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Wednesday,
September 3, 2008
 Re
Con 1 - Class
- What
a difference a week makes! While the Dems talked the talk all of
last week, after the "first" night of the GOP convention,
all I can say is they certainly walked the walk. Technically, it
started with the
 all-but-canceled
first night (Monday) - due to the Gustav goose egg - when Laura Bush
and Cindy McCain exhorted convention-goers and television viewers to
contribute to various hurricane relief funds. But, Tuesday
night's show was an exercise in class, from the video tribute to Navy
Seal Mike
Mansoor
to the keynote comments of Joe Lieberman ("I'm here
to support John McCain because country matters more than
party."), I thought that the tone was just right.
President Bush gave an effective speech, but it wasn't especially
rousing. Fred Thompson, on the other hand (pictured to the
right) was in top form, detailing John McCain's wartime experiences
and telling the audience that McCain has "character you can
believe in." I thought it was quite powerful, as I did not
know much of the details of McCain's imprisonment in the Hanoi Hilton
(except that he was and it was for many years). Unlike his performance
at the Defending the American Dream Summit last fall, Thompson was
lively and engaged.
While Obama was not often identified by name, I thought that the
subtle dismantling of the aura that surrounds him was masterful.
When Laura Bush talked about Cindy McCain's trips to various world hot
spots, all over just the last eight months, Obama came off looking
even more superficial. And, the unrelenting criticism by
Lieberman, the Dems Veep candidate of just eight years ago, were
stinging. Well, my view is that Obama entered into the race
thinking he would lose to Clinton, but that he'd have created a
national following that would propel him into the White House in 4, or
8 years. In an odd sort of way, it is unlucky of him to have
beat Hillary!
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Thursday,
September 4, 2008
 Re
Con 2 - Palin KOs BO
- Day
two of the Republican convention took off right where the first day
ended. [Technically, this was day 3, but since day 1 was
shortened to about a half hour, due to hurricane Gustav, it hardly
counts.] I caught most of Michael Steele's speech - I still
think he would have made a good veep choice. He extended the
whole "country first" theme to its logical, and untenable,
conclusion - country, community and family before self.
Yeech. This flies in the face of "individualism" and I
can't imagine that many true conservatives would really embrace this
altruistic notion. Indeed, there is an inherent paradox here -
why do we extol the sacrifices made by others in the name of country,
community and family? Usually, it is so that others can pursue
their own self interest. Hmm . . . The ultimate goal of
any sacrifice must be that the individual is important. That
doesn't mean we can't honor sacrifice, nor that we can't actually
sacrifice ourselves. But, let's not lose sight of the true
purpose.
Mitt Romney was OK, but not his usual self. The quip about
keeping Al Gore's private jet on the ground was a good one, but we've
heard this before. Mike Huckabee was personable and his defense
of the notion that not all conservatives are rich was well done.
His best line was about how Sarah Palin got more votes for mayor of
little Wasilla, AK than
Joe Biden got running for President.
Laura Lingle, governor of Hawaii, was fine, but not an especially
rousing speaker. Rudy Giuliani was looking quite comfortable at
the podium and relaxed as he goaded the crowd with his commentary
against Obama. Finally, we have heard from someone that has
taken Obama to task for promising to use public financing for his
campaign and then changing his mind on that - for obvious
reasons. Rudy's litany of how Obama had broken many promises
ended with this snortler: "If I were Joe Biden, I'd want to get
the VP thing in writing."
The highlight, of course, was VP nominee Sarah Palin. Her speech
was nothing less than a knockout, especially considering that reports
out today say that her teleprompter was malfunctioning midway through
her presentation. She came across as just a regular person, but
one that can see through all the smoke and mirrors of the
campaign. From her blasting of the media to the shallowness of
Obama, she was on target and has really made a great first
impression. Her digs at the Obama campaign's denigrating her
tenure as mayor of a small city was being played over and over again
on TV ("I guess it's kind of like being a community organizer, except
with actual responsibilities."). She did a good job of telling the
audience about herself, and a good job of talking about McCain.
