Trashed Prius

You see the darnedest things when you come to work a couple hours late:

I took this photo just down the street from my office this morning. Apparently, somebody has it in for hybrids; or maybe it's just the Toyota Prius. The windshield and the four side windows are smashed, sideview mirrors pulverized, all four tires flat, random black spray paint all over it; at least they could have left us with some thoughtful graffiti instead.

Who's to blame? Supporters of Big Oil, livid at the impressive, profit-crimping gas mileage the Prius delivers? A marauding gang of Chinese youths celebrating New Year and simultaneously administering symbolic payback for the rape of Nanking on the nearest symbol of Japanese success? This is the edge of Chinatown after all. Maybe it was done by a gaggle of patchouli drenched eco-youths who are confused by their conflicting feelings about global warming on this much colder than normal morning? If that's the case, it will probably be chalked up as a hate crime.

No matter who is to blame, were it my car, I'd be pretty freakin' pissed off.

Government front running

This is what happens when government front runs the private sector:

Bailouts Punish Investors in Bank Capital Notes
2009-01-23 12:13:34 .845 GMT

By John Glover
Jan. 23 (Bloomberg) -- Investors in bank capital securities
are being punished as the notes plunge in value on concern
government bailouts will make them effectively worthless.
Lenders use so-called Tier 1 notes to bolster regulatory
capita and cushion senior bondholders and depositors against
losses. The CHART OF THE DAY (above) shows the $93 billion market is
suffering the biggest slide on record, according to data from
Merrill Lynch & Co.’s Euro Sub-Debt Tier 1 Index.
Banks may be forced to stop paying interest on the
securities as a condition of getting billions of dollars of
taxpayer’s cash, according to Simon Adamson, an analyst at
CreditSights Inc. The price slump is hurting investors such as
U.S. insurer Aflac Inc., whose shares fell the most in more than
25 years yesterday as Morgan Stanley called the firm’s
investments in “a rapidly escalating concern.”
“Tier 1 investors are being punished,” London-based
Adamson said in an interview. “Now that governments are bailing
out banks or nationalizing them, the risk of interest deferral is
increasing.”
Tier 1 bonds, which combine elements of equity and debt,
typically have no set maturity and issuers can defer or pass
interest payments. Holders are paid after other debt investors in
the event of a bankruptcy.

If there's one thing the market absolutely hates, it is uncertainty. As a private investor, why would you consider investing in anything if there was the chance that government was going to either change the rules of the game on a whim or step in front of you in the queue to book a return on investment?

This is a perfect example of why excessive government intervention will effectively prolong our much anticipated economic recovery.

Seems we may be doomed to learn the lessons of the 1930's all over again.

The notion of too big to fail

The following bubble chart compares the current market capitalization of our nation's biggest banks to what they were in the second quarter of 2007:

The chart is a little fuzzy, but the blue bubble represents Q2'07 and the green bubble represents Q1'09 YTD. The giant bubble with the tiny inset bubble that looks like the earth against the sun is Citigroup.

This link leads to a state-by-state breakdown of the allocation of TARP funds. Interestingly, those states that are politically known as "blue" are the reddest of red in this depiction.

Nouriel Roubini, a professor at NYU who has been getting a lot of press lately for correctly predicting the current banking crisis, thinks that losses may reach $3.6 trillion before we're through the woods:

“I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai today. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.”

Losses and writedowns at financial companies worldwide have risen to more than $1 trillion since the U.S. subprime mortgage market collapsed in 2007, according to data compiled by Bloomberg.

President Barack Obama will have to use as much as $1 trillion of public funds to shore up the capitalization of the banking sector, following the $350 billion injection by the Bush administration, Roubini told Bloomberg News. Congress last year approved a $700 billion rescue fund, of which half remains to be disbursed.

I have been opposed to the TARP bailout since it was first proposed on the grounds that nobody is too big to fail. What we have is a perversion of capitalism, where fiscally irresponsible behavior is rewarded not with failure, but with a government handout. This is then presented as "proof" that capitalism does not work by those who fail to consider that what it really is is an example of crony capitalism. It takes two to tango, so as easy as it is to blame all of this mess on greedy bankers as many do, even the current darling of progressive economic circles, J M Keynes, realized that, "it is a mistake to believe that businessmen are more immoral than politicians" as he wrote in a letter to FDR in 1938. What we are now witnessing are the legislative fruits of millions of dollars in lobbying efforts and generous campaign donations paid for by hedge funds and banks.

