Thursday, December 31, 2009

Did You Know II?

The depiction of the 25 largest companies in 1999 and in 2009 is another interesting analysis from the Wall Street Journal's end-of-decade article. Only eight of the 25 companies on the 1999 list made the 2009 list. This illustrates the incredible dynamism of the (semi) free market we live in.

In contrast to the left's depiction of a static economic environment, with the implication that today's winners will be tomorrow's winners as well due to the advantages of precedent, a free market produces dramatic changes in a short period of time.

Instead, today's winners can be tomorrow's losers, and companies one has never heard of become wildly successful (think Google) in a short period of time.

Wednesday, December 30, 2009

Did You Know?

The Wall Street Journal produced an end-of-the-decade recap, and it had some very interesting information.

One analysis depicted the top five donors to the Democratic party and Republican party.

Other than ActBlue, which is self-described as " the online clearinghouse for Democratic action", the top donors to the Democrats were all labor unions, donating $116 million. The top five donors to the Republican party were two companies and three industry associations, donating a total of $59 million.

Add the ability to deliver volunteers for political activities, and now you know why labor unions are so critical to the Democratic party - and it helps explain Barack Obama's massive payoff to unions in the "stimulus" bill, the auto bailout, and other policies.

Tuesday, December 29, 2009

Crime and the Economy

In an email from the New York Times with today's headlines, the Times said:

"Despite the bad economy, [New York City] is on track to have the fewest homicides in a 12-month period since 1962."

That comment is based on the left's belief that economic conditions are the key determinant of criminal activity. Crime rates rose during the economic boom of the 1920's and fell during the Great Depression of the 1930's. The fact that this pattern was influenced by criminal activity associated with Prohibition during the 1920's and its repeal in 1933 suggests that crime is due to many factors and is not well correlated to economic conditions.

The drop in the number of murders in New York in 2009 during a recession further explodes this myth.

The article discusses the continued decline in murder that New York has enjoyed. From a peak of 2,245 murders in 1990, the number of murders this year as of December 27 was 461 - a staggering decline of almost 80%.

One of the tactics the New York City police employ is to question and frisk some people on the streets - which resulted this year in 7,000 weapons being seized, including 800 guns. Speaking of this tactic, Police Commissioner Raymond Kelly says, "We believe young people who may have a gun think twice before they take it out on the street."

This is a profoundly important policy. The NYPD is raising the cost to would-be thugs from bringing weapons on to the streets by confiscating them, and as with most things in life, if the "cost" of something is raised, people will engage in less of that activity.

Interestingly, this tactic is likely to be "politically incorrect", since its implementation is probably based on common-sense profiling (does he look like a gang member?). Perhaps city residents are enjoying the 80% drop in murders too much to protest.

Friday, December 18, 2009

So Long TARP

Being tarped is such a bad thing that banks are racing to repay government investments to escape restrictions on their compensation and business practices.

Citigroup and Wells Fargo are the latest firms to announce plans to repay the government $20 billion and $25 billion respectively.

The government may make $14 billion on its Citigroup investment, which if realized soon would work out to approximately a 30% return for a year - which is a rate of return similar to what LBO investors and venture capital firms achieve.

As I have previously mentioned, the government's bailout of the banking sector was fundamentally a different exercise than its bailout of the auto industry. One bottom line measure of that difference is the government is making money on its bank bailout, while it is deeply in the red on its bailout of GM and Chrysler.

Tuesday, December 15, 2009

Here We Go Again

The Wall Street Journal reports that academics and housing experts believe the U.S. government should retain the part public entity / part private company aspect of Fannie Mae and Freddie Mac, with Fannie and Freddie promoting loans to low-income borrowers and the government insuring mortgages.

This is exactly the type of government intervention in the housing market that caused the financial crisis.

It is said that "people who forget history are doomed to repeat it."

And then there are those who never learned the "history" of our recent financial crisis to begin with.

Monday, December 14, 2009

Iran Takes Hostages, Again

Iran announced that it will try three American, who were hiking near the Iranian border, as spies. This continues a pattern of similar incidents, such as last week capturing five British citizens who were sailing in or near Iranian waters. The five Brits were released, and I suspect the three Americans will eventually be released after a show trial followed by a pardon by the Iranian regime.

You may wonder why Iran would do such a thing. I can see a number of benefits to the regime:
  • It sends a message to Iranians, many of whom are protesting stolen elections from earlier this year, that if America can't even help its own citizens it surely won't help you in your protests.
  • It creates the impression domestically that America is threatening the country, in a hope of rallying disenchanted Iranians to support the regime against external threats.
  • It allows the thuggish regime to gain credibility and respect when American leaders have to ask for the return of the three captives.
  • The regime looks "generous" when it subsequently releases them.
  • It demonstrates to America that Iran can hurt us in many ways, attempting to deter an American military strike on Iran's nuclear facilities.
And what price does Iran pay for this behavior, which in previous times would have been grounds for war? Nothing. Iran knows very well America won't make them pay a fearful price for harming or threatening Americans.

If there only benefits, and no costs, from acting thuggishly, expect more of the same.

Friday, December 11, 2009

Now He Tells Us

The Obama administration is defending its Afghan war strategy by pointing to the success of George Bush's "surge" in Iraq in 2007.

Senator Barack Obama opposed the Iraqi surge, voting against it in February 2007.

For a man who has apologised for American's purportedly bad behavior, and who claims he wants to change the political culture in Washington, Barack Obama could acknowledge he was wrong, and Bush was right, about the Iraqi surge.

Don't hold your breath.