If one were to look at the speech not knowing anything about the
current political landscape, you'd bet a great deal that she had been
a well-regarded national politician for some time. Not yet, but
it seems she will be. In fact, my wife opines that she can
easily see Palin as President down the road. We'll see.
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Tuesday,
September 16, 2008
Re
Con 3 - McMaybe
- Although almost two weeks have passed, and numerous events have
unfolded (Ike, lipstick on a pig, non-debate on service, 9-11, et.
al), it seems like just yesterday the Republican convention was
wrapping up. So, past time to comment . . .
Speeches by Lindsey Graham and Tom Ridge were, well, not especially
riveting. I found that my attention was easily diverted and
missed a lot of the specifics of what they were saying. But,
they weren't the main course anyway.
The video on Cindy McCain was well-done. She has an interesting
background, and her experiences around the world are quite
inspiring. Likewise, the video on John McCain was powerful and
had its moment of humor - "John McCain is" . . . (somber music) . . .
"a
mama's boy" (cut to his mother). I don't recall the same kind of
easy-going humor at the Dems convention. Did I miss it?
McCain's speech was strong and I give him lots of points for
style. He shrugged off the protesters well enough ("Ignore
the ground noise and static."), who did a good job of making
fools of themselves and their worthless cause. His rhetorical
flourishes - "Change is coming" and "We believe
...," and "Stand up; Stand up" - were comparable to the
skills exhibited by Barack Obama, which I didn't think would be
possible.
As to the substance of McCain's remarks, I give him a resounding
"McMaybe." He was clearly appealing to the middle
ground, which he must do in order to win the election.
Post-convention data show that he actually had a bigger audience than
Obama, which is a shocker. The nuts and bolts of his speech
included the following:
"We
have the strength, experience and backbone to keep our word." -
Yes, an excellent point. Nobody seems to make much of the fact
that Obama is not going to get his way with Congress and is likely
to change his mind on a number of issues (either further to the left
or further to the middle). I'm not sure that is a bad thing,
but McCain is spot on with this remark.
"The
first big pork barrel bill that comes across my desk will get
vetoed."
- Good, but it does beg the
question of what "big" means. Still, I think he is honest in
steering a much different course than G. W. Bush, but, then, he is
likely to have to deal with a Democrat-controlled Congress, so he
can afford to be more confrontational.
"We
need to help workers whose job won't come back find a new one that
will stay." -
Yikes!! This is the Republican convention, isn't it????
And, by the way, no job will "stay" over time. It isn't the
nature of our economy. Don't workers have an incentive to
acquire skills that will be demanded over time? I really don't
know where he's going with this one.
"Education
is the civil rights issue of this century." -
Well, it all depends on what he means. If he wants to dump the
Dept. of Education, then "Yes." If he want to end the
socialization of education, then, "Yes." If he wants to
increase government spending here, then "No." He talked about
competition and choice, but I have this sinking feeling that this
isn't really where this issue is headed.
He
promotes an energy plan that will "create jobs." -
Impossible. Any government program in this regard will only
rearrange the economic landscape. It can't add to growth, and,
more likely, it will take away from growth since resources are
redirected in ways inconsistent with market outcomes.
"Nothing
brings greater happiness than to serve a cause greater than one's
self." -
Well, maybe. If he feels this way, then fine. But, it
can't be the touchstone of our society. Down that road leads
totalitarianism. We have a country that is premised on the
"pursuit of life, liberty and happiness," not one devoted to
service to the state. His remarks at the forum
on 9/11 were unambiguous - service is a voluntary matter, not a
mandated one. That make's me feel a bit better. Still, his
campaign theme - "Country First" - does not resonate with
me. We don't fight for a place; we fight for the ideals of a
place. The terrorists of 9/11 weren't attacking just some place
when they ran those planes into the World Trade Center; they were
attacking American ideals - liberty, freedom, markets. As I
listen to John McCain, I'm not always sure that's what he means.