If we were living in a pure capitalistic system, those banks that chose to leverage themselves 40 to 1, chose to engage in hyper-risky lending and chose to create and sell derivatives with little to no intrinsic value would have to live with the consequences of their actions, which most likely would be either reorganization in bankruptcy or going out of business altogether. For every bank that failed, there would be another--a fiscally responsible one with a strong balance sheet--to take its place. These banks would then be allowed to sink or swim based on their ability to navigate the rough seas of finance. Contrary to what those "too big to fail" banks may tell you, these banks do exist.

Like many Americans, I "get" TARP, I just can't stand it either. Unlike the practitioners of crony capitalism who run our nation, I can see that the billions already spent and the billions more promised will have little to no effect in stimulating our economy. So why spend it in the first place?

Too handsome to lampoon

Two hours and thirty five minutes into Obama's presidency, and already he's off limits to least one European cartoonist:

Obama too handsome for good satire -caricaturist

Tuesday, January 20, 2009 11:35:00 AM (GMT-08:00) BRUSSELS, Jan 20 (Reuters) -

U.S. President Barack Obama is too good looking to provide inspiration for cartoons in the same way George W. Bush served as fodder for some of their most biting commentary, a caricaturist on said Tuesday.

"It's never a gift for a caricaturist to draw a handsome man," said Pierre Kroll, from Belgium, which prides itself on its comic book culture including Tintin.

"Somehow, we prefer overweight people, people with a beard, huge noses, ridiculous glasses ... If caricaturists could elect presidents, we would choose people with faces we enjoy drawing, and not a playboy like him," said Kroll whose works appears in the Belgian daily "Le Soir".

Kroll said positive public sentiment towards the incoming U.S president might also make it harder for caricaturists whose portraits have to underline a person's weaknesses and flaws.

"Caricaturists like to be a bit nasty and here, he comes with a lot of sympathy, it's harder for us to do our job and mock him while Bush had become a favourite target for cartoonists," he said.

(Reporting by Bate Felix and Marine Hass)

I feel sorry for poor Pierre Kroll. He is so blinded by Bush-hatred that he fails to see that Obama's ears are almost as big as Dumbo the Elephant's. If those suckers aren't perfect caricature-fodder I don't know what is. Then he goes on to describe what really makes a good caricature, "overweight people, people with a beard, huge noses, ridiculous glasses" without stopping to consider that Bush possessed none of those features, yet they had a field day with him. I hope he has another skill to fall back on, because caricatures of the former President Bush are going to start to look a little out dated pretty quickly. Maybe he makes a really bitchen' Belgian waffle!

Keynesian Economics and Venezuelan Amerindians

Barron's takes a dig at Keynesian economics:

IN FACT, HALF A LOAF COULD BE BETTER FOR the economy, and better for Obama's ultimate treatment in the history books, not to mention his re-election odds. A $500 billion package -- say, 60% tax cuts and 40% increased spending -- could realize his stated aim of spending money wisely, while providing significant fiscal stimulus.One reason for caution is that priming the pump never quite works the way the textbooks say it should. The economy's lifeblood isn't consumer demand, but rather credit, both for the financing of business investment and the purchase of consumer durables like cars. No amount of fiscal stimulus will make much difference if credit is constricted. If credit is available, jobs and higher incomes will follow.

Even the indigenous people of Venezuela realize that receiving free money and food from the government is not the path to prosperity (from the Economist):

The Yukpas are divided. Some oppose the land invasions and even support the ranchers. “Invasions are very bad,” says Rosario Romero, a Yukpa woman. “The ranchers worked for what they have. In the sierra there’s lots of land to cultivate maize and other crops.” She adds that, contrary to what radical Yukpa leaders say, her parents never suggested these lands were theirs. Her community had never received government help until Mr Chávez came along, she says, “Now we get money and food.” However, this encourages indolence. Many Yukpa women have married non-Amerindians, as she has done, “because the Yukpa men don’t want to work.”

