A Greater Effort

Quote of the Day

2011-11-10T10:05:00.000-06:00

"The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists." Joan Robinson

Tim Price Nails It Again

2011-08-12T10:17:00.000-05:00

If you are not reading Tim Price's stuff, please start now:

Conventional thinking has it that the financial crisis began in September 2008 with the failure of Lehman Brothers. We believe that conventional thinking is missing the point. As economist Tim Lee of pi Economics indicated several years ago, subprime, for example, was never THE problem, it was merely the first and worst part of the debt edifice to collapse. The reality, we would suggest, is that the world is drowning in debt of dubious provenance which will never be paid back in full. Instead of addressing the debt burden, the politicians of the western economies (where most of this debt is sitting) have repeatedly tried to kick the can down the road, because they are more in thrall to the electoral calendar than to a day of reckoning they are trying to hospital-pass down to the next generation. At the same time, since 1971 the world’s central banks have operated to a purely fiat money system, in which currency is backed not by precious metal but by faith in government and nothing more. We believe that this experiment in unbacked currency may be moving to some form of ultimate resolution or recalibration. Having the US dollar as the global reserve currency is incompatible with having US Treasury bonds representing the de facto riskfree rate, given that the accumulated debt burden of the US is bigger than that of any other sovereign power, and is still expanding when it should be contracting. Meanwhile the euro zone for the last decade has attempted its own science project, of trying to operate a common currency bloc without full political or fiscal union. This is unworkable.

In supposedly ‘rescuing’ the banks by gifting their bad debts to the taxpayer, western governments merely converted a private sector solvency problem into a public sector solvency problem. Whereas banks were too big to fail, governments and their finances are now probably too big to save. The problem of debt service would have been problematic even if western economies were growing at something close to their pre-crisis rate, but with austerity having become the new black, it is now closer to being an existential problem eroding public confidence in both markets and money, because at near zero GDP growth, governments will soon struggle just to service their historic debts, let alone take out new ones or undertake new bail-outs, which we should perhaps call fail-outs, in that they are now predestined to fail.

It has taken just a few reported instances of sub-par growth in the western economies for the marginal investor to grasp the situation. It is not a subprime debt crisis or a euro zone debt crisis or a US debt crisis. It is a global sovereign debt crisis and since government bonds are the largest asset class in the world, there will inevitably be fall-out in other markets when a sufficient number of investors starts to appreciate that the emperor is wearing no clothes. Equity markets have been pumped up by otherwise ineffective money printing, given the spurious quasi-scientific gloss of quantitative easing, which has done precisely nothing to improve the economy on the ground. Investors have been conditioned to call for more, even as the process has been revealed to be an exercise in magical thinking, whereby temporarily boosted financial assets somehow mysteriously trickle down wealth into the real economy. Quantitative easing has one specific side-effect, which is to savage the currencies of whichever administration practises this dark art. Choose your poison. Global investors have a fairly limited choice: they can hold US dollars (with a reserve currency status that the Fed is doing its damnedest to destroy), or they can hold euros (a currency that may break apart if euro zone politicians continue to avoid taking hard choices, and with other people’s money). Rational investors have been voting in favour of harder currencies, in the form of gold, for roughly the last decade and the logic for that currency preference is as indisputable now as it ever has been. Gold is the premier stateless currency and is guaranteed to see its supply rise at a slower rate than that of any paper currency, which is what the trend of the last decade really represents. Other than gold and silver, investors have so far correctly identified the superior currencies of the world as stores of value on a relative basis, a club that includes the Japanese yen and the Swiss franc.

Open Challenge to Rachel Maddow

2011-08-12T10:10:00.001-05:00

Best of Mind Control

2011-08-08T13:33:00.000-05:00

I have recently become fascinated with mentalism.

Check out what a mentalist like Derren Brown can do:

Larry Summers Needs a History Lesson

2011-08-04T09:02:00.000-05:00

From David Henderson over at EconLog:

But for Hitler and the military buildup up he caused, FDR would have left office in early 1941 a failure, with American unemployment above 15 percent.

This is from Lawrence Summers, "More Stimulus Needed For Jobs Crisis," in theHuffington Post, June 13, 2011. This article is Larry's attempt to justify large increases in government spending to increase employment. There is a huge factual problem with Larry's statement.

Larry is assuming that there was a big military build-up in 1940. 1941 doesn't count because the election that, by his hypothesis, would have driven FDR from office was in November 1940. But there was no big military build-up in 1940. Alexander Field, in his book, A Great Leap Forward, points out that even with a broad measure of military spending that includes Lend-Lease and the government's Defense Plan Corporation, a subsidiary of the Reconstruction Finance Corporation, spending in 1940 and 1941 was only 5 percent of the cumulative defense spending that occurred between 1940 and 1945. And certainly 1941 spending wasn't below 1940 spending. Which means that military spending in 1940 was less than 2.5 percent of overall military spending between 1940 and 1945.

The Sane Among the Crazies

2011-08-01T16:26:00.000-05:00

I think it's really sad that this guy is seen as the crazy one in Washington:

When a cut is not a cut
By Rep. Ron Paul (R-Texas)

One might think that the recent drama over the debt ceiling involves one side wanting to increase or maintain spending with the other side wanting to drastically cut spending, but that is far from the truth. In spite of the rhetoric being thrown around, the real debate is over how much government spending will increase.

No plan under serious consideration cuts spending in the way you and I think about it. Instead, the "cuts" being discussed are illusory, and are not cuts from current amounts being spent, but cuts in projected spending increases. This is akin to a family "saving" $100,000 in expenses by deciding not to buy a Lamborghini, and instead getting a fully loaded Mercedes, when really their budget dictates that they need to stick with their perfectly serviceable Honda. But this is the type of math Washington uses to mask the incriminating truth about their unrepentant plundering of the American people.

The truth is that frightening rhetoric about default and full faith and credit of the United States is being carelessly thrown around to ram through a bigger budget than ever, in spite of stagnant revenues. If your family's income did not change year over year, would it be wise financial management to accelerate spending so you would feel richer? That is what our government is doing, with one side merely suggesting a different list of purchases than the other.

In reality, bringing our fiscal house into order is not that complicated or excruciatingly painful at all. If we simply kept spending at current levels, by their definition of "cuts" that would save nearly $400 billion in the next few years, versus the $25 billion the Budget Control Act claims to "cut". It would only take us 5 years to "cut" $1 trillion, in Washington math, just by holding the line on spending. That is hardly austere or catastrophic.

A balanced budget is similarly simple and within reach if Washington had just a tiny amount of fiscal common sense. Our revenues currently stand at approximately $2.2 trillion a year and are likely to remain stagnant as the recession continues. Our outlays are $3.7 trillion and projected to grow every year. Yet we only have to go back to 2004 for federal outlays of $2.2 trillion, and the government was far from small that year. If we simply returned to that year's spending levels, which would hardly be austere, we would have a balanced budget right now. If we held the line on spending, and the economy actually did grow as estimated, the budget would balance on its own by 2015 with no cuts whatsoever.

We pay 35 percent more for our military today than we did 10 years ago, for the exact same capabilities. The same could be said for the rest of the government. Why has our budget doubled in 10 years? This country doesn't have double the population, or double the land area, or double anything that would require the federal government to grow by such an obscene amount.

In Washington terms, a simple freeze in spending would be a much bigger "cut" than any plan being discussed. If politicians simply cannot bear to implement actual cuts to actual spending, just freezing the budget would give the economy the best chance to catch its breath, recover and grow.

The Surgery Was a Success, but the Patient Died.

2011-07-25T12:13:00.002-05:00

Pretty please take time to read Tom Price's latest piece.

My favorite part:

Rothbard‟s thesis is most striking in relation to the role of government. His first and clearest injunction to return the economy to “normal” prosperity is: don‟t interfere with the market‟s adjustment process.

“The more the government intervenes to delay the market‟s adjustment, the longer and more gruelling the depression will be, and the more difficult will be the road to complete recovery.

Government hampering advocates and perpetuates the depression. Yet, government depression policy has always (and would have even more today) aggravated the very evils it has loudly tried to cure.”

Rothbard goes on to list the various ways that government might hamper the market adjustment process. The list exactly constitutes the preferred “anti-depression” measures of government policy. What is striking today is how many of these measures are being actively pursued by western governments. The most egregious are highlighted below:

Prevent or delay liquidation: by lending money to shaky businesses, calling on banks to lend further, etc.

Inflate further: further inflation blocks the necessary fall in prices, delaying adjustment and prolonging depression.

Keep wage rates up: artificial maintenance of wage rates in a depression ensures permanent mass unemployment.

Keep prices up: keeping prices above their free market levels will create unsaleable surpluses, and prevent a return to prosperity.

Stimulate consumption and discourage saving: any increase in the relative size of government in the economy encourages people and companies to consume rather than invest, and prolongs the depression.

Subsidize unemployment: any subsidisation of unemployment will prolong unemployment indefinitely, and delay the shift of workers to the fields where jobs are available.

Paul Ryan to Ben Bernanke

2011-07-25T11:59:00.000-05:00

Congressman Ron Paul addressing US Federal Reserve chairman Ben Bernanke, Financial Services Subcommittee on Monetary Policy, July 13, 2011:

“We hear that in the future we’re going to have a better economy and everybody hopes so, but it’s hard for me to believe because I look back on our past three years and what Congress has done and what the Fed has done is literally injected about $5.3 trillion and I don’t think we got very much for it. The national debt went up by $5.1 trillion; real GDP grew by less than one per cent; unemployment really hasn’t recovered – we still have 7 million people that have become unemployed.. one statistic that is very glaring if you look at the charts is how long people are unemployed. The average time used to be 17 weeks – now it’s nearly 40 weeks. Nothing there reassures me.. Also, when we talk about prices, we’re always reassured that there’s not all that much inflation, and we’re told that they might start calculating inflation differently with a new CPI.. of course, we changed our CPI a few years back. There’s still a free market group that calculates the CPI the old-fashioned way. They come up with a figure – despite all this weak economy – that prices have gone up 35%, 9.4% every year, and I think if you just went out and talked to the average housewife, she might believe the 9.4% figure rather than saying it’s only 2%. So I would say what we’ve been doing isn’t very reassuring with all this money expenditure.. Spending all this money hasn’t helped. That $5.3 trillion didn’t go to consumers, it went to buying bad assets, it went to bailing out banks, it went to bailing out big companies.. lo and behold, the consumer didn’t end up getting this, the consumer lost their job, their houses and their mortgages..”

The Proper Role of Government

2011-07-25T11:44:00.000-05:00

I saw this over at Cafe Hayek and thought it was one of the best things I have ever read on the role government should play in our society and lives:

The passage below is from an essay written in 1830 by Thomas Babington Macaulay; its title is “Southey’s Colloquies on Society“:

It is not by the intermeddling of [English poet laureate] Mr. Southey’s idol, the omniscient and omnipotent State, but by the prudence and energy of the people, that England has hitherto been carried forward in civilization; and it is to the same prudence and the same energy that we now look with comfort and good hope. Our rulers will best promote the improvement of the nation by strictly confining themselves to their own legitimate duties, by leaving capital to find its most lucrative course, commodities their fair price, industry and intelligence their natural reward, idleness and folly their natural punishment, by maintaining peace, by defending property, by diminishing the price of law, and by observing strict economy in every department of the state. Let the Government do this: the People will assuredly do the rest.

Is Heaven a "Fairy Story"

2011-05-16T17:17:00.000-05:00

According to Stephen Hawking, yes it is:

"British scientist Stephen Hawking has branded heaven a "fairy story" for people afraid of the dark, in his latest dismissal of the concepts underpinning the world's religions."

Whenever I see statements like the one made by Mr. Hawking above, I think of Pascal's Wager.

I did not accept Jesus Christ as my Lord and Savior because of Pascal's Wager, but Pascal's Wager certainly did make me take a closer look at the evidence.

If you are not familiar with it, here is a look at the famous French philosopher and mathematician's Wager:

1) "God is, or He is not"
2) A Game is being played... where heads or tails will turn up.
3) According to reason, you can defend neither of the propositions.
4) You must wager. It is not optional.
5) Let us weigh the gain and the loss in wagering that God is. Let us estimate these two chances. If you gain, you gain all; if you lose, you lose nothing.
6) Wager, then, without hesitation that He is. (...) There is here an infinity of an infinitely happy life to gain, a chance of gain against a finite number of chances of loss, and what you stake is finite. And so our proposition is of infinite force, when there is the finite to stake in a game where there are equal risks of gain and of loss, and the infinite to gain.

Zuppkeisms

2011-05-13T13:41:00.000-05:00

Some great stuff here from the late and great Illinois football coach Bob Zuppke. Coach Zuppke coached the Illini from 1913-1941.

Some Interesting Notes From Debka File

2011-05-02T21:26:00.002-05:00

Debka.com is a Israeli-based military intelligence website. I used to read it all of the time when I worked in DC, and I just started reading it again when the Bin Laden news broke.

Below is an interesting piece from Debka:

The photos released of the fortified villa in Abbottabad, Pakistan, where Osama bin Laden died on Sunday night, May 2, show a satellite dish as well as cables and wires snaking along the outer and inner walls. Smashed computers appear in shots of the interior rooms. Far from dispensing with electronic devices and Internet connections as widely reported, the fortress that was the al Qaeda leader's last haven proves to have been equipped with both.

All this up-to-date electronic technology would have opened the six-year old building wide to outside intelligence penetration and surveillance. Bin Laden additionally suffered from a kidney disease and was dependent on dialysis treatment and outside medical care - another porthole into the Bin Laden's establishment.

There was no need therefore to follow the trail of the couriers described as leading the CIA to the hideout of the most wanted terrorist in the world. He occupied a large three-storey building which stuck out on the skyline of the Pakistani garrison town of Abbottabad, 120 kilometers from Islamabad, and towered over neighboring buildings. Pakistani intelligence must have been curious, to say the least, about this sizeable compound when it was built in 2005 just 100 meters from a military academy in a small town housing a military base and generals' residences.

Therefore, the repeated statements by US officials that the Navy Seals' special operation took place without Pakistani knowledge sounds like a hollow attempt to absolve Islamabad of involvement in the killing of the arch terrorist in the eyes of the Muslim world.

US President Barack Obama said he received his first lead to bin Laden's whereabouts last August. Why then did it take nine months for him to order the targeted operation? And why did the US intelligence and military need all that time to prepare it?

They are only two of the puzzling questions surrounding the episode. Might the answers lie in its juxtaposition with the Arab Revolt, or Arab Spring, which flared first in Tunisia in December 2010, then spread to Egypt and played out in February 2011 and flared in Syria in April 2011?

Was al Qaeda's spirit and mastermind eliminated before his networks could move in on the national and Islamic struggles which are still unfolding in Tunis, Cairo, Tripoli and Damascus?

The linkage was drawn by US Secretary of State Hillary Clinton in her first statement on the master-terrorist's death Monday: "…history would record that bin Laden's death had come at a time when peoples in the Middle East and North Africa were rejecting the extremist narrative and were standing up for freedom and democracy."

Obama's adviser on terror John Brennan said later: "I would hope that the people of the Middle East will understand that the time for terror is over."

That of course will depend on how those peoples view the US targeted operation to kill the head of al Qaeda. The reaction in some places was of disbelief in the American claim to have killed him and demands for proof of his identity. The statement by "an American intelligence official" to Reuter was not helpful. He said "US Special forces set out to kill Osama bin Laden and dump his body in the sea to make it harder for the al Qaeda founder to become a martyr."

The head of the Al-Azhar Supreme Sunni Council of Egypt reacted by condemning the dumping of bin Laden's body in the sea as violating the tenets of Islam and human norms.

It was noted in Arab capitals, that he was killed in the second US targeted operation against an Arab leader in three days – NATO failed in its attempt to kill Libyan ruler Muammar Qaddafi Saturday night, April 30.

At his news briefing Monday night, John Brennan tried to soften the hard edges of resentment building up in Arab and Muslim opinion. To settle questions about identity, he reported that a DNA test had showed a 99.9 percent match against his relatives, but declined to say if and when photos of his body would be released..

Obama's adviser on terror went on to insist that Bin Laden had been given a religious Muslim funeral before being buried at sea. He also explained that the al Qaeda leader would have been taken alive had there been the opportunity.

Brennan disclosed that a large quantity of documents had been seized in the Abbottabad villa and was being checked. He added that it was inconceivable that the dead terrorist did not have a support system.

