Wednesday, March 26, 2008

I Can't Make This Stuff Up

As you may or may not be aware, Senator Clinton recently tapped former Fed chairman Greenspan to head a committee charged with finding a solution to the current housing crash. As hundreds of bloggers have pointed out (yet the mainstream media fails to grasp), it is stupifyingly outrageous to think that Greenspan, the very man who helped create the housing bubble, should be charged with finding a solution to it.

In light of this, The Philadelphia Daily News asked Senator Clinton why she would pick Greenspan to head up this effort. Her response:

"He has a calming influence still to this day on Wall Street - don’t ask me why because I never understand what he’s saying - but nevertheless people respond to that Delphic oracle approach. I think it would be wise to include him. And recently he’s come out, and very smartly so, that we have to deal with housing and maybe we need to have some kind of buyout mechanism for mortgages. So he’s moved on his understanding and depth of the problem - but you know you could pick three others. You just have to have some demonstrable involvement of presidential leadership."


This, to me, is kind of like saying we should put a mobster in charge of dealing with a crime problem. The only solution they're going to give you is the very thing that caused the problem in the first place (government intervention).

Friday, March 7, 2008

What is Freedom?

I see and hear a lot of misperceptions about what freedom is. For example, many think that consumer choice is freedom, but this goes without recognizing that those choices come at a price that is mostly unseen. Really, it seems that that most people don't at all understand what freedom really is. The Creed of Freedom defines it perfectly:


I believe that only individuals have rights, not the collective group; that these rights are intrinsic to each individual, not granted by the state; for if the state has the power to grant them, it also has the power to deny them, and that is incompatible with personal liberty.

I believe that a just government derives its power solely from the governed. Therefore, the state must never presume to do anything beyond what individual citizens also have the right to do. Otherwise, the state is a power unto itself and becomes the master instead of the servant of society.


I believe that one of the greatest threats to freedom is to allow any group, no matter its numeric superiority, to deny the rights of the minority; and that one of the primary functions of just government is to protect each individual from the greed and passion of the majority.


I believe that desirable social and economic objectives are better achieved by voluntary action than by coercion of law. I believe that social tranquility and brotherhood are better achieved by tolerance, persuasion, and the power of good example than by coercion of law. I believe that those in need are better served by charity, which is the giving of one's own money, than by welfare, which is the giving of other people's money through coercion of law.


I believe that all citizens should be equal under law, regardless of their national origin, race, religion, gender, education, economic status, life style, or political opinion. Likewise, no class should be given preferential treatment, regardless of the merit or popularity of its cause. To favor one class over another is not equality under law.


I believe that the proper role of government is negative, not positive; defensive, not aggressive. It is to protect, not to provide; for if the state is granted the power to provide for some, it must also be able to take from others, and once that power is granted, there are those who will seek it for their advantage. It always leads to legalized plunder and loss of freedom. If government is powerful enough to give us everything we want, it is also powerful enough to take from us everything we have. Therefore, the proper function of government is to protect the lives, liberty, and property of its citizens; nothing more. That government is best which governs least.

Thursday, March 6, 2008

Everything is just fine

My man Mish explains that everything is fine:

Other than overleverage, bad debts, sinking home prices, no jobs, shrinking wages, cash strapped US consumers, rising oil prices, a sinking US dollar, $500 trillion in derivatives not marked to market, rampant overcapacity, underfunded pension plans, looming boomer retirements, no funding for Medicaid, no funding for Medicare, and no Social Security trust fund, everything is just fine.

Quote of the day - Punishment for Prudence

"Our own tax dollars will be used to prevent us from getting a good deal on a house"


Tuesday, March 4, 2008

The Height of Hypocrisy

For anyone with a decent memory (or access to google) the housing bubble was a period littered with media stories shilling the glories of endless house appreciation from a calvacade of experts and industry insiders whose opinions were never met with opposition in print. The New York Times was at the forefront of this movement, giving itself over to almost daily shilling from the National Association of Realtors and experts like David Lereah who saw nothing but perpetual appreciation for housing with no consequences to speak of.

Now that housing is crashing, the New York Times sees it fit to join the "told you so" crowd, lashing out at experts, the very experts they chose to cite over and over in their articles, for having not foreseen the bubble. Let's tune in:

ONE great puzzle about the recent housing bubble is why even most experts didn’t recognize the bubble as it was forming...The failure to recognize the housing bubble is the core reason for the collapsing house of cards we are seeing in financial markets in the United States and around the world.

It seems the height of hypocrisy that the NYT, an entity which repeatedly chose to cite individuals who had a vested interest in perpetuating the housing bubble over the contrarian experts who accurately predicted what was to happen, yet that the NYT is coming away from all of this criticizing the very experts they chose to showcase. In fact, even this week the Times is still going to the same losers for more expert advice. Is it any wonder what the outcome will be?

Furthermore, these people are being influenced by agencies like the National Association of Realtors, which is conducting a public-relations campaign intended to show that putting money into housing is a reliable way to build wealth. Under these circumstances, it’s easy to understand how even experts could come to believe that housing is a spectacular investment.

This is clearly the most offensive bit of the article since, as was mentioned before, anyone with a decent memory will vividly remember near daily quotes from experts at the NAR, published in the NYT, regarding the housing outlook (the NAR, for those not in the know, is infamous for inaccurately predicting outcomes and projecting overly optimistic economic outlooks).

The fundamental problem is that the information obtained by any individual — even one as well-placed as the chairman of the Federal Reserve — is bound to be incomplete.

It's not entirely clear what this statement is intended to mean, but I take it as an excuse for the Fed chairman having missed the housing bubble. When so many contrarian economists were sounding the alarm, there's no excuse for anyone to have not seen what was coming, particularly the Fed chairman. The idea that the Fed chairman has inadequate information is just ridiculous.

It is clear that just such an information cascade helped to create the housing bubble.

I couldn't agree more. The New York Times stands guilty.

There is a slight catch to all of this, that this article was written by Robert Shiller, one of the economists who actually did foresee the problems with housing. Unfortunately though, the New York Times having ran this piece can be seen as an obvious attempt to wash over their hypocrisy with Mr. Shiller's credibility. Fortunately for us, we're not so easily taken.