lowest common denominator of people's impulses, Adolf Hitler being one of them. Not everybody wants to hit the wall in a violent rage and break their knuckles, so he does it for them."

Penn, known the world over for his restraint, likened O'Reilly and Stern to Hitler and the Taliban in this interview.

Well, at least he didn't say they were like Paparazzi. Because we all know what happens to them....

From the desk of Jane Galt:

A Vote of Confidence for the Euro Zone

Perry DeHavilland predicts disaster for the euro. I can't argue with his conclusion -- he's closer to it than I am, and he thinks, per my post below, that the eurocrats will succeed in forcing social policy to the greatest common denominator.

Now that the Euro is a fait accompli, the long slow glide begins, perpetually pointed just below the distant horizon. The interest rates prevailing across a very significant area of the industrialised world will now be set to suit the business cycles of France and Germany. Many predict that once the economies of Europe are integrated like that of the United States, that will cease to be a matter of concern. And of course they are correct, once the fringe economies are flattened.

However, I have to take issue with his monetary analysis:

All that is different in Europe because whereas NAFTA has purely economic objectives, the Euro has mostly political ones. Sophisticated and relatively efficient European core economies will no longer have to deal with defensive depreciation of Spanish, Italian, Greek or Irish etc. currencies and will simply wipe out pools of local capital that might have buoyed up less effective local producers. This in and of itself is not automatically a bad thing, provided the local capital markets can adjust... which of course they will not be able to do. The mid to late 1990's surge in the US economy was a disaster for Argentina, whose currency was pegged to the greenback, because unlike the US, it was not experiencing an economic surge. No mechanism was readily and incrementally available to off-set the asymmetries by allowing the currency to naturally devalue. With the Euro, which is in effect an ersatz Deutschmark/Franc hybrid, this same toxic effect will happen to Greece, Italy, Ireland, Spain, Portugal etc. with one big difference... it will probably happen to many of them at once when the cycle begins, as it surely will.

I've done a little classwork on the Argentinian crisis (a couple of my professors saw this coming last spring), and my impression is that the capital markets are not the greatest problem Argentina faces. Argentina's inability to issue debt was due to its moribund economy, which in turn was due to a competitive devaluation by Brazil which Argentina was unable to follow, and a combination of social and economic policies that left the government unable to cut spending or rationalize inefficient sectors of the economy. With its own currency, it's a (fairly) easy bet that Argentina might be still solvent -- but only because they would be inflating their way out of the problem, destroying the value of financial assets and devastating their capital markets much more thoroughly than dollarization did. We might also explore the "death spiral" effect of repeated competitive devalutations; check Europe in the 1930's.

Yes, Argentina suffered from deflation. But deflation doesn't have to cause suffering -- we had it for quite some time without serious damage, both in the 19th century and in parts of the 20th. Deflation is a problem when it is a) sudden and unexpected and b) accompanied by structural problems in the economy: a speculative bubble and subsequent problems with the banking system in 1930's America, combined with an idiotic obsession with Keynsian economics manipulating gold; a speculative bubble and subsequent problems with the banking system in present-day Japan, combined with an all-too realistic obsession with Keynsian economics and the demographic disaster heading down the pike (their incredibly low birth rate: they're not even replacing themselves. The Japanese thus are determined to save! save! save! for their retirement.) This causes what is known as a "Liquidity Trap", in which the government is powerless to reverse deflation through traditional means because (this is a gross simplification, but well. . . ) because any money they inject into the economy gets stuffed under mattresses instead of spent.

All of which is to say that while I agree that rigidity in the labor and (possibly, if the governments are really slow and stupid) capital markets will make local monetary policy extremely problematic -- as it already did in Ireland (outrageous tax surpluses as they tried to substitute fiscal policiy for monetary policy to keep growth at a sustainable level). Nonetheless, I'm betting Ireland will do okay. The effect of government policy will be much more pronounced, IMHO, than transient currency issues. Business cycles DO harmonize -- witness that Ireland moved off Britain's cycle onto Europe's without major disaster (I think -- I may be treading on thin ground). They can't harmonize if the government interferes. So I predict that government policies will be much more important than monetary fluctuation in the coming years.