All Hail the Chief

2011-05-02T21:15:00.000-05:00

President Obama certainly deserves praise and credit for bringing Bin Laden to justice but he may want to pay attention to the piece below and remember who really deserves the praise for this victory (hint, it's not just you Mr. President):

From the LA Times:

Osama bin Laden dead: Yes, SEALs were in on the raid, but aides hail Obama's office bravery
According to another one of those White House briefings of reporters designed to suck up all available credit for good news, President Obama's homeland security advisor reveals that it was a really tense time in the air-conditioned White House as unidentified U.S. Navy SEALs closed in on the world's most wanted man after midnight a half a world away.
"Minutes passed like days," says John Brennan, who bravely stood with press secretary Jay Carney before reporters and TV cameras today chronicling his boss' weekend heroics.
The heavily-armed commandos flying in a quartet of darkened Blackhawk and Chinook helicopters more than 100 miles into Pakistan were probably listening to their iPods and discussing the NFL draft.
"The concern was that bin Laden would oppose any type of capture operation," said Obama's Sherlock Holmes. So U.S. troops were prepared "for all contingencies."
In fact, this weekend was such a tense time in the White House that Obama only got in nine holes of golf. But he still managed to deliver his joke script to the White House Correspondents Assn. dinner Saturday evening.
Sunday was, Brennan revealed to his eager audience, "probably one of the most anxiety-filled periods of times in the lives of the people assembled here." Poor poor bureaucrats. Extra Tums all around. Did someone order dinner?
There may have been a little anxiety aboard those combat choppers. Who knows? We can't hear from them. And, as every day, anxiety in the kitchens, hearts and mind of thousands of military families who put up with the terrifying uncertainty of the dangerous deeds their loved ones have volunteered to secretly do for their country.
During his 49 minute presentation Brennan did squeeze in one reference to the mission's "very brave personnel."

But the emphasis, with 2012 just around the calendrical corner, was on the boss' valor. "There was nothing that confirmed that bin Laden was at that compound," Brennan related as if such uncertainty is uncommon in war.
"And, therefore," Brennan continued, "when President Obama was faced with the opportunity to act upon this, the president had to evaluate the strength of that information and then made what I believe was one of the most gutsiest calls of any president in recent memory."
According to early reports of the incident, detailed here in The Ticket, 24 SEALs rappelled down ropes from hovering Chinooks in post-midnight darkness Monday Pakistan time with Osama security forces shooting at them. Brennan didn't have much time to go into all that today, the goal is to elevate the ex-state senator to at least a one-star commander-in-chief.
Here's something else that didn't get much recognition in all the street celebrations or all-hail-Obama briefings:
The trail to Monday morning's assault on Osama's Pakistan compound began during someone else's presidency. That previous president authorized enhanced interrogation techniques which convinced folks like Khalid Shaikh Mohammed to give up, among many other things, the name of their top-secret courier, now deceased. His travels ultimately led the CIA back to Osama's six-year-old suburban home.

Hayek vs. Keynes Part II

2011-04-28T12:17:00.000-05:00

Nothing like a hip-hop song focused on economics:

Thoughts from a Surgeon

2011-04-26T14:40:00.000-05:00

Some must read stuff on Mish's blog:

Hello Mish

I am a shrugging surgeon, having left practice in disgust that the medical system has no concept of value. Instead of seeking results of therapy, the system focuses on how to pay for the inefficiencies.

The general government mantra is simple: If are you for the kids, the poor, the teachers, the police, the military, the farmers, etc., then it is necessary to keep throwing money at targeted programs without questioning whether the increased spending ever does any good.

While it is obvious to anyone paying attention that most of this spending is a waste, it is unpatriotic to point it out. Yet until there is some accounting for what we get, and a genuine incentive to control costs and add value, we will just keep spending more and more while getting less and less.

I tried to introduce sanity in the form of global fees for operations and outpatient centers that could provide operations for a fraction of the prevailing cost at the local hospitals.

Unfortunately, such programs are feared, even banned by government bureaucrats (and other beneficiaries of governmental bureaucratic waste) who fear genuine competition. I was harassed every step of the way in my efforts to provide value to patients.

Thanks, Ed Schmitt

I sent an email to Dr. Schmitt asking him to expound upon the last paragraph in his email to me. Here is the reply from Dr. Schmitt ...

Hello Mish

It is a long story but I believe I can summarize it for you.

I am a surgeon. I am not practicing now, but once one has invested as much as is needed to become a surgeon, the surgical personality is ingrained into my life. Thus I am still a surgeon.

The early part of my career was consumed by learning the trade, when to operate and how to operate. Once I was in practice it was clear that excellence in practicing medicine was not enough.

Many doctors are not aware of the financial implications of what they do. The thinking is "if insurance pays, then who cares what it costs?"

However, I was too observant of what was really going on around in the hospitals and for my patients. There were huge financial implications for anyone who touched the medical system whether or not they had insurance.

I hate waste and respect value. I saw lots of waste and little value in my daily practice. It became clear that common sense issues regarding a diagnosis were important but overlooked.

For example, when facing a patient's medical problem, the thinking should be along the lines of "What is the most effective way to treat this problem, that causes the least disability, quickest recovery, and is a reasonable in cost"?

While most people lump all medical costs into the category "doctors' bills", it is actually the facility fees and extras that cost far more than I billed.

Since I controlled everything that went on in the operating room, it was up to me to decide what instruments and supplies I needed. In this respect there were huge differences in the cost and functionality of the different options.

I had to have total control over these things to make an impact. The myth is that hospitals control these things for everyone. That is false. They have a contract with huge companies to provide whatever the company offers without a true understanding of what really works.

I had an eye toward getting the job done perfectly for the least cost. I was one of the first general surgeons to put an operating room in my office. I was able to realize great savings on drapes, equipment, and supplies. I love to operate so I could quote a very reasonable price to patients for something that was satisfying and fun to do.

Unfortunately, I couldn't put these global fee packages together for insured patients because the insurance companies didn't have a mechanism to deal with any creative new ideas.

I was even on the boards of some insurance companies. The conversations were extremely frustrating. I was constantly asking questions like "You will let me do these procedures in a facility of lesser quality, a facility that costs five times as much as my office, when my office is fully licensed and inspected, and I will do the operation itself for less than half of what you are used to paying, and you won't let me?"

Mish, I could offer these global fees for patients that didn't have insurance. For example, I charged $750 for a hernia repair, ($1250 for both sides), and this included everything associated with the repair of the hernia and came with a guarantee.

It was obvious to me that the usual way of doing medicine was absurd from the patients point of view. They had a problem they wanted solved and were interested in how much it would cost and how long they would be laid up.

Business as usual would have them see multiple doctors prior to the procedure with lots of lab work that was unnecessary, then have an operation with no warranty and prolonged follow up, with every encounter ringing the cash register.

As long as someone else paid it was just frustrating and wasteful, but when the patient had to pay out of their pocket, it was intolerable. That was what I was trying to address.

Unfortunately, hospitals immediately targeted me. Hospital executives told family doctors not to refer patients to me, anesthesiologists on the staff were forbidden to work in my office, and I was increasingly harassed by the administration.

One hospital threw me off their insurance panels and tried to sanction my medical license. I continued in the outpatient and hospital setting.

An independent surgery center opened in town and rather than continue the fight to have the one in my office, I started using them. That lead to increasing distance from the hospital and my practice becoming almost exclusively outpatient. I started to resent my affiliation with the hospitals. Eventually I let all my hospital privileges go to the least level of involvement.

To make matters worse, credentialing laws require doctors to have some hospital privileges even to had an outpatient surgical practice. Since credentials have to do with how competent one is, you might think that economic affiliation with a surgery center would not have any bearing on hospital credentials.

You would be wrong.

Colorado made it acceptable for a hospital to deny privileges for economic reasons. One city hospital offered me privileges as long as I would sign a document that said I would never in any way criticize the hospital and that if anyone ever thought they heard me doing so, I would surrender my medical license.

This was from a hospital that wouldn't let me have any say in the gloves I wore, bandages I applied, or sutures I used. I figured it was a good time to shrug.

I love fly fishing and have had a lot in Alaska on the best river in the world so I built a house and live up north fishing, skiing, kayaking, and reading. It is sad because most doctors know the system doesn't work and are very frustrated. They don't dare do anything to try to fix it because of the things that have happened to me and many other creative docs who are also shrugging.

You are very welcome to quote me, I wish there was some creative way to help move the medical system toward value.

Thanks, Ed

New Blog

2011-04-26T14:35:00.000-05:00

I wanted to make you aware of a new, must-read website I have helped to create for anyone and everyone with even a remote interest in college football.

The site is called Coaches By The Numbers (http://coachesbythenumbers.com) and is dedicate to the analysis of college football coaches by the numbers.

Over the last six months, we have collected (outside of normal business hours of course) over 800,000 pieces of information on college football coaches. Going back to 2001, we have collected detailed statistical and biographical information on every Head Coach, Offensive Coordinator, and Defensive Coordinator for all 120 FBS programs. We have also collected statistical information on Head Coaches for all 126 FCS programs dating back to 2001.

We have come up with a proprietary system to rank and rate Head Coaches and Coordinators using the available statistical data. In addition to our proprietary rankings, we have come up with 21 additional rankings for coaches. We have rankings for Recruiting, Revenues, NFL Draft Picks, Graduation Rates, and almost any other stat you can or can’t think of. In addition to the obvious data on coaches, we have collected the not so obvious data as well. We have information on what position a coach played in college, what state he is from, and what school he attended. Our coach profile pages are unparalleled in their attention to detail and scope.

Furthermore, users of our site can customize and sort information to compare and contrast coaches.

If you have ever felt that you knew you were right about a coach but just didn’t have access to the appropriate information, look no further than http://coachesbythenumbers.com.

If you have ever wanted to disprove your coworker’s “gut feeling” on a coach, look no further than http://coachesbythenumbers.com.

If you have ever wondered if you can prove statistically that the SEC, Big Ten, ACC, etc. has the best coaches, look no further than http://coachesbythenumbers.com.

If you ever wondered why you keep losing money on your can’t miss bets, look no further than http://coachesbythenumbers.com.

Please browse our site and let us know what you think and please forward this email to anyone that has a vested interest in college football.

As we are just getting off the ground with this new venture, it would help a lot if friends and family would support us by subscribing to our site. We offer one month, six month, and annual membership options.

Also, don’t be afraid to click on a few of our sponsors while visiting the site as we generate revenue this way as well. Be sure to “like” us on Facebook and follow us on Twitter as well.

Thanks in advance for your support and we look forward to everyone’s feedback on the site.

Other People's Money

2011-04-22T14:36:00.001-05:00

Every now and again my mom will give me a gift card to Starbucks.

When I am shopping at Starbucks without my mom's money, I tend to keep in pretty simple. I will by a Grande Coffee and leave it at that.

When I am shopping with my mom's money, I tend to buy a Venti Coffee, Sausage Sandwich, the Wall Street Journal, and whatever suits my fancy on that particular day.

To say the very least, with mom's money, I become a very irresponsible consumer.

The chart below goes a long way in explaining one of the reasons health care costs have exploded over the last 20-30 years.

When we have other people's money to play with, we seem to alway play a little more recklessly.

Obama's Budget Speech

2011-04-14T11:30:00.000-05:00

From Congressman Paul Ryan's office on Obama's budget speech:

Counts unspecified savings over 12 years, not the 10-year window by which serious budget proposals are evaluated.
Postpones all savings until 2013 – after his reelection campaign.
Runs away from the Fiscal Commission’s recommendations on Social Security – puts forward no specific ideas or even a process to force action.
Calls for the appointment of another commission, after mostly omitting from his Fiscal Year 2012 Budget any of proposals submitted by the commission he appointed last year.
Non-specific framework fails to meet his Fiscal Commission's own deficit-reduction goals.
Taxes:

Proposes to raise taxes on the American people by more than $1 trillion, devastating our fragile economy and stifling job creation.
Endorsed the Fiscal Commission’s ideas on taxes, which specifically called for lower tax rates and a broader base, but then called for higher tax rates. Which is it?
Government health and retirement programs are growing at more than twice the speed of the economy. At the current rate of spending, revenue would have to rise “by more than 50 percent” just to keep debt at its current level, according to the Government Accountability Office. That means tax increases across-the-board, now and in the future.

Medicare:

Instead of proposing structural reforms that would actually reduce health care costs, the President proposed across-the-board cuts to current seniors’ care.
Strictly limits the amount of health care seniors can receive within the existing structure of unsustainable government health care programs.
Gives more power to unelected bureaucrats in Washington to determine what treatments seniors should or shouldn’t get, against a backdrop of costs that continue to rise.
Conceded that the relentlessly rising cost of health care is the primary reason why the nation is threatened by debt, and implicitly conceded that his health care law failed to solve the problem.
Eviscerates the only competitive element anywhere in health-care entitlement programs – the competition amongst Part D prescription-drug plans – which allowed the drug benefit to come in 41 percent under budget.

Medicaid:

Acknowledges that the open-ended financing of Medicaid is a crippling financial burden to both states and the federal government, but explicitly rejected the only solution to this problem, which is to give states the freedom they need to design systems that work for the unique needs of their own populations.

Defense:

Proposes more cuts on top of $78 billion in cuts included in his own defense budget, which he proposed just two months ago – all at a time when he continues to task the military with new missions.
Secretary Gates has said that the military needs 2 percent – 3 percent real growth just to keep executing the missions that DOD has already been assigned.
Secretary Gates described deficit reduction plans that let budget targets drive defense policy as “math, not strategy.”

Who Do We Really Owe?

2011-04-13T15:54:00.001-05:00

From Jeff Gudlach:

Uh-Oh! Cov Lite Coming Back Strong

2011-04-13T15:51:00.002-05:00

This is either a really good sign that the market is recovering or a really bad sign that history is simply doomed to repeat itself:

From Clusterstock:

In retrospect, the incredible volume of cov-lite loans -- loans with few strings attached -- was one of the surest signs of a credit bubble. That obviously ended in tears.

Anyway, they're back.

In his latest presentation, Jeff Gundlach takes a look at cov-lite volume and notes that through just one quarter of 2011, we've already surpassed 2010's level of cov-lite. We're already on pace for one of the highest years ever.

With the Fed keeping rates incredibly low, and options for yield not widespread, it's no wonder his presentation was called Deja Vu All Over Again:

Not a Good Sign

2011-04-01T15:49:00.000-05:00

From Scott Hodge with the Tax Foundation:

B. Percentage shares of richest 10%
	1. Share of taxes of the richest 10%	2. Share of market income of the richest 10%	3. Ratio of shares for richest 10% (1/2)
Australia	36.8	28.6	1.29
Austria	28.5	26.1	1.1
Belgium	25.4	27.1	0.94
Canada	35.8	29.3	1.22
Czech Republic	34.3	29.4	1.17
Denmark	26.2	25.7	1.02
Finland	32.3	26.9	1.2
France	28	25.5	1.1
Germany	31.2	29.2	1.07
Iceland	21.6	24	0.9
Ireland	39.1	30.9	1.26
Italy	42.2	35.8	1.18
Japan	28.5	28.1	1.01
Korea	27.4	23.4	1.17
Luxembourg	30.3	26.4	1.15
Netherlands	35.2	27.5	1.28
New Zealand	35.9	30.3	1.19
Norway	27.4	28.9	0.95
Poland	28.3	33.9	0.84
Slovak Republic	32	28	1.14
Sweden	26.7	26.6	1
Switzerland	20.9	23.5	0.89
United Kingdom	38.6	32.3	1.2
United States	45.1	33.5	1.35

OECD-24	31.6	28.4	1.1

Want to Be More Efficient? Quit Making Left Turns

2011-04-01T15:18:00.001-05:00

WHY UPS IS SO EFFICIENT: "OUR TRUCKS NEVER TURN LEFT"

BOB STOFFEL, SENIOR VP OF UPS, REVEALED AN UNUSUAL WAY TO SAVE TIME AND MONEY TO FORTUNE:

STOP MAKING LEFT-HAND TURNS.

ENGINEERS MAP OUT EVERY ROUTE, HE SAYS, AND PROVIDE RIGHT-TURN ONLY DIRECTIONS TO DRIVERS.

THIS SEEMINGLY SILLY STRATEGY HAS PAID OFF: UPS'S ROUTING SOFTWARE SHAVED 20.4 MILLION MILES OFF THEIR ROUTES LAST YEAR* WHILE DELIVERING 350,000 MORE PACKAGES. IT ALSO DIMINISHED CO2 EMISSIONS BY 20,000 METRIC TONS.

DON'T BELIEVE IT? MYTHBUSTERS TRIED IT OUT. THE SHOW HAD DRIVERS TAKE THE SAME ROUTE, ONLY SOME MADE RIGHT TURNS WHILE OTHERS TURNED LEFT. THE RESULTS WERE SIMILAR.