I hereby nominate Rosario Romero for Treasury Secretary.

Inauguration Day Carbon Footprint

This sort of thing matters to some people--mostly to the anthropomorphic global warming disciples who do not understand that correlation does not imply causation. Fortunately it doesn't matter to me, but just in case anybody needs ammo when pointing out the hypocrisy among the patricians of our nation, well here ya go:

Carbon Bigfoot: 2009 Inauguration Expected to Generate More Than a Half-Billion Pounds of CO2

WASHINGTON, Jan. 15 /PRNewswire/ -- Next week scores of celebrities including Leonardo DiCaprio, Sharon Stone, Sting, and Steven Spielberg are all expected to flock to the nation's capitol, many by private jets, to the historic inauguration of Barack Obama. The swearing-in extravaganza will surely be the largest yet and is seeing ballooning costs and a major environmental footprint.
In a report released today, the Institute for Liberty (IFL) utilizes data from federal agencies, environmentalist organizations, and news accounts to extrapolate the estimated environmental impact for the 2009 Inauguration. IFL estimates that, given the millions of people expected to converge on the nation's capital. IFL concludes:

-- The 600 private jets expected to fly visitors to and from the event will
produce 25,320,000 POUNDS of CO2
-- Personal vehicles could account for 262,483,200 POUNDS of CO2
-- In the Inaugural parade, horses alone will produce more than 400 POUNDS of CO2
-- The total carbon footprint for the Inauguration will likely exceed 575
million POUNDS of CO2
-- It would take the average U.S. household 57,598 years to produce a
carbon footprint equal to that of the new president's housewarming
party

The Inauguration of President Obama is truly an historic occasion that should be celebrated," said IFL President Andrew Langer. "However, it would be very hypocritical for the scores of celebrities, VIPs and political elites to lecture on environmental policy to middle America and small businesses that are merely trying to survive in these difficult economic times, and then turn around and contribute to the half-billion pounds of emitted CO2. This is a celebration -- DC's small businesses, and thus DC's working families, are going to greatly benefit from this event. The rest of America should share in that opportunity."

Of course, the star-studded list of carbon offenders will be given a free pass by their would-be censors for at least two reasons. First, this is an historic occasion. Second, they're mostly the same people, so they'd be censoring themselves. They'll also give Obama a free pass on the estimated $146mil price tag for the whole affair; forgetting that just 4 years ago they pilloried Bush for his inauguration excesses which cost us taxpayers a fraction of what the Obama affair will cost.

It seems you just can't put a price tag--carbon or otherwise--on the celebration of tokenism, especially since the Senate voted to ban ticket scalping at the event. And anybody dumb enough to try to scalp a ticket to what is supposed to be a free event ought to be allowed to. Clearly, they have too much money. That's the kind of wealth redistribution I can get on board with.

Posted so as not to be lost for posterity

Here are what I feel are the two most clearly written pieces I have read on the causes of the current economic crisis.

The first, Deciphering the Liquidity and Credit Crunch 2007-08, explains in simple terms the financial causes of our current predicament.

The second, Anatomy of a Trainwreck, explores both the political and the financial causes.

Fiddling while Rome burns

In light of all the economic turmoil we are presently experiencing, if I were about to be inaugurated as the 44th President of the United States of America, I might think it wise to tone down my inaugural ceremony just a tad.

It seems that Obama is choosing the opposite course by allowing it to become the most expensive swearing in ceremony in history.

Barack Obama's inauguration is set to cost more than £100m ($146 million) making it the most expensive swearing-in ceremony in US history.

The President-elect will take less than a minute to recite the oath of office in front of an estimated two million people in the US capital next week.

But by the time the final dance has been held at one of the many inaugural balls the costs for the day will be a staggering £110m ($160.6 million).

So many people are expected in the U.S. capital that President Bush declared a state of emergency.