From the desk of Mindles H. Dreck:

Bias is fun, but not that informative

The Wall Street Journal hyped Bias by Bernard Goldberg in it's lead editorial column yesterday:

He explains matters like the strange way anchors have of identifying conservatives as such but not those on the other side of the political spectrum. And so CBS identifies the famously radical feminist and leftist Catharine MacKinnon as a "noted law professor" while Phyllis Schlafly is a "conservative spokeswoman." Rush Limbaugh is the "conservative radio talk show host" but Rosie O'Donnell, who (while hosting a fund-raiser for Hillary Clinton) referred to Mayor Rudolph Giuliani as "New York's village idiot," is not described as the liberal TV talk show host. What this says, Mr. Goldberg notes, is that conservatives require identification because--in the world view that prevails at the networks--they are outside the mainstream.

Here's the problem. The WSJ just gave you about 15% of the hard information in Bias. An awful lot of the book is invective against the CBS folks (particularly Dan Rather) who ostracized him. Not that that isn't amusing (much like a late night blog post, really), but I felt there could have been more hard examples of how the bias affects the presentation.

I believe those examples are all around us. Lord knows the blogging community and special purpose 'zines like Smartertimes pick them up every day. So I was disappointed that Goldberg left himself open to the inevitable dismissal from the left as a "polemic." This time, they will have some justification for making that charge.

From the desk of Mindles H. Dreck:

Helping Blogger?

Alex Knapp is concerned that by possibly moving away from Blogger I'm not supporting it. My defense against this allegation goes to the heart of Blogger's business model. By simply using it, I don't think I'm giving it much support. I've knocked the ads off all my sites and will continue to pay for it. That's support.

Today, the "blogback" comment script isn't working for the 500th time, slowing down my page horribly even as another instapundit avalanche comes in. And the blogger server was pretty slow for posts last night.

I want Blogger to survive. l continue to keep this site up, and pay for the ads. But I' d like a good-looking, functioning site that loads quickly, and Blogger hasn't felt stable lately.

I think Ev's move here would be to start making deals with ISPs, or even re-selling their services. Most people don't use the web space that comes with their ISP, and Blogger gives them an easy way to do it. If an ISP subscription came with a blogger account (with whatever updates he's planning) fully configured, that would be perceived as value-added from the consumer side. This business model would probably result in Ev selling to AOL and becoming very wealthy. 300,000 subscribers is a real number, even to AOL with 20 million subscribers.

So that could be good for Ev, and would ensure his survival and greater bandwidth....

From the desk of Mindles H. Dreck:

Kry for Me, Kleptocracy

A reader ("Eric") writes in on my Krugman/Argentina post:

'Mindles', it's sad that Krugman can only deal with Argentina as a political football. But his conservative opposition hasn't been much better, calling instead for more liberalization when 20% of the people are out of work isn't going to happen.

The sad thing is, the US Fed was the cause the deflation in Argentina, but the deflation is affecting the US economy as well. The best way to solve the problem would be for the US to devalue. That would end deflation in both countries.

I responded:

Well, a U.S. devaluation is an interesting idea, but it doesn't cure the following Argentine problems:

1. A tendency to confiscate private wealth - bank accounts (which they did in 1989 as well as recently) and private retirement plans, whose assets they confiscated and replaced the assets with worthless government debt.

2. Fiscal irresponsibility. Argentina was about 10% of emerging market GDP but accounts for 65% of sovereign emerging market debt.

Without fixing these things, the government will always receive a no-confidence vote from its citizens. These are the core issues, and a U.S.-cushioned devaluation would be only a band-aid, if that. This is over. Argentina's joining the ranks of fourth world countries. Krugman's probably right about that. But it's kleptocracy that done it.

Now Fredrik Norman, John O'Leary, Ian Vasquez, Walter Willaims, Ana Eiras and Fredrik's readers are weighing in, particularly on the "kleptocracy" charge:

[Not] a single Argentine government since the 1930s, "capitalist" or otherwise, has made protecting property rights a cornerstone of its reforms.