WHY DOES THIS WORK? A FEW REASONS, SAYS STOFFEL. TURNING RIGHT DECREASES SAFETY HAZARDS AND DELAYS. IF A DRIVER IS STUCK WAITING FOR TRAFFIC TO PASS WITH A LEFT BLINKER ON, IT'S GOING TO SET THEM BACK. JUTTING OUT INTO TRAFFIC IS ALSO A GOOD WAY TO GET SIDE-SWIPED, ESPECIALLY WHEN DRIVING A BIG TRUCK.

*THE 20.4 MILLION FIGURE IS NOT JUST FROM MAKING RIGHT-HAND TURNS. IT IS THE TOTAL MILES THE ROUTING SOFTWARE HELPED UPS SAVE LAST YEAR IN ALL CAPACITIES.

My Goodness Gracious

2011-03-25T17:08:00.000-05:00

“The United States is a 236-year old country, and almost 40% of the entire public sector debt has been built up by the current Administration in barely more than two years. The United States has a monetary base of $2.06 trillion, and nearly 60% of that has been created since Helicopter Ben took over the cockpit in early 2006. A 236 year-old country, and well over half of the stock of money has been created in just the past half-decade. Remarkable. Maybe the real question we should be asking is why the stock market has only managed to double from the lows with all this massive stimulation.” David Rosenberg, Breakfast with Dave, Gluskin Sheff, February 22, 2011, p. 10.

More From Tom Brown on Why Loan Mods are Such a Bad Idea

2011-03-17T15:50:00.000-05:00

From a February article in the WSJ:

The Obama administration is trying to push through a settlement over mortgage-servicing breakdowns that could force America's largest banks to pay for reductions in loan principal worth billions of dollars.

Terms of the administration's proposal include a commitment from mortgage servicers to reduce the loan balances of troubled borrowers who owe more than their homes are worth, people familiar with the matter said. The cost of those writedowns won't be borne by investors who purchased mortgage-backed securities, these people said.

If a unified settlement can be reached, some state attorneys general and federal agencies are pushing for banks to pay more than $20 billion in civil fines or to fund a comparable amount of loan modifications for distressed borrowers, these people said.

Now, here are Tom Brown's thoughts on the Obama Administration's plans:

What oh what is this strange obsession the people in the Obama administration have with loan modifications, and is there a pill someone can give them to cure it? This notion of a “unified settlement” to benefit delinquent mortgage borrowers is a terrible idea. It won’t help borrowers. It won’t help lenders. It won’t help virtually anyone. Here’s why:

· A global loan mod deal would invite moral hazard, on steroids. Only “troubled borrowers” will get relief? Count me in! It’s the easiest thing in the world for a borrower who’s current to render himself delinquent unilaterally, simply by closing his checkbook. His cash flow improves right away, and his default makes him eligible for the principal reductions his less-prudent neighbor is already lined up for. People will unilaterally default in droves and expect to become eligible for the deal, regardless of what anti-moral-hazard safeguards are proposed early on. (They might even be right; these people vote, remember.) Borrowers would be idiots to not default. What do you think that would do to banks’ loan quality?

· A deal would divert bank capital from other, more productive uses. Like, for instance, lending. Only last week, as she delivered the banking industry’s fourth-quarter report card, Sheila Bair said that “we need to see more lending” on the part of the banking industry. Maybe so. But if banks are going to be forced to shell out for civil penalties to pay for real or imagined transgressions, and shell out some more for principal forgiveness they’ll be strong-armed into granting, there’s going to be that much less available for writing loans that actually have a chance of being paid back. That would not, I should add, be auspicious for the outlook for economic growth.

· Loan mods don’t provide real relief for borrowers. The numbers aren’t just bad; they’re awful. One-third of borrowers who qualify for a modification don’t even make it through the three-month trial period. And as Joseph Mason points out in Friday’s Wall Street Journal, half of those who do make it through the trial re-default within six months. What exactly is the point? The vast majority of modified borrowers end up losing their homes anyway.

· This kind of government intervention will make mortgage credit scarcer and more expensive. Now that lenders know that a mortgage is no longer a simple contract between consenting adults—that, instead, the government might come swooping in to alter the deal’s terms to the material advantage of one of the parties—they will factor that knowledge into their pricing of future loans. Believe me, it won’t make ‘em cheaper.

· Loan modifications squeeze more money out of delinquent borrowers for no reason. If a severely delinquent borrower inevitably face foreclosure (and the numbers are emphatic that that’s the case), why string him along for a few extra months? For the borrower, one of the advantages of foreclosure (and, yes, there are a few) is that he gets to live in the property rent-free for several months. This housing recession is so severe that that can add up to a mini-windfall. These days, typical foreclosure doesn’t happen until 18 moths after the loan first becomes delinquent. That’s a lot of rent-free living. Plus, the sooner the foreclosure, the sooner the borrower can move on with his life (by, say, moving to a city with a better employment outlook) without having to sell the damn house first. So for most borrowers, the loan mod process takes a bad situation worse.

The government has been pursuing its loan modification strategy for so long by now that it’s become abundantly clear that massive, government-instigated loan mods are a terrible idea both in theory and in practice. Have these people learned nothing? A global modification deal would be bad for lenders and borrowers, and a threat to economic growth. The sooner this trial balloon gets popped, the better.

Two-Bits, Four-Bits, Six-Bits, A Dollar

2011-03-05T16:00:00.000-06:00

Take time to the entirety of Bill Gross' new Investment Outlook.

In the meantime, pay special attention to these charts Gross uses in his commentary:

Chart 1: Who owns what percentage of the existing stock of Treasuries

Chart 2: Who has been buying the annual supply(which closely parallels the Federal deficit)

Chart 3: Who might step up to the plate if and when the Fed and its QE bat are retired.

Here is Gross's conclusion on the charts above:

Basically, the recent game plan is as simple as the Ohio State Buckeyes’ “three yards and a cloud of dust” in the 1960s. When applied to the Treasury market it translates to this: The Treasury issues bonds and the Fed buys them. What could be simpler, and who’s to worry? This Sammy Scheme as I’ve described it in recentOutlooks is as foolproof as Ponzi and Madoff until… until… well, until it isn’t. Because like at the end of a typical chain letter, the legitimate corollary question is – Who will buy Treasuries when the Fed doesn’t?

The Nanny State in Visual Form - Part III

2011-02-21T16:22:00.002-06:00

The Nanny State in Visual Form - Part II

2011-02-21T16:21:00.000-06:00

The Nanny State in Visual Form

2011-02-21T16:20:00.000-06:00

How in Debt Are We?

2011-02-15T10:42:00.002-06:00

The video below should really scare the daylights out of you:

The New Red Menace

2011-02-12T12:24:00.000-06:00

Please, please, pretty please take time to read Mitch Daniel's CPAC speech.

My hope is that this speech serves as Mitch Daniel's coming out party to the American people:

Indiana Governor Mitch Daniels
February 11, 2011 Remarks
Ronald Reagan Centennial Dinner
Conservative Political Action Conference
Washington, D.C.

Phyllis Schlafly, David Keene, George Will, good friends, thank you for the enormous privilege of this podium. Even a casual observer of American public life knows how many great ideas have been born here, how many important debates joined here, how many giants of our democracy appeared on this platform. When David broached the invitation, my first reaction was one I often have: “Who cancelled?” But first choice or fifteenth, the honor, and the responsibility to do the occasion justice, is the same. I am seized with the sentiment best expressed by Hizzoner, the original Mayor Richard Daley, who once proclaimed a similar honor the “pinochle of success.”

We are all grateful to our co-sponsors, the Reagan Foundation and the Reagan Ranch. How fitting that we convene under their auspices, as we close this first week of the centennial. Those of us who served President Reagan were taught to show constant respect for the presidency and whoever occupies it. But, among us alums, the term “the President” tends to connote just one of those forty-four men, that great man with whom God blessed America one hundred years ago this week.

The prefix in “co-sponsor” is meaningful tonight. It is no state secret that the two foundations have not always been co-operative, or co-llaborative, or co-llegial. So it is a tribute to the stature and diplomacy of David Keene that they have come together to produce so warm a moment as this. I am now converted to the view that yes, the Israeli-Palestinian conflict will be solved. Well done, David; Nobel Peace Prizes have been awarded for far less.

I bring greetings from a place called Indiana. The coastal types present may think of it as a “flyover” state, or one of those “I” states. Perhaps a quick anthropological summary would help.

We Hoosiers hold to some quaint notions. Some might say we “cling” to them, though not out of fear or ignorance. We believe in paying our bills. We have kept our state in the black throughout the recent unpleasantness, while cutting rather than raising taxes, by practicing an old tribal ritual – we spend less money than we take in.

We believe it wrong ever to take a dollar from a free citizen without a very necessary public purpose, because each such taking diminishes the freedom to spend that dollar as its owner would prefer. When we do find it necessary, we feel a profound duty to use that dollar as carefully and effectively as possible, else we should never have taken it at all.

Before our General Assembly now is my proposal for an automatic refund of tax dollars beyond a specified level of state reserves. We say that anytime budgets are balanced and an ample savings account has been set aside, government should just stop collecting taxes. Better to leave that money in the pockets of those who earned it, than to let it burn a hole, as it always does, in the pockets of government.

We believe that government works for the benefit of private life, and not the other way around. We see government’s mission as fostering and enabling the important realms – our businesses, service clubs, Little Leagues, churches – to flourish. Our first thought is always for those on life’s first rung, and how we might increase their chances of climbing.

Every day, we work to lower the costs and barriers to free men and women creating wealth for each other. We build roads, and bridges, and new sources of homegrown energy at record rates, in order to have the strongest possible backbone to which people of enterprise can attach their investments and build their dreams. When business leaders ask me what they can do for Indiana, I always reply: “Make money. Go make money. That’s the first act of ‘corporate citizenship.’ If you do that, you’ll have to hire someone else, and you’ll have enough profit to help one of those non-profits we’re so proud of.”

We place our trust in average people. We are confident in their ability to decide wisely for themselves, on the important matters of their lives. So when we cut property taxes, to the lowest level in America, we left flexibility for localities to raise them, but only by securing the permission of their taxpayers, voting in referendum. We designed both our state employee health plans and the one we created for low-income Hoosiers as Health Savings Accounts, and now in the tens of thousands these citizens are proving that they are fully capable of making smart, consumerist choices about their own health care.

We have broadened the right of parents to select the best place for their children’s education to include every public school, traditional or charter, regardless of geography, tuition-free. And before our current legislature adjourns, we intend to become the first state of full and true choice by saying to every low and middle-income Hoosier family, if you think a non-government school is the right one for your child, you’re as entitled to that option as any wealthy family; here’s a voucher, go sign up.

Lastly, speaking now for my administration colleagues, we believe in government that is limited but active. Within that narrow sphere of legitimate collective action, we choose to be the initiators of new ideas or, as we have labeled ourselves, the Party of Purpose. In President Reagan’s phrase, “We are the change.” On election nights, we remind each other that victory is not a vindication, it is an instruction, not an endorsement, but an assignment.

The national elections of 2010 carried an instruction. In our nation, in our time, the friends of freedom have an assignment, as great as those of the 1860s, or the 1940s, or the long twilight of the Cold War. As in those days, the American project is menaced by a survival-level threat. We face an enemy, lethal to liberty, and even more implacable than those America has defeated before. We cannot deter it; there is no countervailing danger we can pose. We cannot negotiate with it, any more than with an iceberg or a Great White.

I refer, of course, to the debts our nation has amassed for itself over decades of indulgence. It is the new Red Menace, this time consisting of ink. We can debate its origins endlessly and search for villains on ideological grounds, but the reality is pure arithmetic. No enterprise, small or large, public or private, can remain self-governing, let alone successful, so deeply in hock to others as we are about to be.
Need I illustrate? Surely the consequences, to prosperity, world influence, and personal freedom itself are as clear to this audience as to any one could appear before.

Do I exaggerate? I’d love to be shown that I do. Any who think so please see me in the hallway afterward, and bring your third grade math books.

If a foreign power advanced an army to the border of our land, everyone in this room would drop everything and look for a way to help. We would set aside all other agendas and disputes as secondary, and go to the ramparts until the threat was repelled. That is what those of us here, and every possible ally we can persuade to join us, are now called to do. It is our generational assignment. It is the mission of our era. Forgive the pun when I call it our “raison debt.”

Every conflict has its draft dodgers. There are those who will not enlist with us. Some who can accept, or even welcome, the ballooning of the state, regardless of the cost in dollars, opportunity, or liberty, and the slippage of the United States into a gray parity with the other nations of this earth. Some who sincerely believe that history has devised a leftward ratchet, moving in fits and starts but always in the direction of a more powerful state. The people who coined the smug and infuriating term – have you heard it? – “the Reagan Interruption.”

The task of such people is now a simple one. They need only play good defense. The federal spending commitments now in place will bring about the leviathan state they have always sought. The health care travesty now on the books will engulf private markets and produce a single-payer system or its equivalent, and it won’t take long to happen. Our fiscal ruin and resulting loss of world leadership will, in their eyes, be not a tragic event but a desirable one, delivering the multilateral world of which they’ve dreamed so long.

Fortunately, these folks remain few. They are vastly outnumbered by Americans who sense the presence of the enemy, but are awaiting the call for volunteers, and a credible battle plan for saving our Republic. That call must come from this room, and rooms like it.

But we, too, are relatively few in number, in a nation of 300 million. If freedom’s best friends cannot unify around a realistic, actionable program of fundamental change, one that attracts and persuades a broad majority of our fellow citizens, big change will not come. Or rather, big change will come, of the kind that the skeptics of all centuries have predicted for those naïve societies that believed that government of and by the people could long endure.

We know what the basic elements must be. An affectionate thank you to the major social welfare programs of the last century, but their sunsetting when those currently or soon to be enrolled have passed off the scene. The creation of new Social Security and Medicare compacts with the young people who will pay for their elders and who deserve to have a backstop available to them in their own retirement.

These programs should reserve their funds for those most in need of them. They should be updated to catch up to Americans’ increasing longevity and good health. They should protect benefits against inflation but not overprotect them. Medicare 2.0 should restore to the next generation the dignity of making their own decisions, by delivering its dollars directly to the individual, based on financial and medical need, entrusting and empowering citizens to choose their own insurance and, inevitably, pay for more of their routine care like the discerning, autonomous consumers we know them to be.

Our morbidly obese federal government needs not just behavior modification but bariatric surgery. The perverse presumption that places the burden of proof on the challenger of spending must be inverted, back to the rule that applies elsewhere in life: “Prove to me why we should.”

Lost to history is the fact that, in my OMB assignment, I was the first loud critic of Congressional earmarks. I was also the first to get absolutely nowhere in reducing them: first to rail and first to fail. They are a pernicious practice and should be stopped. But, in the cause of national solvency, they are a trifle. Talking much more about them, or “waste, fraud, and abuse,” trivializes what needs to be done, and misleads our fellow citizens to believe that easy answers are available to us. In this room, we all know how hard the answers are, how much change is required.

And that means nothing, not even the first and most important mission of government, our national defense, can get a free pass. I served in two administrations that practiced and validated the policy of peace through strength. It has served America and the world with irrefutable success. But if our nation goes over a financial Niagara, we won’t have much strength and, eventually, we won’t have peace. We are currently borrowing the entire defense budget from foreign investors. Within a few years, we will be spending more on interest payments than on national security. That is not, as our military friends say, a “robust strategy.”

I personally favor restoring impoundment power to the presidency, at least on an emergency basis. Having had this authority the last six years, and used it shall we say with vigor, I can testify to its effectiveness, and to this finding: You’d be amazed how much government you’ll never miss.

The nation must be summoned to General Quarters in the cause of economic growth. The friends of freedom always favor a growing economy as the wellspring of individual opportunity and a bulwark against a domineering state. But here, doctrinal debates are unnecessary; the arithmetic tells it all. We don’t have a prayer of defeating the Red Threat of our generation without a long boom of almost unprecedented duration. Every other goal, however worthy, must be tested against and often subordinated to actions that spur the faster expansion of the private sector on which all else depends.

A friend of mine attended a recent meeting of the NBA leadership, at which a small-market owner, whom I won’t name but will mention is also a member of the U.S. Senate, made an impassioned plea for more sharing of revenue by the more successful teams. At a coffee break, Mr. Prokhorov, the new Russian owner of the New Jersey Nets, murmured to my friend, “We tried that, you know. It doesn’t work.”

Americans have seen these last two years what doesn’t work. The failure of national economic policy is costing us more than jobs; it has begun to weaken that uniquely American spirit of risk-taking, large ambition, and optimism about the future. We must rally them now to bold departures that rebuild our national morale as well as our material prosperity.