In doing so he paves the way for unlimited funding to be released to those local authorities responsible for staging the event. (who says democrats and republicans can't work together? -ed)

Washington Mayor Adrian Fenty revealed that is the amount that will be billed in the days after the January 20th event. US authorities had previously budgeted just £10m ($14.6 million) for the day based on previous inaugurations for George Bush and Bill Clinton.

Though questions remain as to the legality of the means utilized to raise the money, the fact is Obama raised $741.7 million during his presidential campaign. His inauguration is set to cost 10 times as much as his most recent predecessors. It might be a good idea to use part of the $30 million left in his campaign coffer to help pay for this historic moment since a token show of fiscal restraint seems like too much to ask.

Ah well, party on faithful! Enjoy the moment, because I have a suspicious feeling that Inauguration Day may be the high point of the Obama administration.

A trillion is the new billion

“Never confuse motion with action.” --Ben Franklin

This simple wisdom is apparently beyond the understanding of our elected leaders as demonstrated by the following headline:

Obama Warns of Irreversible Decline Without Action

Jan. 8 (Bloomberg) -- President-elect Barack Obama warned that without immediate steps by the government to revive the economy, family incomes will drop, the unemployment rate could reach “double digits” and the U.S. risks losing a “generation of potential and promise.”

In excerpts of a speech he’s scheduled to give today at 11 a.m. New York time in the Washington suburb of Fairfax, Virginia, Obama says that while the cost of his economic recovery plan will add to a deficit already projected to exceed $1 trillion, he “won’t just throw money at our problems.”

“It is true that we cannot depend on government alone to create jobs or long-term growth,” Obama will say. “But at this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe.”

Not to make light of what is now a very serious economic problem, but it often seems as though government's main function is to take something that should not have been a problem in the first place (had they been doing their job properly) and allowing it to snowball into a big crisis that only government can fix. This serves their real unspoken job rather well, which is the continual search for the justification of their own existence. At the risk of oversimplification, the main reason the Great Depression lasted as long as it did was that FDR firmly inserted government in the middle of all aspects of our economy. While his intentions were arguably well meaning, his policies were outright hostile to the private sector. So what did the private sector do? They kept their job creating, GDP expanding, entrepreneurial enabling capital on the sidelines for almost 10 years, which gave rise to the term, "idle rich." This had the effect of making government the only game in town, which further justified more government intervention.

What our economy needs is not more stimulation--overstimulation is what got us into this mess in the first place. Our economy needs to rest. Like a drunk coming down from a binge, you don't make him feel better by sticking another bottle of Jack Daniels in his hand and telling him to drink it, you let him sleep it off. Increasing unemployment (the reallocation of human capital) is a byproduct, but unemployment is in the future no matter what. Better for the private sector to put capital to work as soon as possible--creating real jobs--than letting government mis-allocate borrowed money to pay for "make work" jobs designed as a short term fix.

I feel we are in real deflationary danger. Private sector capital will continue to sit on the sidelines until our economy is well rested. But government will not let it rest, which will prolong the rough times ahead.

A better solution would be for government to temporarily cut all corporate and personal tax rates to say, 10%. It would reduce government revenues significantly of course, but borrowing money from the future to put in place a fiscal stimulus package that will surely be in excess of $1 trillion will have an even more drastic long term effect. Government can always borrow to keep critical programs and institutions running on a case by case basis.

I hold no illusions of anything like this happening, as the two things that are fundamentally anathema to big government are small businesses and the entrepreneurs that create them; for neither has any reason to pay tribute to an entity whose main purpose seems to be administering death by a thousand paper cuts. Small businesses employ far more Americans than big businesses do, but it is big business--through expensive lobbing efforts and campaign contributions--that have convinced our elected officials that they are "too big to fail" and are deserving of a taxpayer-funded bailout. Small businesses, having no such resources, are stuck scrounging for life lines of credit from banks who are simultaneously told to loan their TARP money and rebuild their capital base. If they do not secure a line of credit, they are forced to lay off workers, or close altogether, which perpetuates the economic downward spiral.

Alexis de Tocqueville had it right over 175 years ago:

The American Republic will endure until the Congress discovers they can bribe the people with their own money.

It seems the price of the bribe is somewhere north of $1,000,000,000,000