Rather than excerpt further from Fredrik's post, I'll just suggest you go there. I will add, however, that Hernando de Soto's The Mystery of Capital is a topical read on on how property rights and the legal systems to enforce them are the major hindrance in "third world" development. To get a sense of his thinking, you can read , this interview. The following is a decent summary from Tim Murphy's review:

.....such countries have yet to establish and normalize the invisible network of laws that turns assets from "dead" into "liquid" capital. In the West, standardized laws allow us to mortgage a house to raise money for a new venture, permit the worth of a company to be broken up into so many publicly tradable stocks, and make it possible to govern and appraise property with agreed-upon rules that hold across neighborhoods, towns, or regions. This invisible infrastructure of "asset management"--so taken for granted in the West, even though it has only fully existed in the United States for the past 100 years--is the missing ingredient to success with capitalism, insists de Soto. But even though that link is primarily a legal one, he argues that the process of making it a normalized component of a society is more a political--or attitude-changing--challenge than anything else.

The most fundamental "attitude change" necessary for capitalism to work has to come from the government. They have to protect your right to property, and they certainly can't just confiscate your assets.

The Mystery of Capital excerpts extensive research on the proprty documentation process in developing countries performed by de Soto. He has painstakingly chronicled the number of steps necessary to open a newstand or start a grocery in various countries, even depicting the process graphically (and amusingly). Argentina definitely still had these problems. Here's Ian Vasquez on Argentine red tape:

Regulation continues to be a problem nationwide. To open a business in Argentina, for example, requires 12 bureaucratic procedures, 77 business days and $2,100 in fees. In Canada, by comparison, the same operation takes 2 days, 2 procedures and $280. Argentina’s extremely rigid labor laws, a legacy of the authoritarian Peronist era, also remain unreformed. The consequently high cost of labor is directly responsible for the country’s chronically high unemployment rates that have ranged from 14 to 18 percent in the 1990s.

De Soto's book, written well before Argentina's current crisis, is relevant reading, not only to analyze Argentina's half-baked reforms, but also to think about some of the reasons the secular Islamic kleptocracies have failed to grow consistently, and are breeding terrorists instead.

From the desk of Jane Galt:

Whither the Euro Zone?

Sorry for all the links to a subscribers-only site (highly recommend getting a subscription, though), but this article on the euro is too good to pass up.

It's authors make several great points:

1) Transparent purchasing decisions mean the effective end of individual governments to offload social costs onto businesses and consumers. Make your VAT too high and ALL your buyers -- and investors -- will decamp elsewhere.

2) Labor, on the other hand, will remain largely immobile for some time. This could be disastrous for regions like Spain, with high unemployment and now no ability to affect monetary policy. The authors fret that these regions could become permanent wards of the EU.

3) Their most interesting suggestion is that people who believe that their labor markets are too rigid and social spending is too high, but despair of changing it, are using the Euro to, as they put it, "Bring in Thatcherism by the back door."

The idea that the Euro will create a Thatcher-like revolution is interesting -- and certainly possible. I think it is also possible, however, that the pressures will work the other way, forcing all member states near to the most rigid controls in the union, rather than the least. I do think that whichever way it goes, all governments will have to go to one standard or the other. Which one they choose will depend on how badly powerful decision-makers like France fare under the new regime, and how the politics of consolidation plays out.

From the desk of Jane Galt:

Drug Companies Threaten Europe Having

Drug Companies Threaten Europe

Having only recently convinced my mother that the reason drug prices are so high is that the US is funding all the drug research for the world, rather than because drug companies are evil price gougers, I was interested to see this article in the WSJ saying that drug companies have threatened to pull some drugs off the market rather than sell at marginal-cost pricing (subscription required. As the article notes, the average cost of research and developement for a new drug is $800 million; for political reasons, monopoly health providers in Europe try to force companies to sell the drugs based on what it cost to make them, rather than what it cost to develop them in the first place, leaving the drug companies to recoup the entire cost of development in the only remaining free market: the US. Now that US consumers are starting to rebel, drug makers have threatened to pull some of their patented products off the shelf in key nations like France rather than accept such below-market prices.