Here, too, the room abounds with experts and good ideas, and the nation will need every one. Just to name three: it’s time we had, in Bill Simon’s words “a tax system that looks like someone designed it on purpose.” And the purpose should be private growth. So lower and flatter, and completely flat is best. Tax compensation but not the savings and investment without which the economy cannot boom.

Second, untie Gulliver. The regulatory rainforest through which our enterprises must hack their way is blighting the future of millions of Americans. Today’s EPA should be renamed the “Employment Prevention Agency.” After a two-year orgy of new regulation, President Obama’s recent executive order was a wonderment, as though the number one producer of rap music had suddenly expressed alarm about obscenity.

In Indiana, where our privatization of a toll road generated billions for reinvestment in infrastructure, we can build in half the time at two-thirds the cost when we use our own money only and are free from the federal rulebook. A moratorium on new regulation is a minimal suggestion; better yet, move at least temporarily to a self-certification regime that lets America build, and expand, and explore now and settle up later in those few instances where someone colors outside the lines.

Finally, treat domestic energy production as the economic necessity it is and the job creator it can be. Drill, and frack, and lease, and license, unleash in every way the jobs potential in the enormous energy resources we have been denying ourselves. And help our fellow citizens to understand that a poorer country will not be a greener country, but its opposite. It is freedom and its fruits that enable the steady progress we have made in preserving and protecting God’s kingdom.

If this strikes you as a project of unusual ambition, given the state of modern politics, you are right. If it strikes you as too bold for our fellow Americans to embrace, I believe you are wrong. Seven years as a practitioner in elective politics tells me that history’s skeptics are wrong. That Americans, in a vast majority, are still a people born for self-governance. They are ready to summon the discipline to pay down our collective debts as they are now paying down their own; to put the future before the present, their children’s interest before their own.

Our proposals will be labeled radical, but this is easy to rebut. Starting a new retirement plan for those below a certain age is something tens of millions of Americans have already been through at work.

Opponents will expect us to be defensive, but they have it backwards. When they call the slightest spending reductions “painful”, we will say “If government spending prevents pain, why are we suffering so much of it?” And “If you want to experience real pain, just stay on the track we are on.” When they attack us for our social welfare reforms, we will say that the true enemies of Social Security and Medicare are those who defend an imploding status quo, and the arithmetic backs us up.

They will attack our program as the way of despair, but we will say no, America’s way forward is brilliant with hope, as soon as we have dealt decisively with the manageable problems before us.

2010 showed that the spirit of liberty and independence is stirring anew, that a growing number of Americans still hear Lincoln’s mystic chords of memory. But their number will have to grow, and do so swiftly. Change of the dimension we need requires a coalition of a dimension no one has recently assembled. And, unless you disbelieve what the arithmetic of disaster is telling us, time is very short.

Here I wish to be very plainspoken: It is up to us to show, specifically, the best way back to greatness, and to argue for it with all the passion of our patriotism. But, should the best way be blocked, while the enemy draws nearer, then someone will need to find the second best way. Or the third, because the nation’s survival requires it.

Purity in martyrdom is for suicide bombers. King Pyrrhus is remembered, but his nation disappeared. Winston Churchill set aside his lifetime loathing of Communism in order to fight World War II. Challenged as a hypocrite, he said that when the safety of Britain was at stake, his “conscience became a good girl.” We are at such a moment. I for one have no interest in standing in the wreckage of our Republic saying “I told you so” or “You should’ve done it my way.”

We must be the vanguard of recovery, but we cannot do it alone. We have learned in Indiana, big change requires big majorities. We will need people who never tune in to Rush or Glenn or Laura or Sean. Who surf past C-SPAN to get to SportsCenter. Who, if they’d ever heard of CPAC, would assume it was a cruise ship accessory.

The second worst outcome I can imagine for next year would be to lose to the current president and subject the nation to what might be a fatal last dose of statism. The worst would be to win the election and then prove ourselves incapable of turning the ship of state before it went on the rocks, with us at the helm.

So we must unify America, or enough of it, to demand and sustain the Big Change we propose. Here are a few suggestions:

We must display a heart for every American, and a special passion for those still on the first rung of life’s ladder. Upward mobility from the bottom is the crux of the American promise, and the stagnation of the middle class is in fact becoming a problem, on any fair reading of the facts. Our main task is not to see that people of great wealth add to it, but that those without much money have a greater chance to earn some.

We should address ourselves to young America at every opportunity. It is their futures that today’s policies endanger, and in their direct interest that we propose a new direction.

We should distinguish carefully skepticism about Big Government from contempt for all government. After all, it is a new government we hope to form, a government we will ask our fellow citizens to trust to make huge changes.

I urge a similar thoughtfulness about the rhetoric we deploy in the great debate ahead. I suspect everyone here regrets and laments the sad, crude coarsening of our popular culture. It has a counterpart in the venomous, petty, often ad hominem political discourse of the day.
When one of us – I confess sometimes it was yours truly – got a little hotheaded, President Reagan would admonish us, “Remember, we have no enemies, only opponents.” Good advice, then and now.

And besides, our opponents are better at nastiness than we will ever be. It comes naturally. Power to them is everything, so there’s nothing they won’t say to get it. The public is increasingly disgusted with a steady diet of defamation, and prepared to reward those who refrain from it. Am I alone in observing that one of conservatism’s best moments this past year was a massive rally that came and went from Washington without leaving any trash, physical or rhetorical, behind?

A more affirmative, “better angels” approach to voters is really less an aesthetic than a practical one: with apologies for the banality, I submit that, as we ask Americans to join us on such a boldly different course, it would help if they liked us, just a bit.

Lastly, critically, I urge great care not to drift into a loss of faith in the American people. In speech after speech, article upon article, we remind each other how many are dependent on government, or how few pay taxes, or how much essential virtues like family formation or civic education have withered. All true. All worrisome. But we must never yield to the self-fulfilling despair that these problems are immutable, or insurmountable.

All great enterprises have a pearl of faith at their core, and this must be ours: that Americans are still a people born to liberty. That they retain the capacity for self-government. That, addressed as free-born, autonomous men and women of God-given dignity, they will rise yet again to drive back a mortal enemy.

History’s assignment to this generation of freedom fighters is in one way even more profound than the tests of our proud past. We are tasked to rebuild not just a damaged economy, and a debt-ridden balance sheet, but to do so by drawing forth the best that is in our fellow citizens. If we would summon the best from Americans, we must assume the best about them. If we don’t believe in Americans, who will?

I do believe. I’ve seen it in the people of our very typical corner of the nation. I’ve seen it in the hundred Indiana homes in which I have stayed overnight. I’ve seen it in Hoosiers’ resolute support of limited government, their willingness, even insistence, that government keep within the boundaries our constitutional surveyors mapped out for it.

I’ve always loved John Adams’ diary entry, written en route to Philadelphia, there to put his life, liberty, and sacred honor all at risk. He wrote that it was all well worth it because, he said, “Great things are wanted to be done.”

When he and his colleagues arrived, and over the years ahead, they practiced the art of the possible. They made compacts and concessions and, yes, compromises. They made deep sectional and other differences secondary in pursuit of the grand prize of freedom. They each argued passionately for the best answers as they saw them, but they never permitted the perfect to be the enemy of the historic good they did for us, and all mankind. They gave us a Republic, citizen Franklin said, if we can keep it.

Keeping the Republic is the great thing that is wanted to be done, now, in our time, by us. In this room are convened freedom’s best friends but, to keep our Republic, freedom needs every friend it can get. Let’s go find them, and befriend them, and welcome them to the great thing that is wanted to be done in our day.

God bless this meeting and the liberty which makes it possible.

Bank Bailouts Explained

2011-02-06T07:57:00.000-06:00

Heading to the ER? Maybe after American Idol is over.

2011-02-03T13:02:00.000-06:00

I thought this post from David Henderson was extremely interesting:

This is one of my very few posts in which I'm not trying--or, at least, not trying hard--to draw a moral or a lesson or illustrate an economic principle. I just found it fascinating. If I were trying to extract a lesson, it would probably be a Robin Hanson, we-waste-a-lot-of-money-on-health-care lesson.

Last night, my wife, who's recovering from a bad cold, suddenly had trouble breathing. At about 10:00 p.m., I took her to the local emergency room. When she was giving her data to the nurse who checked her in, I commented on how few people were in the ER compared to the number I expected. She answered, "American Idol must be on tonight."

"Really?" I said.

"Oh, yes," she said. "When American Idol is on or when football playoff games are on, we get way fewer people coming in. Also, we have a lot of 'regulars' and that number tends to drop off when American Idol, or football games, or the Grammies are on."

I read this to my wife just now (she's doing better, by the way) and she told me she has a different moral: "People have an amazing capacity to ignore their symptoms, whether real or imagined, if something comes along that's more interesting." I'm not sure whether this is a different moral or a non-economist's way of stating something similar to my Robin Hanson moral.

Meredith Whitney's Cycle of Perpetual Weakness

2011-02-03T12:10:00.000-06:00

Let's hope Mrs. Whitney's cycle can be broken:

Quote of the Day

2011-01-28T15:59:00.002-06:00

"However that may be, since we must turn to what the socialists call a parasite, which of the two—the merchant or the public official—is the less demanding parasite?" - Frédéric Bastiat, French economist, 1848.

Not a Good Sign

2011-01-26T17:07:00.002-06:00

Not a Good Sign

2011-01-26T13:58:00.000-06:00

Average federal salaries exceed average private-sector pay in 83% of comparable occupations. A sampling of average annnual salaries in 2008, the most recent data:

Job	Federal	Private	Difference
Airline pilot, copilot, flight engineer	$93,690	$120,012	-$26,322

Broadcast technician	$90,310	$49,265	$41,045

Budget analyst	$73,140	$65,532	$7,608

Chemist	$98,060	$72,120	$25,940

Civil engineer	$85,970	$76,184	$9,786

Clergy	$70,460	$39,247	$31,213

Computer, information systems manager	$122,020	$115,705	$6,315

Computer support specialist	$45,830	$54,875	-$9,045

Cook	$38,400	$23,279	$15,121

Crane, tower operator	$54,900	$44,044	$10,856

Dental assistant	$36,170	$32,069	$4,101

Economist	$101,020	$91,065	$9,955

Editors	$42,210	$54,803	-$12,593

Electrical engineer	$86,400	$84,653	$1,747

Financial analysts	$87,400	$81,232	$6,168

Graphic designer	$70,820	$46,565	$24,255

Highway maintenance worker	$42,720	$31,376	$11,344

Janitor	$30,110	$24,188	$5,922

Landscape architects	$80,830	$58,380	$22,450

Laundry, dry-cleaning worker	$33,100	$19,945	$13,155

Lawyer	$123,660	$126,763	-$3,103

Librarian	$76,110	$63,284	$12,826

Locomotive engineer	$48,440	$63,125	-$14,685

Machinist	$51,530	$44,315	$7,215

Mechanical engineer	$88,690	$77,554	$11,136

Office clerk	$34,260	$29,863	$4,397

Optometrist	$61,530	$106,665	-$45,135

Paralegals	$60,340	$48,890	$11,450

Pest control worker	$48,670	$33,675	$14,995

Physicians, surgeons	$176,050	$177,102	-$1,052

Physician assistant	$77,770	$87,783	-$10,013

Procurement clerk	$40,640	$34,082	$6,558

Public relations manager	$132,410	$88,241	$44,169

Recreation worker	$43,630	$21,671	$21,959

Registered nurse	$74,460	$63,780	$10,680

Respiratory therapist	$46,740	$50,443	-$3,703

Secretary	$44,500	$33,829	$10,671

Sheet metal worker	$49,700	$43,725	$5,975

Statistician	$88,520	$78,065	$10,455

Surveyor	$78,710	$67,336	$11,374

Not a Good Sign

2011-01-26T13:24:00.000-06:00

Death to the BCS

2011-01-20T15:07:00.000-06:00

As you can see below, 27 of the 35 bowl games (77%) had TV ratings of 5 or below.

Three of the five BCS games had TV ratings at 8 or below.

For some perspective, the NFL playoff games have averaged around 17.

For some more perspective, the show Mike & Molly consistently scores around an 8.

Why the Government Should Stay Out of the Way

2011-01-20T11:23:00.000-06:00

The article below from the Atlantic is a great reminder to why the federal government should stay the heck out of the way.
How the Government Caused Overinvestment in Housing

By Daniel Indiviglio

Conservatives blame poor government policy for causing the housing bubble, while progressives blame the financial industry. While most arguments on the right focus on the government-sponsored enterprises Fannie Mae and Freddie Mac, its stance actually might not need to rely on them. Data indicates that the government's broader efforts to make housing an attractive investment has funneled money away from business and into the housing sector.

This analysis comes from University of Chicago economist Casey Mulligan, via the New York Times Economix blog. He analyzed the value of housing capital, as a measure of profitability, in the U.S. from 1950 to 2000. He calculates it to be average out to 5.7% over the period. Here's his chart:

It was 6.4% in 2000.

He then did a separate calculation to determine the value of business capital. At 15.3% over the 50-year period, excluding taxes, it was much higher. This implies overinvestment in housing. Mulligan explains:

Business capital has been so profitable to the economy because it is more scarce. It's the law of demand: the less business capital there is, the higher the rate of return that remaining business capital earns because each unit of capital serves more customers. A low profit rate for housing is a symptom of its abundance.

This would seem to imply that prudent investors would be better off investing in business than housing, since business capital is more productive than housing capital. So what happened? The government made housing look like a more attractive investment. Mulligan also calculated profitability with taxes taken into account:

The business-residential profitability gap is almost 10 percent, but our attempts to adjust both profit rates for applicable taxes show that the after-tax profitability gap is zero to five percentage points.

In other words, tax differences sweeten residential real estate investment. They result in it looking nearly as profitable as business investment.

There are a few things to note about this finding. First, it's important to bear in mind that this was all before the housing bubble; Mulligan's analysis ends in the year 2000. In other words, the overinvestment in housing obviously got much, much, worse in the seven years that followed. This begins to show one reason why so much money flowed to real estate instead of to other investment options.

The second implication is arguably even more important. Business growth in the U.S. during that decade was weaker than it could have been because so much investment was coaxed towards real estate by the government instead of towards other more technology-driven industries. If the U.S. wonders why it's having so much trouble with economic growth now, it can look to the overinvestment in real estate over the past decade, which ultimately resulted in a tragic amount of capital destruction.

Third, this analysis shows the extent to which residential real estate benefits from favorable tax treatment and business suffers from relatively unfavorable tax treatment. If the government wants to figure out how to create jobs, there's its answer. It should reduce the tax benefits provided to real estate and provide them to businesses instead.

Up to now the government has had a dual-rationale for its preference for housing investment. One end it appreciates is promoting homeownership, because it has long (wrongly) viewed owning a home as a part of the American Dream. Second, the housing industry lobby is very powerful, as is evidenced by the ridiculously expensive but politically untouchable mortgage interest deduction. It's time for Washington to challenge this status quo and begin to encourage Americans to put their money in more productive investments that will facilitate stronger long-term economic growth.

The Contributor

2011-01-18T17:11:00.000-06:00

This entire blog post from author Stephen Mansfield is worth your time in reading.

I experienced one of the most fascinating meetings of my life this past week. It took place at Nashville’s downtown Presbyterian Church on a rainy afternoon a few days after Christmas. It was attended primarily by some 400 homeless men and women and I know what you might expect but give me a minute before you close your mind.

I should start by telling you that I have long been part of two movements that unfortunately have two distinct approaches to the homeless in our land. First, I am a political conservative who believes in limited government, the rule of law, private property, low taxes, strong defense and freedom for each man to rise to whatever heights his gifts allow. This places me among a tribe who tend to view homelessness as a liberal invention designed to squeeze funding from government budgets. The frequent response of my fellow conservatives to a homeless man on the street is to growl, “Get a job!”

I am also a Christian, though, and I have been privileged to lead activist churches that have engaged the homeless with compassion and generosity. We understand that our Christ so identifies with the homeless that to serve them is to worship him. So we have started halfway houses. We have driven buses into impoverished neighborhoods to offer food, clothing and medical care. We have taken the homeless into our own homes. More important, perhaps, we have embraced the biblical understanding that not all poverty and dysfunction is the fruit of sin and irresponsibility.

Obviously, my politically conservative and compassionately Christian worlds frequently collide.

So back to that meeting on that rainy afternoon in Nashville. The reason so many homeless had gathered that day was a publication called The Contributor, the “homeless newspaper” of Nashville. I had seen people selling the paper on the streets and I had even bought one or two, but I had no idea of the impact it was having on homelessness in Nashville. I also had no idea of how The Contributor was bridging my two worlds.