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Tuesday,
October 7, 2008
Financial
Market Turmoil
- With the recent turmoil in financial markets, and given my
relative advantage in this area (I have been teaching a course in
"Money & Banking" the last four years), I asked the
editor (Randy Wilson) of the Daily Sun if he would be interested in an
editorial on the topic under their "Coconino Voices" banner,
which is an irregular platform for locals with expertise to spout off
about things they know something about. He was enthusiastic
about this, and even though I finished it off on Friday (10/3), he got
it on the main editorial page for
Sunday.
While it has been a couple of days since then, surprisingly there are no web
comments on my opinion piece. That seems odd, although Randy
told someone else that he did expect to see some letters come in on my
editorial. We'll see. Still, my colleague Doug Brown, who
is quite the polar opposite of me insofar as politics and economics
goes, told me that he was asking his students to comment on my piece
as part of a homework assignment. So, that's good news and I'll be interested in hearing
how they react to it.
Controlling financial markets a fatal
conceit
'For the sins of the father
you, though guiltless, must suffer," wrote the Roman poet
Horace. Today's financial turmoil has its roots in the
Great Depression of the 1930s. We have been suffering,
and continue to suffer, the sins of our fathers. And the
suffering isn't over yet.
The real sin of the Great Depression era was the notion that
political control of the marketplace would curb
"capitalism's excesses" and distribute long-lasting
wealth more evenly. This experiment was a colossal
failure -- our economy went through the 1930s with an average
unemployment rate of some 15 percent. And, the sins of
this grand experiment continue to be visited upon us.
That's why there was a savings and loan debacle in the
1980s. That's why there are huge investment banks that
can't diversify their activities, putting them at greater risk
of collapse. Although much reform has taken place
recently, we have seen continued efforts to regulate financial
markets, from requiring firms to make risky loans (because
it's nondiscriminatory) to using oddball accounting rules for
valuing highly illiquid assets (mortgages), wrecking balance
sheets and casting a pall of uncertainty over credit markets.
Why do we care about credit
markets? Well, our economy runs more smoothly, and our
standards of living rise more quickly the more robust is the
credit market. The business world constantly faces cash
flow problems -- the outflow of expenses is hardly ever
matched, on a timely basis, with the inflow of income.
Farmers, for example, earn all their income at harvest time,
yet need to incur huge expenses months in advance if they are
to have a crop. Retailers do a huge volume of business
during the Christmas season, yet they have expenses to pay on
a regular basis throughout the year. A freeze on credit
will disrupt production, boost unemployment and can send us
into a recession. That is why there is so much concern
about financial markets today. We don't yet have a
recession, but that will not last if this problem is not
remedied.
Our most immediate problem is the sea of poorly priced home
mortgage debt. This also has roots to Great
Depression-era policy, when Fannie Mae was created, as a
government agency, to redirect capital to home building.
Years later, Fannie was demoted to the status of
"government sponsored enterprise," which combines
the worst of the political and economic world -- it is a
private firm, with private owners, but its debt is guaranteed
by the government, so it can ignore the normal constraints of
market discipline. Later, Fannie got a brother, Freddie
Mac, and together they own nearly half of the mortgage debt in
the U.S. They sold bonds to raise money to buy
mortgages, which they could pool together in order to sell
more bonds. It's actually a creative and innovate way to
promote liquidity in an otherwise illiquid market. But,
with no market discipline, and a keen desire to satisfy
political demands, these institutions have propelled us into
this current crisis. As Ron Paul wryly observed
recently, if Fannie and Freddie are the culprits in this mess,
wasn't it foolish of Congress to charter them in the first
place? Of course it was, but mostly you hear opinion
makers chattering about Wall Street greed, which is not the
root problem.