However, I'm not sure it will work. If Pfizer pulls Viagra, will France just stop offering it because it's under patent -- or proclaim the right of the people to have -- er, ahem, anyway, proclaim the right of the people, and authorize a generic manufacturer to produce it? I don't know how possible it is -- but mightn't the drug companies start refusing to patent their product, selling it only by mail from some unregulated island? After all, if the governments of the world succeed, they'll legislate the companies out of existance anyway, for the short-term political gain of lower prices. An interesting thought, anyway.

From the desk of Jane Galt:

Long Distance Bills Rising Fascinating

Long Distance Bills Rising

Fascinating article in the WSJ (subscription required) on says major long-distance carriers are raising the rates. It seems that AT&T; is trying the same strategy as big-city mayors during the 70's -- as they lose rate payers (mayors to the suburbs; major carriers to wireless and email), they're making up the revenue by raising rates. If it worked in Detroit. . .

Even more interesting is the payments to the "Universal Service Fund". These are mandatory lump sums the carriers have to pay into the fund that subsidizes rural telephone service. Leaving aside the question of whether land lines are the appropriate technology in the age of wireless, that subsidy is apparently 10-11% of the original bill. Lesson on Why Things the Government Gives Away are Not Free: Next time you open your phone bill, say to yourself "Approximately 10% of my long distance bill every month goes to the fund that makes sure Harrison Ford et al have phones on their Montana ranches."

From the desk of Mindles H. Dreck:

My Local Phone Authority Company

Imagine if your CD player were not functioning, and you called the manufacturer's support line:

"Hello, this is dwzlfghjmurmph, may I have your serial number please?" "Uh, where is it?" "It's inside the chassis. All you need is a drill press and some C4 - I'll walk you through it" "Won't that void the warranty?" "Well...it can also be found on your manual" "OK, here it is" "Thank you, and the area code your calling from?, Have you called us before? Your mother's maiden name? Your social security number?" "Could we cut to the chase?" "What seems to be the problem?" "My CD player doesn't play CDs." "Which CD are you playing?" "Well I tried a few different ones" "Could you put in Lawrence Welk's Greatest Hits?" "I don't have that disk" "I'm sorry sir, we only support using Lawrence Welk's Greatest Hits in our CD players..." "What was your name again?" "Let me put you on hold for just a minute"

You're thinking this isn't too far-fetched if the RIAA gets their way. But that's not my point. My point is that Verizon (formerly Bell Atlantic) is a company that would like to put its customers in jail, or at least a straitjacket. I use their DSL service, due to a lack of broadband alternatives. One of my pet peeves is that they only provide support if you use their 3rd party PPPoE provider, WinPoET, from Ivasion. I ditched it a long time ago - dubbing it "Ivirus", because it behaved like a severe infection. Uninstalling it was the best thing I ever did for system stability. Furthermore, it was slow. A good product description for WinPoET would be "DSL at dial-up speed!" Ivasion also takes forever to come out with new versions for OS updates.

The new solution is a router with PPPoE in the firmware, and that really works well. It's much faster than Ivasion, easier to maintain, easy to configure and update from a browser, resets with the touch of a button, and performs the function of a NAT firewall to boot. (Oh, by the way, Verizon doesn't want you to install any firewall software you've ever heard of either). I've been telling Verizon until I'm blue in the face that they should contract with the router vendor to combine the router with the DSL modem. Then they wouldn't have to do any OS-based software support, and the access software could be maintained through the customer's browser, or even the support desk's browser. They could package it with a simple non-invasive diagnostic package for troubleshooting. Apparently, nothing simple and obvious occurs to them. They would rather make the user change his software, operating system and network configuration just for the privilege of using SauronVerizon as his ISP. Oh lucky us!

But if I admit that I use the vastly superior router, they won't talk to me, or even let me report a problem on their end. I can understand them not wanting to pinch hit for my router manufacturer (which supports all kinds of third parties!). What I don't understand is why they won't even let me report a service outage. The DSL modem tells me whether the signal is good. But they won't accept that news without attempting to force me to disconnect from the router and install Ivasion. "The problem must be with the set up, not us - can I close your issue now sir?"

Then, yesterday, the coup de grace. I have been having a problem with outbound email, where the SMTP server times out. I call to work through this and...they won't help me unless I install Outlook Express as my mail program. No Outlook, no Eudora. Well, if they hadn't alienated most of their audience with the Ivasion thing, this ought to do it.