It turns out that The Contributor was begun a few years ago to serve the cause of the homeless. When I first heard this, I assumed the paper would be filled with articles advocating for the homeless. You know the stuff: complaints about the police, gripes about angry storeowners, tirades about the heartlessness of people today. I was pleasantly surprised. There were marvelous articles and many by people described as “formerly homeless.” There was poetry. There were funny essays. There were tender testimonials and even movie reviews. I was touched.

Then I learned about the economic impact of the paper. You see, the homeless can buy The Contributor from the publisher for twenty-five cents. They have to attend training sessions, observe certain standards and participate in follow-up meetings, but once they qualify they can sell The Contributor for a dollar. Many receive tips as well. The meeting I attended on that afternoon after Christmas was a training session before new editions of the paper were sold to “vendors,” the people we call homeless. But they aren’t just homeless anymore when they have The Contributor in their hands. They are vendors, entrepreneurs—yes, contributors.

Let me tell you what this means. A year ago, ten thousand copies of TheContributor were sold in Nashville. This last month, 120,000 copies were sold. This means that through sales and tips, over a million dollars have been put into the hands of the homeless in the last year. And it is changing lives. One of the most moving moments I’ve had is when the executive director of The Contributor, Tasha French, showed me photos that one formerly homeless man had sent her. You see, he had begun selling The Contributor and had made enough money to live. Then he got a home. Then he got a wife. The photos he sent Tasha were of his dinner table on Thanksgiving Day. It was lovely and filled with food and he was planning to invite some of his homeless friends in for a feast.

Conservatives want the homeless to get a job. In Nashville, they have. Christians want to help the homeless out of poverty and into lives of character and prosperity. In Nashville, The Contributor is making this possible. It is what we have hoped for. Something that works. Something that involves free market principles. Something that demands character. Something that is changing lives.

I want you to help. I plan to write for this paper if they’ll have me and my firms are going to purchase advertising and provide literary services, which is part of what we do. I want you to first log onto www.thecontributor.org and read up. Then, I want you do to what you do best. For some, this means giving money. You’ll see how on the site. If you run into problems, contact me through this site and we’ll help. For you business owners, I want you to purchase advertising. Surely you can benefit from 120,000 Nashvillians seeing your ad. Some of you will want to volunteer. Some of you more famous folks might want to agree to interviews that will appear in the paper or perhaps even offer articles of your own that will raise The Contributor’s profile. Feel free to contact me about this. By the way, The Contributor is already the most successful homeless paper in America. What would happen if we helped it become a model for thousands like it around the country?

Learning From T.R.

2011-01-18T16:22:00.000-06:00

Author and Pastor George Grant shares some lessons learned from the great Theodore Roosevelt:

1. The first prerequisite of true leadership is a happy home. The private life is the proving ground for the public life.

2. Leadership is the art of pursuing the ideal in the midst of a world that is something less than ideal—and never losing sight of either notion.

3. A leader is an idealist who is simultaneously blessed with a strong dose of reality.

4. A leader knows that what is really important in life rarely puts on airs of importance.

5. There is little extraordinary about the achievements of a genius, a prodigy, or a savant. Inevitably, a great leader is someone who overcomes tremendous obstacles and still succeeds.

6. A leader has the ability to take any circumstance and see it through the lens of happy providence. He is living proof the fact that laughter is indeed, the best medicine.

7. The efficacy of leadership depends, to a large degree, on the leader’s incognizance of the consequences of doing right.

8. A leader understands that failure is merely the backdoor to success.

9. A leader will always prefer to be faithful than famous.

10. A leader invariably lives his life as a sincere imitator of the best attributes of others. Heroes always have heroes.

11. With great privileges come great responsibilities. Blessings bring with them duties. And the joy of liberty is the most sober obligation ever entrusted to men or nations.

What a Difference a Few Hundred Years Makes

2011-01-12T11:34:00.000-06:00

I am currently reading Charles Rappleye’s biography of Robert Morris (a somewhat unknown founding father who played an unbelievably large role in the founding of this nation), and I wanted to share a passage in the book I found extremely interesting:

……Morris’ resignation highlighted one feature that distinguishes the American Revolution from so many of the revolutions that would follow: its leadership almost uniformly abhorred the positions of power they came to assume. Like Washington and Nathanael Greene, like Jay and Duane in New York and Dickinson in Pennsylvania and even Henry Laurens, Robert Morris entered public life reluctantly, out of a sense of duty, and always considered it a burden. None of these prime actors fought to hold on to power the way their successors did in France, in Russia, in China, or in most of the tumults that marked the Age of Revolution; each of them---save for Jay, a born jurist----would step down from their positions of responsibility as soon as they felt they were able. This is not to disparage the motivations of any particular, later revolutionists, but to point out one key characteristic of this first, remarkable revolution.

Why Systems and "Fit" Is So Important in All Organizations

2011-01-12T09:14:00.000-06:00

Whether you are coaching a football team or running a company, you can learn something about how to put together a winning organization from the information below:

So How Do They Do It?

The Patriots led the N.F.L. in points scored. They threw the most touchdowns passes. They committed fewer turnovers than any other team since the adoption of the 16-game schedule. They ranked second in rushing touchdowns and in net yards per pass attempt. And yet, as we’ve described, they are almost entirely powered by late-round and undrafted players. So how does Belichick turn an offense that appears marginal on paper into a dominant unit?

Tom Brady is the obvious reason, but New England’s offense has been less explosive with more talented teams during the Brady era. Even though Brady’s probably playing the best football of his career right now, the offense’s success is about more than the quarterback. Conventional wisdom would suggest that Belichick is both a master of the draft, finding gems with late-round picks, and a fantastic coach in the truest sense of the word, able to turn young men into elite players with his tireless attention to detail.

I’d argue it goes a step further than that. The Patriots, for the first time in the past few seasons, have regained a level of organizational clarity that few teams can match. When Scott Pioli and Belichick built the championship Patriots teams at the beginning of the decade, New England consistently added “their guys,” players who fit the Patriot profile. With the drafting of Hernandez and Gronkowski, and the re-acquisition of Branch, to go along with Welker and Brady, the Patriots are back to finding players who, first and foremost, fit their system. Green-Ellis, Woodhead and Branch wouldn’t succeeed on a lot of teams, but Belichick knows exactly what he wants out of every roster spot and only looks for players who possess those traits. And that’s a big secret of his success.

Following in the Footsteps of Japan?

2011-01-11T16:50:00.000-06:00

Letter to Congressional Leaders

2011-01-09T16:51:00.000-06:00

The Honorable Harry Reid
Majority Leader
United States Senate
Washington, DC 20510

Dear Mr. Leader,

I'm writing in response to Treasury Secretary Timothy Geithner's appeal to you to raise the debt ceiling.

I understand that you didn't ask for my opinion. And with no political positions on my curriculum vitae, you may not even recognize my name. But I have co-authored two books warning about the United States' fiscal situation, starting with Financial Reckoning Day in 2003 and followed by Empire of Debt in 2005. I mailed copies of the latter to you and the other members of Congress free of charge. While it may not be sitting on your nightstand, I trust that you're at least aware of the book.

After we published the book, I wrote and produced a documentary, I.O.U.S.A., which was screened in competition at the Sundance Film Festival, nominated for a Critics Choice award and shortlisted for an Academy Award. The film attempts to present the fiscal crisis facing the United States in a way that the average American could understand. The film took two years to produce and premiered on Aug. 22, 2008 - almost a month before Lehman Bros. declared bankruptcy, kicking off the Panic of '08.

So after a decade of attempting to bring the root causes of our economic woes to light, I humbly suggest that the shortsighted tone of Mr. Geithner's appeal is itself part of the problem. It is, in fact, no different than Secretary of Treasury Hank Paulson's frantic three-page proposal that kicked off the bailouts in September 2008.

Sir, in short, by raising the debt ceiling, we're delaying the day of reckoning yet again. Instead of paying for our excessive spending today, we'll pass that burden on to our children and grandchildren. I have three young children. And I, like many Americans, already find it a challenge to educate them and provide for their health care. Now I must also worry about what their future is going to look like...what opportunities will they find when it's their turn to join the work force or start businesses?

Mr. Geithner shares his fears of a default in his letter to you. But his request simply means my children - everyone's children - will have to deal with that default on their own.

Do we really want our children burdened by higher taxes, excessive government regulation, higher mortgage rates, reduced incentives to start their own businesses and, as things are going, the end of the freedoms that you, Mr. Geithner, the rest of the American public and I cherish?

Freedom is the very promise that America bestows on history. But now, through our own malfeasance, we are in a position of telling the world, "We cannot afford to offer you the opportunity to enjoy that freedom anymore."

How did it come to this? And why perpetuate the very malfeasance that threatens our future prosperity?

For most of America, understanding the fiscal condition of the nation is no easy task. For that, they place their trust in you. No doubt, it's easier to do exactly what our Treasury secretary is asking you to do - ignore the problem and continue to kick the can down the road. But I'm asking you, on behalf of future generations, to think deeper about the problem and begin addressing it today.

To help you with your decision, here are some images you can use to illustrate the magnitude of the national burden.

As Mr. Geithner stated in his letter to you, "In February of 2010, Congress passed legislation to increase the debt limit to $14.29 trillion." To grasp that staggering figure, imagine stacking $100 bills on top of one another. To reach $14.29 trillion, your stack would soar 9,721 miles into the sky!

Said a different way, that's like 1,767 mountains of $100 bills the size of Mount Everest piled on top of each other.

Of course, the current debt wouldn't be a problem if tax revenue were exceeding our spending and therefore reducing the debt. But we both know that is not happening. Even if we taxed all Americans 100% of their income for an entire year, we still wouldn't be able to pay off our $14.29 trillion hole

What's more, the interest we're paying on the current debt is forcing us deeper and deeper into the hole. According to the TreasuryDirect.gov website, the interest payment on our debt was a massive $1.13 billion per day - for a total of $413 billion - in 2010.

The interest payment alone amounts to record-breaking deficits hit during the Bush administration just a few short years ago. If you agree to raise the ceiling, you effectively agree to drive up the interest payments until they exceed tax revenue - creating a situation in which we'll be forced to default, eventually. And the longer it takes to happen, the worse it will be for our children.

The Treasury secretary outlines how catastrophic a default would be for the financial system and the integrity of the United States:

Default would effectively impose a significant and long-lasting tax on all Americans and all American businesses and could lead to the loss of millions of American jobs.
When, I ask you, do we begin addressing the root problem? When do we admit that we're spending beyond our means and begin to address the problem in earnest? "We can live beyond our means for a very long time," to paraphrase a leading financier from I.O.U.S.A., "and we can do it on a very large scale - but we cannot do it forever."

The United States is like a private company suffering from a pension burden it did not plan for and that is losing market share because its products are no longer competitive. And it is as if the management has decided to take an extended vacation, rather than hold a meeting to find a way out of the hole.

In Congress, you don't address the real problems. You talk around them, play politics with them and then make frantic appeals at the 11th hour to borrow more money to paper over the problems again for yet another year.

At this pace, how do you honestly believe the government will ever balance its books again? In the era of uncertainty created by mayhem in Washington and ever-increasing global competition, how do you expect the economy to get back on track?

Let's put the numbers aside for a second. I'd like to ask you a simple question:

Imagine for a moment that you've chosen to smoke cigarettes all your life. You've ignored the warnings about them that appear all around you. Then, eventually, and unfortunately, you get diagnosed with lung cancer.

Luckily, you've caught the disease in its very early stages. The doctor presents you with two choices.

First, you can enter chemotherapy. The road to recovery, the doctor tells you, will be harsh. You'll suffer extreme nausea. You'll hardly be able to swallow from the ulcers you develop in your mouth. In short, you'll go through hell in an attempt to beat the disease. But because you caught the disease after the first symptoms appeared, you have a high chance at a full recovery.

The doctor also offers a second alternative. He's worked out a deal that allows you to rid yourself of the disease instantly. No pain. No suffering. No hell. All you have to do is agree to give the disease to your 2-year-old grandson.

Would you make that deal, Mr. Leader?

I trust you'll make the right decision about our nation's fiscal health. At the very least, there needs to be an honest debate over raising the debt ceiling. If you provide the rubber stamp Mr. Geithner is asking for, you will be as guilty as he of passing the buck. Each time the buck gets passed, the stakes get higher. The default Mr. Geithner fears only looms more ominous in our future.

The newly elected speaker of the House, John Boehner, has gone on record saying he'll agree to increase the debt limit because we have to be "adults" about addressing the fiscal crisis the nation faces.

What, may I ask, is "adult" about failing to address this issue altogether?

Sincerely,

Addison Wiggin
Executive publisher, Agora Financial
Co-author, Financial Reckoning Day and Empire of Debt
Executive producer, writer, I.O.U.S.A.

cc: The Honorable John A. Boehner, Speaker of the House
The Honorable Nancy Pelosi, House Minority Leader
The Honorable Mitch McConnell, Senate Minority Leader
The Honorable Dave Camp, Chairman, House Committee on Ways and Means
The Honorable Sander M. Levin, Ranking Member, House Committee on Ways and Means
The Honorable Max Baucus, Chairman, Senate Committee on Finance
The Honorable Orrin Hatch, Ranking Member, Senate Committee on Finance
All Other Members of the 112th Congress

Death to the BCS

2011-01-05T13:38:00.000-06:00

Rick Reilly absolutely nails it with his latest article for ESPN:

There is no Auburn versus Oregon game. No Tostitos BCS National Championship Game on Jan. 10. It's been cancelled on account of fraud. It's as phony as an Ivory Coast election.

If TCU can't play for the national championship, then nobody should play for it. Bust the crystal football this year. Until Nostradamus rises from the grave and can predict the future, we need to play this thing off. Anything else is about as real as Cheez Whiz.

TCU's 21-19 win over arguably the hottest team in college football -- Wisconsin -- Saturday in the Rose Bowl means the Horned Frogs are undefeated and untied and unwelcome in the BCS "Doesn't Prove A Damn Thing Game" in Glendale.

The Horned Frogs' perfect 13-0 season was rendered pointless by The Greedheads Who Run College Football.

Crazy, huh? TCU wins the roses and gets the thorns.

What a lie this BCS era is. They say a playoff would take too much time away from school, yet Oregon's players will have had 37 days off when they play again.

They say with this system, "every game counts." Except of course, TCU's epic win over Wisconsin to stay undefeated Saturday. Counts exactly as much as a rainbow to Stevie Wonder.

They say they don't believe in a playoff but they already have a two-team playoff. Why is a four-team playoff system any worse than a two-team system?

And what's the upside of a playoff? Besides quadrupling the money the colleges would make and quintupling fan satisfaction, I mean? And what's the downside? Oh, yeah, it would end the cash grab BCS officials wallow in now.

What a lie this BCS era is. They say a playoff would take too much time away from school, yet Oregon's players will have had 37 days off when they play again.

Just another day in college football -- the Chrysler K Car of sport -- the only place in the world where athletes have to shrug and say, "Well, I guess we just have to settle for an undefeated season," as a few Horned Frogs did after the game Saturday. "Today we proved that we have just as good players as anybody else in the country," said Horned Frogs QB Andy Dalton, who won't get the chance to prove another thing -- that they're better.

It makes me so mad I want to knock people's hats off their heads.

But when somebody asked TCU coach Gary Patterson on Saturday night if he was mad about it, all he said was, "I'm looking forward to sitting on my couch and watching the national championship game, because I don't have to sweat. I don't have to call a defense."

Really? That's all he's got? The inspirational "I Have a Couch" speech? He may have a great brain for football (he's won 36 of his past 39 games), but he seems to have mislaid his spine for the moment.

What Patterson should've said was: I don't know what game they're playin' next week, but if we're not in it, it's a load of bull potatoes. Just 'cuz somebody puts their boots in the oven don't make 'em biscuits. Anybody wants to be champion has gotta come through Fort Worth. It ain't hard. We got hotels, too.

Patterson is a guy who supports a playoff. He received texts all week from "all the little guys" in college football who never get the chance. But when he had a chance to speak up for them, for an entire sport, he got even littler.

That's OK. There's one guy who can change all this with the stroke of a pen. He's a guy who has broken a mountain of promises in the past two years, but can make it all right by making good on a promise he did make, the one to look hard into a playoff. President Obama.

In October of '08, he told me on his campaign bus that he was going to make a real try at getting an eight-team playoff done. Once in office, he told "60 Minutes," "I'm gonna throw my weight around a little bit." But he hasn't.

You want to win re-election, Mr. President? You could do worse than backing something that's already favored by 63 percent of Americans, and will now be favored by nearly every Texan, not to mention Utahan (Utah undefeated in 2004 and '08, but left out of the mix for a BCS title shot), Alabaman (Auburn undefeated in '04 but left out) and Idahoan (Boise State undefeated in '06 and '09 and left out).