What of the future? Once the dust settles from this
current massive government effort to establish liquidity and
stability to financial markets, the task of restructuring the
market landscape will begin. And, that's when we will
see whether we have learned anything from history. The
worst thing that can happen, and as of right now, the most
likely thing to happen, is that there will be a new wave of
regulation, oversight and control. If we ratchet up the
regulatory state, we will guarantee yet another day of
reckoning as our children bear the sins of their fathers.
If you think this financial turmoil is the end of the story,
think again. We have yet to deal with the collapse of
Social Security, yet another grand experiment of the Great
Depression. That will be a calamity. And, then
there is the Medicare time bomb. When it goes off, I
shudder to think of the consequences. If change is
coming, it better come quickly and it better be the right
change. Let's keep our fingers crossed and hope that
Hegel was wrong when he opined that the only thing we learn
from history is that we don't learn from history.
Dennis Foster has a Ph.D. in economics, has taught money
and banking classes at the university level since the 1980s.
He encourages readers interested in the Great Depression to
read Amity Shlaes new book, "The Forgotten
Man." |
As you can note, the theme here is that there has been too much
regulation in this industry and that our current (and future!)
problems stem from these regulations, not from "greed" nor
from "poor oversight," hence the nod to Hayek
with the "fatal
conceit" reference in the title.
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Friday,
October 31, 2008
Obama-magic
- With the election just a few scant days away, the consensus
view seems to be that Obama will sweep into the White House. To
some degree, he has history on his side - whenever the economy is
doing poorly, the incumbent party is going to get hammered. And,
there is the "Obama-magic" at work here - his sterling
articulation and rhetorical flourishes have marked him as a singular
politician. He has leveraged these, admittedly superficial,
traits into boatloads of money and was able to convince Dems during
the primary season that they could, in good faith, vote for someone
from the fringe of their party. So it goes with liberals - they
hardly ever say what they mean, and tailor their message to fit their
crowd.
It seemed quite clear to me that Obama represented a "Socialism
Lite" platform. I listened to his speech after the Iowa
caucus, and was bowled over by the array of empty promises - more
money for X, Y and Z. It was as if one could just wave a magic
wand and make everything good and whole. Well, I was convinced
of one thing - Obama could never win the presidential election.
He was just too far left-of-center-left. And, I thought his thin
record would work against him. Instead, just the opposite has
been true. The fact that he doesn't really have a record means
that he can pitch his rhetorical skills at the political center
without fear of contradiction. This, coupled with a media that
has largely lost its way insofar as political reporting goes, may well
win the day next Tuesday. It's not a done deal, but it seems
close to being one.
If Obama wins, I wonder who will emerge on the other side of the
inauguration? Will it be an Obama that really does want to be
adored by the masses? He does seem to have a narcissistic side
to him. He may well spend the next four years playing the center
and pushing only a mild liberal agenda. Although, with Congress
firmly in the hands of the Dems, he may find that he has to check
their drive to increase control, add to the regulatory state and push
taxes into the stratosphere. This Obama will emerge only if his
self-absorption for favorable ratings and a desire for a "place
in history" overwhelm his leftist leanings.
The other Obama is the ACORN trainer, the "spread the
wealth" socialist, the political change agent. This Obama
is likely to want to embark on a "Newer Deal" course that
will create economic havoc and wreck the political left in the years
to come. Although, he will have his hands full with the coming
recession, and I am sure that he will get his "honeymoon"
free ride for the first few months, we may see the glow fade rapidly
from this kind of an Obama presidency. If he champions a return
to Glass-Steagall, a return to more protectionist trade policies, the
enactment of social welfare programs that will exhibit huge amounts of
fraud and waste, a return to the oxymoronic "fairness
doctrine," and the promotion of government work over private
work, we will likely see huge conservative gains in the Congress in
two years, and a one-term Carter-esque collapse of his
administration. Anybody ready for a Sarah Palin - Ron Paul
ticket in 2012?
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