Verizon has rigid, bureaucratic and customer unfriendly tendencies, and I absolutely hate them for it, as do a few DSL Reports respondents (notice on the sole happy Mercer County post the guy is crowing about 70Kbps?). Until RCN installs digital cables, I don't have the greatest alternatives for broadband. This company would die immediately in a truly competitive marketplace.

From the desk of Mindles H. Dreck:

Contacting Me

If you want to contact me, leave a comment on this post. They are all forwarded automatically.

From the desk of Mindles H. Dreck:

Weblog Software Review

Like Steven Den Beste , I was troubled by the reliance of our weblog community on Blogger. Steven has moved to City Desk software. Taking my cue from Fredrik Norman, I have spent the last 10 hours setting up and trying out Moveable Type ("MT"). MT holds out the possibility of being updated from anywhere on-line via CGI like Blogger. City Desk has to be running locally on the computer you are using. So with MT you don't need a direct FTP connection to add posts and republish. FTP is cumbersome from a borrowed PC, even if the ports are open for it.

MT seems to work very well, but for the horror of importing old blogger entries. The import function is finicky about the format. You have to create a special template and republish Blogger into it, and for some reason, the text gets all garbled when I pull it into notepad. There are spaces and returns/no returns where the importer needs them, So when you import it, it looks like one of those messed up forwarded e-mails you get sometimes, or it doesn't get in at all.

The rest looks great (aside from that Mrs. Lincoln...), and the support forum is very responsive. But the importing is driving me NUTS. Perhaps there is a text editing tool that can help me with this.

Excuse me for being repetitive, but remember to set your links and bookmarks to www.janegalt.net. Whatever software I end up using, you'll find me there.

From the desk of Mindles H. Dreck:

Must be our fault

Paul Krugman makes an ad Afghanistan argument about Argentina today in order to take a swipe at "neo-liberals":

It's just another disaster in a small, faraway country of which we know nothing — a country as remote and unlikely to affect our lives as, say, Afghanistan.

....Here's how the story looks to Latin Americans: Argentina, more than any other developing country, bought into the promises of U.S.-promoted "neoliberalism" (that's liberal as in free markets, not as in Ted Kennedy). Tariffs were slashed, state enterprises were privatized, multinational corporations were welcomed, and the peso was pegged to the dollar. Wall Street cheered, and money poured in; for a while, free-market economics seemed vindicated, and its advocates weren't shy about claiming credit.

I'm with Paul on the "neo-liberalism" comment until he got to the part about the peso pegged to the dollar. Government intervention to maintain a hard rate on the currency is hardly "free markets". Still, I'm sure it will be blamed on us. As a matter of fact, Krugman seems to be giving us only the faintest excuse as it is:

I could explain at length the causes of Argentina's slump: it had more to do with monetary policy than with free markets. But Argentines, understandably, can't be bothered with such fine distinctions — especially because Wall Street and Washington told them that free markets and hard money were inseparable.

So free markets avoid judgement, but Wall Street approves of freezing citizens' bank accounts? And that's "neo-liberal"?

What happens next? The best hope for an Argentine turnaround was an orderly devaluation, in which the government reduced the dollar value of the peso and at the same time converted many dollar debts into pesos. But that now seems a remote prospect.

Back in April, George W. Bush touted the proposed Free Trade Area of the Americas as a major foreign policy goal, one that would "build an age of prosperity in a hemisphere of liberty." If that goal really was important, we have just suffered a major setback. Don't cry for Argentina; cry with it.

How, exactly, does one manage an orderly devaluation? At any rate, apart from this being "a disaster for American foreign policy" and a "major setback" for Bush's free trade program ("if that was really important"), what, other than shedding tears, should our policy makers be doing?

Liberalism is not about frozen bank accounts and managing foreign exchange rates. Krugman, of all people, should know this.

Why is it that the entire argument from the Op-Ed regulars in the Times is "this is embarrassing for Bush" or "this will be a disaster" or "shameful consumers/politicians/rich people/:neo-liberals", without any actual opinion or recommendation?