Obama must have the Justice Department sue the BCS for violating the Sherman Antitrust Act. The BCS is run by a cartel of the 11 BCS conference presidents, Notre Dame and the five big bowl games who are restraining trade and colluding to hoard the gold. They are not exempt from antitrust rules. Utah Sen. Orrin Hatch (R) and Texas Rep. Joe Barton (R) have already looked into this. It would work. How many millions of dollars did TCU just lose by not being allowed to play for the title, not just in bowl TV dollars but in alumni donations and national prestige?

My favorite hypocrisy of the Bowlsheviks is: "The bowl system is tradition!" Yes, kids, there's nothing so "traditional" as a team from Texas winning the Rose Bowl and then moving to the Big East.

TCU is a killer team with an amazing story. TCU's seniors won 44 games. What reeks is they won't get a chance to win a 45th.

Just do it, Mr. President.

If this were basketball we were talking about, you'd have it done by the weekend.

World Airline Traffic - 24 Hour Time Lapse

2011-01-03T12:11:00.000-06:00

Pretty fascinating stuff (the yellow dots are airplanes):

Book Recommendation

2011-01-03T11:56:00.000-06:00

I just started reading (per Gov. Mitch Daniels' recommendation) Death to the BCS.

The book is a must-read.

If you think politics is crooked, corrupt, and bureaucratic, wait until you read about the BCS and the bowl system in general.

How America Messes Up Its Kids (Mark Goulston)

2011-01-03T10:54:00.000-06:00

I felt like this entire article from Mark Goulston was worth quoting:

How America Messed Up Its Kids... And How We Can Fix Them

In today's world of blame and finger-pointing, we're teaching our kids that accountability and responsibility are slippery slopes that don't mean what they used to. For example, have you witnessed a parent-teen conversation that went anything like this:

Teenager: "Please, Mom and Dad, just let me do this, and I promise that I will take full responsibility for it."

Parent: "Do you realize that taking full responsibility means that if it backfires and goes wrong, you will own up to it, pay back whatever it takes to make up for it going wrong and learn from it so that it doesn't happen again?"

Teenager: "I didn't agree to that."

Parent: "Well, then what do you think taking full responsibility means?"

Teenager: "That if it goes wrong, I will say, 'I'm sorry.'"

If you have witnessed such a conversation, do you agree with the following?

Among our main roles and responsibility as parents is to teach, coach, guide and pass on to our children the character (and I do mean character) traits of self-reliance, resourcefulness, initiative, taking responsibility for one's actions and learning from one's mistakes (see "How to Raise a Self-Confident Child").

If at age 18 they are lacking these, they are going to find success, happiness and life in general a challenge and even overwhelming.

To bring it into sharper focus, consider that at the exact moment that you as a parent bail out your child from facing the consequences of their screw-ups and taking full responsibility for them, literally millions of children in this world the same age as your child are taking full responsibility for their actions and becoming smarter, stronger and wiser. Within the next 10 to 20 years, those children (from China, India and elsewhere) will become your child's boss, and they won't bail out or accept your child's excuses. Instead, they will fire your children.

How Did America Mess Up Its Kids?

One explanation might be what preceding generations had to endure and what they wanted for their children.

For instance, Americans born between 1900 and 1924, referred to as the G.I. Generation, were born to parents who endured coming to the United States, then heard and watched how the countries that they came from became embroiled in World War I, then enlisted to fight in the Great War and then lived through the Great Depression. It's understandable how these parents who lived through such difficult times would want their children to have it better. Having it better was about having a life where they didn't need to fear for their lives or livelihoods. It wasn't about sexual freedom or accumulating disposable income to conspicuously consume with.

The G.I. Generation grew up during the Great Depression, went to fight in World War II and then gave birth to the Baby Boomer Generation, born between 1946 and 1964. It's understandable that wanting their Baby Boomer children to have it better, especially during the prosperity and relatively peaceful years in the 1950s, would go beyond mere economic survival. Instead, it crossed over into giving their children more of what they had less of, from more sexual freedom to more drugs to more rock and roll to hot cars and especially more mobility as Baby Boomers left home to settle down across the country.

Next, early Baby Boomers gave birth to Generation X, and later Baby Boomers gave birth to Generation Y/Millennials. Although Baby Boomers experienced much more freedom than their parents, as a generation they still largely took responsibility for their actions and did not expect to be bailed out. Baby Boomers may have been tolerated and moderately indulged by their parents, but they didn't take it to the level of entitlement. That required another generational turn.

As the G.I. Generation gave their Baby Boomer children more freedom from oppression and repression, the Baby Boomers have given their Generation Y/Millennials freedom from responsibility and accountability for their actions. They have moved past indulging them directly to spoiling them. And rather than letting their children face the consequences of their actions, Baby Boomers have more often bailed out their Gen Y/Millennial children. And when children feel no responsibility or accountability for their actions, the next step is for them to feel and act entitled -- entitled to act according to how they feel and to what will immediately gratify them, and entitled to not do whatever they don't want to do. It is this attitude that would give rise to the Parent-Teenager dialogue that opened this blog.

What We Can and Need to Do About It

An initial step that might be helpful is to reach a consensus between parents and their children as to what terms related to personal responsibility mean. Here are ten terms that come to mind for me:

Commitment: the level of dedicated action(s) you continue to take after your enthusiasm for an enterprise stops.

Accountability: taking full responsibility for your actions by owning up to the negative or failed results, taking action to make up for it to the person(s) you let down, and learning what you did wrong so that it doesn't occur again.

Maturity: how well you are able to resist an irresistible impulse and instead have and exercise judgment and do the reasonable thing. In the brain we refer to this as exercising one's executive function.

Honesty: this is simply telling the truth according to the facts as you understand them. You know honesty best, when you tell a lie. Pathological liars lie whenever they are trying to get their way and take advantage of a situation. Compulsive liars lie both when the are trying to get their way and when they are trying to get out of facing the consequences of their actions.

Forthrightness: this is coming forward and telling the truth and revealing untruths that you become aware of. It's believing and following Justice Louis Brandeis words: "Sunlight is the greatest disinfectant."

Character: what you do when you are frustrated, angry, annoyed, afraid and/or bored and nobody is watching and your chance of getting caught is close to nil.

Sacrifice: what you do unto others who will not (immediately) be able to pay you back by doing unto you.

Compassion: what you feel unto others who will not be able to do more than say, "Thank you."

Thinking ahead and planning: overcoming the aversion to anything that causes you to forego immediate gratification.

Listening: and then pausing to consider what you've heard before rejecting it, tuning out or competing with it (a skill every generation needs to learn).

What additions or corrections would you make to this list? What terms come to your mind regarding personal responsibility and being accountable and what would be your definitions?

Next step...

As soon as it's possible, parents, teachers and children need to begin having an ongoing discussion of these terms at the beginning of every school year from the third grade forward. That is because these concepts will take on different meanings as children grow. Include as much interactive and experiential exercises as possible. And finally, make a central part of those discussions: a) why children should care about these ideas and values (one reason being that if they don't, they will be unhirable at age 22 when they finish college); and b) how to implement these values into curriculums and schoolwork.

Here is the challenge: People don't do what's important, they do what they care about. Something that might get in the way of parents "caring" about teaching and guiding their children to have and live the above values is that too often parents live vicariously through their children (i.e. know any screaming parents at their kid's soccer games?).

It's also possible that many parents want to indulge their children because those parents resented the deprivation they experienced and that they don't unconsciously want their children to resent them. To counter this, parents need to go from resenting the hardships they had (and acting out on them by spoiling their children) to appreciating how that adversity helped them develop such positive traits as tenacity, perseverance, resilience, resourcefulness and perspective.

Children will only take personal responsibility and be accountable for their actions when parents care enough and see the value in saying "no" when appropriate instead of "yes" and then sticking to it.

It's also helpful for parents to keep in mind the advice I provide managers and leaders: "If you sacrifice being respected for being liked, you won't be either."

What the December 2010 Blizzard Looked Like

2010-12-31T10:09:00.002-06:00

December 2010 Blizzard Timelapse from Michael Black on Vimeo.

NBA and NHL Attendance

2010-12-30T12:35:00.000-06:00

Not encouraging figures for the NBA and NHL:

The Kids are Not All Right

2010-12-22T09:46:00.000-06:00

This piece from Katherine Birbalsingh is simply fantastic.

Ms. Kirbalsingh, a minority teacher in England's public school system and a former Marxist, details how her experiences with leftist policies transformed her to the "right wing."

The best part of the piece:

The regular dumbing-down of our examination system is obvious to any teacher who is paying attention and who has been in the game for some time. The refusal to allow children to fail at anything is endemic in a school culture that always looks after self-esteem and misses the crucial point, which is that children's self-esteem depends on achieving real success. If we never encourage them to challenge themselves by risking failure, self-esteem will never come.

I started to climb the professional teaching ladder, rising to positions of middle and senior management. There too I succeeded but often only by fighting against people's innate liberalism. Indeed, I would sometimes find myself arguing with my own deeply-embedded liberalism: "Take pity on the boy. Don't punish him. It isn't his fault he didn't do his homework; just look at his home situation." Or "Why ask them to do their ties to the top or tuck their shirts in? What does any of that have to do with learning?"

I had become indoctrinated by all the trendy nonsense dictating that if children are not behaving in your classroom, it is because you have been standing in front of them for more than five minutes trying to teach them. If only you had sat them in groups with you as facilitator, rather than teacher at the front, then you'd have the safe environment conducive to learning that we all seek. The basic ideology is that if there is chaos in the classroom, it is the teacher's fault. Children are not responsible for themselves, while senior management fails to establish systems that support teachers and punish children for not doing their homework, whatever their home situation.

I argued constantly with my colleagues and bosses. Often, I won and, almost as if they were inextricably linked, as the innate liberalism within people waned, the department or the school would improve. In every instance, I could see for myself that a move away from liberalism was a step in the right direction, a step that brought calm out of chaos, learning in place of trendiness, and success instead of failure.

On Economists

2010-12-21T17:06:00.000-06:00

Danny Woodhead - My New Favorite Player

2010-12-20T15:10:00.000-06:00

If you haven't been paying attention to Danny Woodhead of the New England Patriots, you are missing out on a great story.

Danny Woodhead is listed as 5 ft. 7 in., 190 lbs (this means he is 5 ft. 6 in., 180 lbs). He played his college football at Chadron State College (a Division II school in Chadron Nebraska).

He was cut from the NY Jets before the season started. The Patriots picked him up and he has been nothing short of amazing.

Here is a video of Woodhead trying to sell his own jersey to Patriot fans at Modell's:

Paul Ryan on the Tax Deal

2010-12-17T22:33:00.000-06:00

I am really struggling with my position on the tax deal.

On one hand, I really find myself agreeing with what Mr. Quinn had to say on the issue.

However, Mr. Ryan in the speech delivered on the House floor is also very persuasive.

Sometimes you have to balance ideology with practicality, but if you do it too much and too often, you end up becoming a politician.

Pretty Spectacular

2010-12-17T16:57:00.000-06:00

I am not much of an X-games guy, but the video below is pretty remarkable:

Vanderbilt's Next Football Coach

2010-12-17T12:03:00.000-06:00

I am an alumni of Vanderbilt and a former student-athlete.

We just hired a new football coach.

Here is an email I sent to the Director of Alumni relations outlining my thoughts on the hire:

Dear ________,

I hope you are having a great day and week.

Well, it looks like we have a new football coach at Vanderbilt.

I hope my instincts are completely wrong (it wouldn’t be the first time), but I think this decision and the process behind this decision was about as well thought out and executed as the decision for Vanderbilt to support President Obama’s Health Care legislation.

I will hope against hope that James Franklin turns out to be the next great head coach in the SEC. That being said, I would be very curious to learn how the administration decided that James Franklin is qualified to be the next head coach at Vanderbilt.

You comment below that James Franklin is one of the nation’s “top offensive coordinators.” I would like to know what data set you studied to come to this conclusion?

In his three years as OC at Maryland, Coach Franklin’s offenses had an average ranking for total offense of 84 (out of 120 teams) and averaged roughly 23 points per game. Maryland' record in his time as OC has been 18-19.

So, in other words, roughly 70% of the offenses in the country had better numbers than Coach Franklin over the last three years, and let’s not forget that this was with the superior recruiting talents that Coach Franklin brings to the table.

In the two years he was OC at Kansas State, his offenses had an average ranking for total offense of 64 (out of 120 teams) and averaged 28 points per game. This was in a conference that played no defense and he had a first round NFL Quarterback in the two years he was calling plays. Kansas State's record in his time as OC was 12-13.

So, in other words, 53% of the offenses in the country had better offenses than Coach Franklin while at Kansas State. And let’s not forget that this was with the superior recruiting talent that Coach Franklin brings to the table.

So, all-in-all, we are looking at a coach with this resume:

No head coaching experience
No ties to the SEC
30-32 record as a signal caller
Average total offensive ranking of 74 out 120 teams
Average of 25 points per game

Just because Coach Franklin’s bio says he is one of the nation’s “top offensive coordinators” doesn’t make it so. When on average 61% of FBS teams have better offensive numbers than you, you statistically cannot be considered to be in the top.

Let’s also consider the fact that Coach Franklin doesn’t have one bit of experience in the SEC. I would be willing to bet that he has never even attended an SEC game or recruited below the Mason-Dixon line.

As for recruiting, I don’t doubt that Coach Franklin can bring in some better talent than the previous staff. However, let’s keep this in mind when it comes to recruiting at Vanderbilt. In order for Vanderbilt to have the 10th best recruiting class in the SEC, we would have to jump 20 spots in the recruiting rankings. If we wanted to have middle-of-the-road talent in the SEC, we would have to jump over 30 spots in the recruiting rankings. Given our academic requirements and other limitations, it is unlikely that we will ever be able to out-recruit anyone in the SEC.

With this in mind, I would like to think that Vanderbilt would realize that if you can’t out-talent someone, you have to outsmart them or out-scheme them.

The way you can outsmart or out-scheme someone is to do something unique and something that is difficult to prepare for. Coach Malzahn runs a unique offense. Ken N. at Navy runs a unique offense. Troy Calhoun at Air Force runs a unique offense. Dan Holgerson at Oklahoma State (now HC in waiting at West Virginia) runs a unique offense. Chip Kelly runs a unique offense. Mike Leach runs a unique offense.

Vanderbilt needs a system offense that can give us a competitive advantage against more talented teams.

Coach Franklin is going to be bringing his “Cheesecake Factory Offense” (CFO) with him to Vanderbilt.

The CFO is just like the experience you have at the restaurant. If you want Chinese, they got it. If you want Mexican, they got it. If you want Italian, they got it. Coach Franklin’s offense is very similar. If you want a little West Coast Offense, he’s got it. If you want a little Power O, he’s got it. If you want some Norv Turner stretch passing game, he’s got it. If you want some read option, he’s got it.

In fact, here is what Coach Franklin had to say about system offenses in an interview:

Tony: What are the trends you see developing in college football.
James: I see the end of “pure systems”. Teams are combining parts of different systems to come up with hybrid systems. For a while everyone was in love with the Spread but as defenses saw more of it they started to defend it much more effectively

I wonder if Coach Malzahn or Coach Kelly, the two offensive coaches calling plays in this year’s National Championship game, would agree with Coach Franklin’s assessment of the end of “pure systems.”

If you want to understand the advantage of having a system, see the below comments about Mike Leach’s “pure system” offense:

Last year, Tech averaged 60 passes a game so it is obviously not a balanced attack, but this actually works in their favor. In practice, they spend virtually all their time focusing on fundamentals related to the passing game. From the time they hit the practice field until they leave, the ball is in the air and the emphasis in on throwing, catching and protecting the quarterback.

It takes great confidence in your scheme to be able to take this approach, but the players appreciate it because they can focus on execution.

Practice -- What's Different

When you watch Texas Tech practice, it doesn't seem as structured as most college practices. They do not stretch as a team and unlike most practices, there is not a horn blowing every five minutes to change drills. The bottom line is that the cosmetic appearance of practice is not as important to Leach as it is to some coaches.

Although not as structured, it is impressive to watch Texas Tech practice and you quickly see why it is so successful. The ball is always in the air and what the Red Raiders practice is what you see them do in a game. They work on every phase of their package every day and in most passing drills, there are four quarterbacks throwing and every eligible receiver catching on each snap.

There is great detail given to fundamentals in all phases of the passing game. Wide receivers, for example, work every day on releases versus different coverages, ball security, scrambling drills, blocking and routes versus specific coverages.

I am not being negative just to be negative, but I cannot for the life of me find a solid reason to get behind the thought process of this hire.

How you make decisions is just as important as the outcome of those decisions because if the thought process is rational and reasoned, you can drastically increase the likelihood of positive outcomes.

If I am playing blackjack and I have 19 and the house is showing a 6, the right decision is to stay (this is not debatable). If I decide to go with my “gut” and hit and I pull a 2 out of my rear, that doesn’t mean I made a good decision. I simply got lucky and eventually bad outcomes will follow my errant thought process.

I hope James Franklin is the 2 to our 19, but I still can’t find a way to support the thought process behind this hire.

Please let me know where I have gone wrong.
Go Dores!

Was the Tax Compromise a Win?

2010-12-08T15:21:00.000-06:00

According to James Quinn, no it was not:
I’m a big fan of Clint Eastwood movies. Below are two of the greatest scenes in movie history, with two of the greatest, most quoted lines in history. The lines are:

“Go ahead, make my day.”

and

“You’ve got to ask yourself one question: Do I feel lucky? Well, do ya, punk?”

For some strange reason these two lines came to my mind as I watched President Obama announce the Great Tax Compromise of 2010. In both scenes the criminals came to their senses when confronted with Dirty Harry. Our criminal Congress and criminal president reached for the gun, because they feel lucky. We know what happens next when confronted with a .44 Magnum.

Obama and his new Republican friends agreed to add $1 trillion to the national debt in the next two years. That is 30% of our entire budget and 7% of GDP. Here are some words of wisdom on this subject, spoken a few years ago:

“Deficits mean future tax increases, pure and simple. Deficit spending should be viewed as a tax on future generations, and politicians who create deficits should be exposed as tax hikers.” – Ron Paul

I have no issue with low taxes. I would like lower taxes. But, we’ve all become Keynesians if we agree with the “compromise” that was reached yesterday. Republicans have not kept taxes low. They’ve insured that future generations will have higher taxes so they can enjoy the good times in 2011 and 2012.

The big surprise was the 2% payroll “tax cut” for 2011. The social security tax would be reduced from 6.2% to 4.2% for one year. This will provide a tax cut of $1,000 for the average American family making the median income of $50,000. It will cost $120 billion. This is certainly an interesting idea when social security has already promised to pay out $17.5 trillion more than it will ever bring in. The Washington, D.C., politician solution to a massive entitlement liability is to make it larger, so that we can buy a new 52 inch HDTV today.

A $1,000 tax cut comes to $20 per week for the average family. Now here is where the Federal Reserve and their politician protectors in Congress and the White House get you while you are not looking. As the world realizes that American politicians have no intention of cutting deficits, the U.S. dollar will continue to weaken. This is what Ben Bernanke wants. It makes our debt burden easier to pay back while screwing our foreign lenders. The result of the weakening dollar has been a dramatic surge in oil and food prices. The average American family drives 25,000 miles per year in two cars. The average car gets 20 mpg. Therefore, the average family is using 1,250 gallons of gas per year. Gas prices are at a two year high and will go higher as the dollar weakens. The entire $1,000 “tax cut” will be utilized to pay the higher price for gas. This doesn’t take into account the much higher food prices headed down the track, along with higher cost for all the stuff we import.

The ruling elite have convinced you that the tax cut will benefit you, when the inflation they have created has actually made your poorer. Thank you sir may I have another.

The 10-year Treasury surged 16 basis points this morning to 3.08%. This is the highest level since July and is now up .68% since Ben Bernanke indicated QE2 was on the way. QE2 was supposed to reduce long term interest rates. Mortgage rates are going up, not down. Housing prices are already in free-fall again. Higher mortage rates will destroy the housing market. Obama, Bernanke and Congress have created the perfect storm. Keep partying today, for tomorrow will be painful.

200 Countries, 200 Years, 4 Minutes

2010-12-06T16:32:00.000-06:00

This is amazing stuff:

Bye Bye Bake Sales

2010-12-06T11:48:00.000-06:00

From Paul Jacob's blog:

It sounded like a good idea — Michelle Obama would get involved in a campaign to reduce childhood obesity. Obesity is a problem, yes, and a good cause for the First Lady. But, today, advocacy must always be paired with legislation.

An AP news story provides all you really need to know:

A child nutrition bill on its way to President Barack Obama — and championed by the first lady — gives the government power to limit school bake sales and other fundraisers that health advocates say sometimes replace wholesome meals in the lunchroom.

So now we are to have federal government’s micro-mismanagement reach far beyond the curriculum. The basic idea being . . . give up on parents. Give up on local control. Go, Washington!

Our national nannies took special care with the bill’s language, adding the category of school fundraisers as a special target of the regulations. Apparently, they can’t stand the fact that, on special occasions, mothers and fathers bake up sugary treats to sell, to support special school activities that affect their kids.

I guess they want us to sell broccoli.

Yup. That’ll send the school band to Disneyland.

The whole bill is a bad idea, and not just because Washington can’t tell special occasions from one’s day-in/day-out diet. The very singling out of special fundraisers for federal attention shows just how far into our lives Washington’s busybodies believe they can insert themselves.

Eye Popping Stat of the Day

2010-12-06T11:24:00.000-06:00

From Paul Kedrosky's site:

U.S. share of world's 100 tallest buildings:

1990: 80%
2012: 18%

What is your political news IQ?

2010-12-02T00:05:00.003-06:00

Take the test and find out: http://pewresearch.org/politicalquiz/quiz/

Avoid Facebook - Save Your Marriage

2010-12-01T23:58:00.000-06:00

Headline from an article in Britain's Daily Mail: The marriage killer: One in five American divorces now involve Facebook

From the article:

It used to be the tell-tale lipstick on the collar. Then there were the give-away texts that spelled the death knell for many marriages.

But now one in five divorces involve the social networking site Facebook, according to a new survey by the American Academy of Matrimonial Lawyers.

.......Flirty messages and photographs found on Facebook are increasingly being cited as proof of unreasonable behaviour or irreconcilable differences.

Many cases revolve around social media users who get back in touch with old flames they hadn’t heard from in many years.

Facebook was by far the biggest offender, with 66 per cent of lawyers citing it as the primary source of evidence in a divorce case. MySpace followed with 15 per cent, Twitter at 5 per cent and other choices lumped together at 14 per cent.

Staggering Chart and Stats

2010-11-23T14:16:00.000-06:00

From Tim Challies:

Seven hundred billion minutes. That’s how much time Facebook’s 500 million active users spend on the site every month. 700,000,000,000 minutes. Let that one sink in for a moment. Every month we spend the equivalent of 1.3 million years on Facebook; the equivalent of nearly 18,000 lifetimes. More than half of us login every single day; we average 130 friends. And we spend vast amounts of time on there.

Facebook now offers 900 million different objects or pages for us to interact with—groups, events, community pages, and so on. We upload over 3 billion photographs every month (which means we’re uploading millions every hour).

[. . .]

So think about this one. Four years ago most of us did not use Facebook at all. And today we are using it compulsively. A recent study of media habits found that about 1/3 of women between 18 and 34 check Facebook before they even go to the bathroom in the morning; 21% check it in the middle of the night; half of them admit that they are addicted to it. Meanwhile the older generations, those in their 40’s and 50’s, are also migrating to social media; they now represent the fastest-growing population.

But again, 4 years ago most of us did not use it at all. We may have heard the name, but it was just a name. Today it’s a way of life. What’s important to think about is the fact that Facebook is not a site that offers us a better way of doing what we were already doing. It’s not like most of us were on another social media site and we then migrated once Facebook came along (with young people being a possible exception; many of them migrated from MySpace to Facebook). For the majority of us, Facebook is a new thing. Those 700 billion minutes are not minutes that we’ve taken away from other online pursuits. They are minutes that we’ve taken away from real life.

Quantitative Easing Explained

2010-11-22T15:42:00.000-06:00

Dear Ben

2010-11-15T14:57:00.002-06:00

Dear Sir,

Good day and compliments. I am Dr (Mr) Benjamin Bernanke, Chairman of Federal Reserve of United States of America. This mail will surely come to you as a great surprise, since we never had any previous correspondence. My aim of contacting you is to crave your indulgence to assist us in securing some funds abroad to prosecute a transaction of great magnitude.

Due to poor banking system in America, many subprime borrowers are not paying back mortgages and banks have lost ONE TRILLION TWO HUNDRED BILLION UNITED STATES DOLLARS ($1,200bn) so far. This calamity has caused much suffering in my country. To help remedy this situation, our president, Mr Barack Obama, has authorised to be spent a sum of EIGHT HUNDRED NINETY SEVEN BILLION DOLLARS ($897bn) on stimulus plus many other good deeds like cash for clunkers. Unfortunately, since that time, we are being molested and constantly harassed by bond vigilantes who do not care that their reckless and vicious behaviour could ruin our hopes and plans.

To this effect, last year I authorised the printing of ONE TRILLION TWO HUNDRED AND FIFTY BILLION ($1,250bn) of United States currency to purchase government securities. To my great shock, this was not enough so I am now buying another SIX HUNDRED BILLION DOLLARS ($600bn).

If you forward a modest sum to purchase Treasury notes then I can buy many more of them with my unlimited printing press and their price will rise. I am absolutely positive that this arrangement will be of mutual benefit to both of us. I can offer you generous interest rate of EIGHT TENTHS OF A PERCENT after taxes.

I want you to immediately inform me of your willingness in assisting and co-operating with us, so that I can send you full details of this transaction and let us make arrangement for a meeting and discuss at length on how to transfer this funds.

Yours Faithfully,

Dr (Mr) Benjamin Bernanke

N/B: Please contact Mr Timothy Geithner on this e-mail address for further briefing and modalities.

10 Centuries in 5 Minutes

2010-11-15T10:51:00.002-06:00

Pretty cool stuff here:

Oh, the Irony

2010-11-08T14:26:00.000-06:00

Who would have ever thought that the United States of America would be receiving a lecture from the Chinese and Germans on the ill effects of a planned economy:

China's Vice-Foreign Minister Cui Tiankai said last Friday that the US step may hurt global confidence, while rejecting state-planning style targets for trade deficits.

.........But on Thursday and Friday, governments focused instead on the global impact of the Fed’s action. “With all due respect, US policy is clueless,” Wolfgang Schäuble, German finance minister, told reporters. “It’s not that the Americans haven’t pumped enough liquidity into the market,” he said. “Now to say let’s pump more into the market is not going to solve their problems.”

Obama and FDR

2010-11-04T14:24:00.000-05:00

From Burt Fulsom:

The 60+ House seats that the Democrats lost this week is the greatest loss for a party in power since FDR’s Democrats lost 81 seats in 1938. The circumstances of both losses are similar.

For example, shortly after FDR lost his 81 seats, Robert Doughton, the Democratic chairman of the House Ways and Means Committee, made this comment: “I don’t believe that generations which so far haven’t a chance to vote or to get born should be paying off our headaches.” FDR had almost doubled the national debt in his first six years in the White House, and Doughton was sad that his grandchildren–who may well be alive today–would have to pay the debts accumulated by FDR’s failed spending programs. The large debt being accumulated today under President Obama will have to be paid off by the grandchildren of Congressman Doughton’s grandchildren. FDR transferred pieces of his debt to us, and now we will transfer debts from the stimulus package and the various bailouts to our grandchildren. Voters in 1938 and in 2010 were both saying “no” to more debt. That is a reason for hope.

Interestingly, the groups in the country most supportive of FDR in 1938 and Obama in 2010 are from the areas of the country struggling the most financially. In Alabama and Mississippi, for example, the Democrats controlled all seats in Congress in 1938, and both states voted overwhelmingly for FDR. Yet they were among the poorest states in the U. S. in 1938. Today, California, with its $138 billion in debt, and Nevada, with its near 14 percent unemployment rate, have supported the Democrats most enthusiastically in 2010. Perhaps the states with the weakest level of entrepreneurship are the most anxious to vote to transfer tax money to their states from the wealthier states with more profitable economies.

College Degree - Worth It?

2010-11-04T11:58:00.000-05:00

Richard Vedder with the Chronicle of Higher Education recently reported the following statistics:

Over 317,000 waiters and waitresses have college degrees (over 8,000 of them have doctoral or professional degrees), along with over 80,000 bartenders, and over 18,000parking lot attendants. All told, some 17,000,000 Americans with college degrees are doing jobs that the BLS says require less than the skill levels associated with a bachelor’s degree.

Vedder goes on to state:

I have long been a proponent of Charles Murray’s thesis that an increasing number of people attending college do not have the cognitive abilities or other attributes usually necessary for success at higher levels of learning. As more and more try to attend colleges, either college degrees will be watered down (something already happening I suspect) or drop-out rates will rise.

.........This week an extraordinarily interesting new study was posted on the Web site of America’s most prestigious economic-research organization, the National Bureau of Economic Research. Three highly regarded economists (one of whom has won the Nobel Prize in Economic Science) have produced “Estimating Marginal Returns to Education,” Working Paper 16474 of the NBER. After very sophisticated and elaborate analysis, the authors conclude “In general, marginal and average returns to college are not the same.” (p. 28)

In other words, even if on average, an investment in higher education yields a good, say 10 percent, rate of return, it does not follow that adding to existing investments will yield that return, partly for reasons outlined above. The authors (Pedro Carneiro, James Heckman, and Edward Vytlacil) make that point explicitly, stating “Some marginal expansions of schooling produce gains that are well below average returns, in general agreement with the analysis of Charles Murray.” (p.29)

...........Yet, at a time when resources are scarce, when American governments are running $1.3-trillion deficits, when we face huge unfunded liabilities associated with commitments made to our growing elderly population, should we be subsidizing increasingly problematic educational programs for students whose prior academic record would suggest little likelihood of academic, much less vocational, success?

I think the American people understand, albeit dimly, the logic above. Increasingly, state governments are cutting back higher-education funding, thinking it is an activity that largely confers private benefits. The pleas of university leaders and governmental officials for more and more college attendance appear to be increasingly costly and unproductive forms of special pleading by a sector that abhors transparency and performance measures.

Higher education is on the brink of big change, like it or not.

Tom Brown - Enough With the Loan Mods!

2010-10-27T12:53:00.000-05:00

I thought the article below from Bankstock.com's Tom Brown was worth posting in full:

“We know how to prevent foreclosures,” Paul Willen, a senior economist from the Boston Fed, said at a housing conference in Washington yesterday. “We just need to be prepared to spend the money.”

Just “be prepared to spend the money”! Economists sometimes make things sound so simple, don’t they? Alas, I have a sense that the “we” Willen was referring to when he was pointing out who should be prepared to do the paying included more than just himself and the other Fed economists in the room. He was being more expansive. Willen meant all of us. Taxpayers. We’re the ones, according to the Beltway conventional wisdom Willen yesterday found himself spouting, who ought to be shelling out money to pay for large-scale loan modifications so that delinquent borrowers to can stay in their homes and “prevent foreclosures.”

Thanks for the insight, Paul! Now, I have a question: Why me? I have my own mortgage, thanks very much. Why do I have to be on the hook for someone else’s, too? If a delinquent borrower, through bad luck or bad judgment, finds himself unable to meet a loan agreement that he freely entered into, let him go through the same thing that generations of defaulted borrowers before him have: foreclosure. No one’s being thrown in jail or being forced to listen to Justin Beiber. You borrowed money from a bank, with your house as collateral. You can’t repay your loan. The bank gets your house. It’s time to move on. Literally.

Do I sound too hard-hearted? Well, if you’re asking me to help finance an alternate transaction—a loan mod—I have a right to, don’t I? And, anyway, for all the sad-sackery we’ve had to listen for the past three years about the tragedy of families losing their homes as a result of the housing blowup, what, really, is so bad about foreclosure, from a borrower’s perspective? The typical defaulted borrower is a year-and-a-half behind on his mortgage by the time eviction finally happens—which means that that’s how long he’s been able to live rent-free. On the face of it, that doesn’t sound like a bad deal. And if the property is located in a market that’s depressed economically (which it likely is), the borrower is unchained from it at last, and can pick up and move to somewhere with a better jobs outlook. Why’s that bad? It’s a hassle, sure, and embarrassing. Life’s full of hassles and embarrassments. But foreclosure is a fresh start, too, and one that solves both the borrower’s and the bank’s problem the most economical way possible. Why do I (and the bank) have to foot the bill for an alternative—especially since the odds are overwhelming that borrower will go ahead a default on the modified loan, too?

Washington’s fetishisation of loan modifications as a cure-all for the housing bust is idiotic. If the housing bubble and crash taught us anything, it’s that home ownership is not a right. Defaulted borrowers don’t deserve extraordinary taxpayer- (or lender-) financed measures that will allow them to stay in their homes. They deserve to be foreclosed on. Let the cycle take its course, and leave my wallet out of it.

Not Union Jack - Union Mohammed

2010-10-27T12:11:00.000-05:00

From Britain's Daily Mail:

Mohammed is now the most popular name for newborn boys in England and Wales ahead of Jack and Harry, it emerged today.

The name, when 12 different spellings were included, was given to 7,549 youngsters in 2009, official statistics revealed.

Oliver was the second most popular and it was given to 7,364 boys in England and Wales in 12 months.

Passing Your Way to Victory?

2010-10-17T14:04:00.000-05:00

The conventional wisdom in college football today is that if you are not a pass oriented offense, you will struggle to win, attract recruits, excite fans, etc., et.c, etc.

Maybe we should take Sherlock Holmes' advice of not theorizing before we have the data (from Coach Wyatt's blog)

(1) Halfway through this season, in the list of the top 25 major college rushing teams (yards per game), there is not one with a losing record; you have to go clear to number 28 before finding one (Wake Forest, at 2-4).

(2) Among the top major college passing teams, however, there are three teams in the top 25 with losing records: Duke at 15, Central Michigan at 18 and Arkansas State at 24.

(3) The Top 10 rushing teams have an overall record of 50-8 (.862) ; the Top 10 passing teams are 35-15 (.700)

(4) The Top 25 rushing teams are 116-30 overall (.795) ; the Top 25 passing teams are 83-48 (.633)

Uh-Oh

2010-10-16T20:45:00.000-05:00

The information below came from John Mauldin's latest letter. The excerpt below was an email sent to one of Mauldin's friends. The person who sent the email is in the financial services industry:

This is very long, but I think it's extremely important that you ready every word of it:

"Homeowners can only be foreclosed and evicted from their homes by the person or institution who actually has the loan paper...only the note-holder has legal standing to ask a court to foreclose and evict. Not the mortgage, the note, which is the actual IOU that people sign, promising to pay back the mortgage loan.

"Before mortgage-backed securities, most mortgage loans were issued by the local savings & loan. So the note usually didn't go anywhere: it stayed in the offices of the S&L down the street.

"But once mortgage loan securitization happened, things got sloppy...they got sloppy by the very nature of mortgage-backed securities.

"The whole purpose of MBSs was for different investors to have their different risk appetites satiated with different bonds. Some bond customers wanted super-safe bonds with low returns, some others wanted riskier bonds with correspondingly higher rates of return.

"Therefore, as everyone knows, the loans were 'bundled' into REMICs (Real-Estate Mortgage Investment Conduits, a special vehicle designed to hold the loans for tax purposes), and then "sliced & diced"...split up and put into tranches, according to their likelihood of default, their interest rates, and other characteristics.

"This slicing and dicing created 'senior tranches,' where the loans would likely be paid in full, if the past history of mortgage loan statistics was to be believed. And it also created 'junior tranches,' where the loans might well default, again according to past history and statistics. (A whole range of tranches was created, of course, but for the purposes of this discussion we can ignore all those countless other variations.)

"These various tranches were sold to different investors, according to their risk appetite. That's why some of the MBS bonds were rated as safe as Treasury bonds, and others were rated by the ratings agencies as risky as junk bonds.

"But here's the key issue: When an MBS was first created, all the mortgages were pristine...none had defaulted yet, because they were all brand-new loans. Statistically, some would default and some others would be paid back in full...but which ones specifically would default? No one knew, of course. If I toss a coin 1,000 times, statistically, 500 tosses the coin will land heads...but what will the result be of, say, the 723rd toss? No one knows.

"Same with mortgages.

"So in fact, it wasn't that the riskier loans were in junior tranches and the safer ones were in senior tranches: rather, all the loans were in the REMIC, and if and when a mortgage in a given bundle of mortgages defaulted, the junior tranche holders would take the losses first, and the senior tranche holder last.

"But who were the owners of the junior-tranche bond and the senior-tranche bonds? Two different people. Therefore, the mortgage note was not actually signed over to the bond holder. In fact, it couldn't be signed over. Because, again, since no one knew which mortgage would default first, it was impossible to assign a specific mortgage to a specific bond.

"Therefore, how to make sure the safe mortgage loan stayed with the safe MBS tranche, and the risky and/or defaulting mortgage went to the riskier tranche?

"Enter stage right the famed MERS...the Mortgage Electronic Registration System.

"MERS was the repository of these digitized mortgage notes that the banks originated from the actual mortgage loans signed by homebuyers. MERS was jointly owned by Fannie Mae and Freddie Mac (yes, those two again ...I know, I know: like the chlamydia and the gonorrhea of the financial world...you cure 'em, but they just keep coming back).

"The purpose of MERS was to help in the securitization process. Basically, MERS directed defaulting mortgages to the appropriate tranches of mortgage bonds. MERS was essentially where the digitized mortgage notes were sliced and diced and rearranged so as to create the mortgage-backed securities. Think of MERS as Dr. Frankenstein's operating table, where the beast got put together.

"However, legally...and this is the important part...MERS didn't hold any mortgage notes: the true owner of the mortgage notes should have been the REMICs.

"But the REMICs didn't own the notes either, because of a fluke of the ratings agencies: the REMICs had to be "bankruptcy remote," in order to get the precious ratings needed to peddle mortgage-backed Securities to institutional investors.

"So somewhere between the REMICs and MERS, the chain of title was broken.

"Now, what does 'broken chain of title' mean? Simple: when a homebuyer signs a mortgage, the key document is the note. As I said before, it's the actual IOU. In order for the mortgage note to be sold or transferred to someone else (and therefore turned into a mortgage-backed security), this document has to be physically endorsed to the next person. All of these signatures on the note are called the 'chain of title.'

"You can endorse the note as many times as you please...but you have to have a clear chain of title right on the actual note: I sold the note to Moe, who sold it to Larry, who sold it to Curly, and all our notarized signatures are actually, physically, on the note, one after the other.

"If for whatever reason any of these signatures is skipped, then the chain of title is said to be broken. Therefore, legally, the mortgage note is no longer valid. That is, the person who took out the mortgage loan to pay for the house no longer owes the loan, because he no longer knows whom to pay.

"To repeat: if the chain of title of the note is broken, then the borrower no longer owes any money on the loan.

"Read that last sentence again, please. Don't worry, I'll wait.

"You read it again? Good: Now you see the can of worms that's opening up.

"The broken chain of title might not have been an issue if there hadn't been an unusual number of foreclosures. Before the housing bubble collapse, the people who defaulted on their mortgages wouldn't have bothered to check to see that the paperwork was in order.

"But as everyone knows, following the housing collapse of 2007-'10-and-counting, there has been a boatload of foreclosures...and foreclosures on a lot of people who weren't sloppy bums who skipped out on their mortgage payments, but smart and cautious people who got squeezed by circumstances.

"These people started contesting their foreclosures and evictions, and so started looking into the chain-of-title issue, and that's when the paperwork became important. So the chain of title became crucial and the botched paperwork became a nontrivial issue.

"Now, the banks had hired 'foreclosure mills'...law firms that specialized in foreclosures...in order to handle the massive volume of foreclosures and evictions that occurred because of the housing crisis. The foreclosure mills, as one would expect, were the first to spot the broken chain of titles.

"Well, what do you know, it turns out that these foreclosure mills might have faked and falsified documentation, so as to fraudulently repair the chain-of-title issue, thereby 'proving' that the banks had judicial standing to foreclose on delinquent mortgages. These foreclosure mills might have even forged the loan note itself...

"Wait, why am I hedging? The foreclosure mills did actually, deliberately, and categorically fake and falsify documents, in order to expedite these foreclosures and evictions. Yves Smith at Naked Capitalism, who has been all over this story, put up a price list for this 'service' from a company called DocX...yes, a price list for forged documents. Talk about your one-stop shopping!

"So in other words, a massive fraud was carried out, with the inevitable innocent bystanders getting caught up in the fraud: the guy who got foreclosed and evicted from his home in Florida, even though he didn't actually have a mortgage, and in fact owned his house free -and clear. The family that was foreclosed and evicted, even though they had a perfect mortgage payment record. Et cetera, depressing et cetera.

"Now, the reason this all came to light is not because too many people were getting screwed by the banks or the government or someone with some power saw what was going on and decided to put a stop to it...that would have been nice, to see a shining knight in armor, riding on a white horse.

"But that's not how America works nowadays.

"No, alarm bells started going off when the title insurance companies started to refuse to insure the titles.

"In every sale, a title insurance company insures that the title is free -and clear ...that the prospective buyer is in fact buying a properly vetted house, with its title issues all in order. Title insurance companies stopped providing their service because...of course...they didn't want to expose themselves to the risk that the chain of title had been broken, and that the bank had illegally foreclosed on the previous owner.

"That's when things started getting interesting: that's when the attorneys general of various states started snooping around and making noises (elections are coming up, after all).

"The fact that Ally Financial (formerly GMAC), JP Morgan Chase, and now Bank of America have suspended foreclosures signals that this is a serious problem...obviously. Banks that size, with that much exposure to foreclosed properties, don't suspend foreclosures just because they're good corporate citizens who want to do the right thing, and who have all their paperwork in strict order...they're halting their foreclosures for a reason.

"The move by the United States Congress last week, to sneak by the Interstate Recognition of Notarizations Act? That was all the banking lobby. They wanted to shove down that law, so that their foreclosure mills' forged and fraudulent documents would not be scrutinized by out-of-state judges. (The spineless cowards in the Senate carried out their master's will by a voice vote...so that there would be no registry of who had voted for it, and therefore no accountability.)

"And President Obama's pocket veto of the measure? He had to veto it...if he'd signed it, there would have been political hell to pay, plus it would have been challenged almost immediately, and likely overturned as unconstitutional in short order. (But he didn't have the gumption to come right out and veto it...he pocket vetoed it.)

"As soon as the White House announced the pocket veto...the very next day!...Bank of America halted all foreclosures, nationwide.

"Why do you think that happened? Because the banks are in trouble...again. Over the same thing as last time...the damned mortgage-backed securities!

"The reason the banks are in the tank again is, if they've been foreclosing on people they didn't have the legal right to foreclose on, then those people have the right to get their houses back. And the people who bought those foreclosed houses from the bank might not actually own the houses they paid for.

"And it won't matter if a particular case...or even most cases...were on the up -and up: It won't matter if most of the foreclosures and evictions were truly due to the homeowner failing to pay his mortgage. The fraud committed by the foreclosure mills casts enough doubt that, now, all foreclosures come into question. Not only that, all mortgages come into question.

"People still haven't figured out what all this means. But I'll tell you: if enough mortgage-paying homeowners realize that they may be able to get out of their mortgage loans and keep their houses, scott-free? That's basically a license to halt payments right now, thank you. That's basically a license to tell the banks to take a hike.

"What are the banks going to do...try to foreclose and then evict you? Show me the paper, Mr. Banker, will be all you need to say.

"This is a major, major crisis. The Lehman bankruptcy could be a spring rain compared to this hurricane. And if this isn't handled right...and handled right quick, in the next couple of weeks at the outside...this crisis could also spell the end of the mortgage business altogether. Of banking altogether. Hell, of civil society. What do you think happens in a country when the citizens realize they don't need to pay their debts?"

Charts to Ponder

2010-10-16T20:32:00.000-05:00

Jeff Matthews Is Not Making This Up

2010-10-13T22:03:00.000-05:00

Jeff's blog is a must read and this particular post is astonishingly good:

The September employment report “is simply a signal, a strong, strong signal for Fed QE2,” Gross said….
—‘Gross Says Employment Report Signals More Fed Easing,’ Bloomberg, October 8, 2010

"The business traveler is back. We're excited to see demand so strong in so many places with prices moving up. But we know what you want to know, essentially where do we go from here? According to the National Bureau of Economic Research, the recession officially ended in June 2009. Notwithstanding that, many seemed to wonder whether the economic recovery has any strength and about the risk of a double dip.

"Let's be clear. There is nothing in our business which indicates that sort of weakness. Both business transient and leisure travel remain strong."
—Arne Sorenson, President & COO, Marriott International, Earnings Call, October 7, 2010

There’s something about Washington DC that saps people’s brains of all reason, sense and intellectual honesty.

How else to explain the process by which Congress and the Administration undertook to restructure the entire healthcare system of the United States without asking a single insurance company for advice on how to improve the system?
Before you spit out your coffee and scream, in the manner of our President and any random Congressperson running for reelection, “hey, the insurance companies are the bad guys of healthcare,” sit back and think what insurance companies really are: they’re the canaries in the healthcare coal mine.

They gather cost data, put a mark-up on it, and negotiate with their customers the delivery of their services—i.e. the parsing and paying of healthcare claims. As a result, no part of the healthcare chain knows more about the actual costs of trial lawyer abuse, hospital waste, insurance fraud, drug company price hikes, and the staggering inefficiency of a Balkanized, paper-based delivery system than the insurers.

And if anybody had bothered to ask where to find and how to prevent inefficiencies, fraud, abuse, and inflation exist, the so-called healthcare “reform” act might have managed to do a thing or two to reform our healthcare delivery system.

But, of course, Congresspersons don’t like to be confused by the facts.

Neither, apparently, does the White House. Bloomberg recently reported that IBM offered to analyze the healthcare system, free of charge. You might think the offer would have been snapped up—but, then, you would be a rational human being:
IBM said it would analyze health-care spending, at no cost to the government, to hunt out fraud, Sam Palmisano, the company’s CEO, said at a conference in New York on Sept. 14. The White House wouldn’t sign on to the plan.
“We offered to do it for free to prove a point, and they turned us down,” Palmisano said. “Our recommendations weren’t aligned with the priorities of the administration. Their priority was not to reduce fraud and improve productivity. It was to increase coverage.”
— ‘Obama May Try to Woo Business as P&G, Blackstone Blister Moves,’ Bloomberg, October 8, 2010

Sure, nobody likes the cost increases insurance companies pass on, and nobody likes the impersonal, bureaucratic decisions they make when it comes to healthcare coverage, or when they make mistakes. Indeed, some people find it offensive that many insurance companies are for-profit enterprises.

But taking out anger at the lousy healthcare delivery system in the US on the insurance companies the way Congress and the Administration did was more like shooting the mailman who delivers the eviction notice than dealing with the actual problem that caused the eviction notice to be sent by the bank.

Consider for ten seconds the mark-up on an insurance company’s services versus that of one of the drug companies on whose behalf the insurers collect much of our hard-earned premiums: United Healthcare’s gross markup (i.e. before administrative and selling costs as well as taxes) on its services is 23%; its net after-tax margin is 4%.

Pfizer’s gross markup on its products is 85%; its net margin 17%.

How, exactly, are the insurance companies the bad guys here?

Of course, people in Washington DC consider nothing for ten seconds unless it involves the prospect of getting reelected, or getting reappointed.

Look at Ben Bernanke and the panic-stricken reaction of the Federal Reserve to the recent employment data. So freaked out is the Fed by the lackluster hiring that it is preparing something called “QE2”—Quantitative Easing, Round 2—by which the Fed will buy government debt (at record, all-time high prices…hardly the time to buy anything) in order to keep the economy from stalling.

The Fed’s reaction to unemployment data, unfortunately, ignores a simple fact: nobody hires new employees because interest rates go down.

They hire when they are confident of their future.

Thus, the weak employment data are not telling the Fed that business stinks—in fact, business is actually fairly healthy. Indeed, if Bernanke listened to an actual company talk about business, he’d hear some interesting stuff.

Take the above-quoted commentary from Marriott International, and think about what it means that both business and leisure travel are “strong.”

It means companies see deals that can be done, so they’re sending people on the road. And if hotels are filling up, it means that airplanes are flying full, rental cars are being rented, restaurants are being booked and cabs are being hailed.

It also means that city hotel room taxes and airport gate fees and sales taxes are being paid, and waiters and waitresses and cabbies and bellmen are being tipped.

Travel is one very important canary in the economic coal mine, and it’s telling us that business really is getting better.

So we have a suggestion for Ben Bernanke, and, for that matter, Bill Gross, ace bond king of PIMCO who seems to manage PIMCO from within a CNBC studio, so frequently do his musings on the state of the economy appear on that TV channel, and a cheerleader of the Fed’s impending QE2 campaign: listen to a few conference calls some time.

If they listened, they’d know that companies aren’t holding back on hiring because business stinks: they’re holding back because they see tax hikes and healthcare cost increases coming, and they’re not sure adding a new FTE is a smart thing to do.

And no amount of “QE2” or QE3, 4, 5 or 6 will change that.

Ah, but who in Washington needs facts to make up their minds?

Jeff Matthews
I Am Not Making This Up

Some Pain to Come

2010-10-10T14:01:00.001-05:00

The slides below are from a presentation delivered on October 6, 2010 by Chris Whalen with the American Enterprise Institute.