Thursday, December 10, 2009

Expropriation, Global-Style

Recent actions by the U.K. and North Korean governments indicate that the desire to expropriate the assets of people who are politically out of favor thrives in the world.

In the U.K., the Labour government announced its plan to impose a 50% tax on bonuses paid to bank employees above $40,000. The shockingly punitive rate, directed at certain workers but not all, is a disgrace to the nation that has done so much to advance freedom in the world.

North Korea, who can't claim such an honor, has issued a new currency - but limited the amount of money per person which can be converted to the new currency (about $50-75 worth), and the old currency will no longer be legal tender. So anyone with more than $50-75 in cash, and $100-150 in a savings account, will see their entire savings above those amounts wiped out.

It appears this despicable act is directed against those who have earned some money in the limited markets that have sprung up in the heavily socialized nation, and the totalitarian regime is seeking to make the people even more dependent on the government.

While many disregard the relationship between private property, the reality is that the growth of wealth provides the motivation and means to seek to change oppressive government policies.

The dictatorship in North Korea understands this all to well. Do we?

Wednesday, December 9, 2009

Three Cheers for Michelle Rhee

Michelle Rhee is the chancellor of the Washington, DC public schools. She was hired in 2007 to shake up one of the worst educational systems in the country despite spending more than most, about $14,000 per student annually.

Rhee created a firestorm with the DC teachers union by firing 266 teachers in September based on quality, and not on seniority.

That which is normal course for many organizations is, however, a crisis for the American Federation of Teachers. The AFT is one of the two main teachers unions in the country, and it is battling Rhee out of fear this example of sound management could spread to other school districts in the country.

Rhee has also tried to create a performance-based compensation culture for the DC schools, where teachers can opt out of tenure-based job protections in return for being able to earn significantly more money. As example, first year teachers could earn up to $78,000 a year, as compared currently to $45,000, while experienced teachers could earn up to $131,000, or double their pay. The union rejected the plan as a threat tenure.

Rhee is a courageous and determined women, fighting to make common sense reforms in education. She deserves our admiration and good wishes.

Tuesday, December 8, 2009

Thanks, Ben

You may wonder why oil prices have more than doubled from their lows this past year, when demand is not growing much or at all. This rise is pushing up the cost of gasoline, acting as anti-stimulus tax increase. Moreover, it is increasing the money flowing to nations like Iran, Russia, and Venenzuela and making it easier for them to oppose America.

The staggering monetary easing by the Federal Reserve under Chairman Ben Bernake is to blame. The Fed is keeping interest rates at all-time lows and flooding the financial system with cash, and one consequence is that the money is bidding up the price of gold, oil, and other assets. Investors have an incentive to move money from money market investments that pay little or no return, or borrow money at low rates, and invest in assets with the hoped-for higher returns.

The Fed is creating bubbles around the world, and while the monetary easing will do far more to aid in recovery than Obama's "stimulus" bill, we are paying a high price for its actions.

Monday, December 7, 2009

Thank you, Australia

The Australian Senate handed a defeat to Prime Minister Kevin Rudd by rejecting Rudd's cap-and-trade plan to limit carbon emissions.

Since countries are reluctant to adopt carbon limits if other nations don't also adopt them, so as not to put domestic industries at a disadvantage to international competitors, Australia's rejection of cap-and-trade makes it less likely other nations will adopt it.

Thank you, Australia.

Sunday, December 6, 2009

Global Warming Fraud

A number of years ago, I read a column by a scientist who said that many scientists often found it difficult to know whether they should disclose all they could about various issues or focus on the message they want to deliver to the public. He gave as an example the issue of smoking, where many researchers don't publicize the chances that a person would die from smoking out of fear if the real probability was known, some people would be less motivated to quit.

He finally disclosed in the article that the chances of dying from smoking are about 33%, and while in reality that is a shockingly high number since so many things can kill you, it is possible some smokers implicitly assume the probability is even higher. So for such smokers, scientists fear that disclosure of the details would deter some from quitting smoking.

This was a specific example of the broader problem he wrote about it, and it has made me very concerned since then about the nature of scientific claims. Adding to that concern is the intellectual trend among leftists in academia, which of course is where scientists spend so many years studying and teaching, to deny that there is objective truth, and therefore one should simply express one's political preferences so there is no truth anyway. Journalism schools have taught this (which is the intellectual underpinning of why the media is so biased), and the "softer" intellectual disciplines, such as history, sociology, and literature, are filled with this approach.

The "hard" sciences, such as physics, chemistry, and biology, have been less immune to this assault on reality, since it is harder to ignore the data.

All of this led me to be very skeptical of the claims of environmental activists in general and global warming activists in particular. Although it would seem that environment science falls more into the hard science category, global warming concerns are driven by what models project the weather will be like tens and hundreds of years from now so it is open to enormous interpretation. And given the intellectual climate, with a desire to focus on one's political goals and to be "effective" as scientists, the inherent uncertainties in projecting the future left much room for political goals to get in the way of science.

The recent disclosure of emails by environmental scientists has exposed the shocking disregard for the truth that must animate scientists and instead has made clear the scientific thuggery of many: seeking to prevent different views from being publicized, corrupting the peer-review process, and "losing" data provide compelling evidence of corruption and politicization of these global warming crusaders.

The "lost" data is, of course, a joke: it has never been easier in the history of mankind to store data than in recent years, and such data is the essence of the scientific method (i.e., what is actually going on in the world), so the proper inference is that these scientists must have discarded data because it didn't help their cause.

In addition, look at the nature of the debate. The proper discussion of any issue is to gather the evidence, integrated in a logical manner, to make the case. Instead, we see global warming advocates seek to denounce those who disagree, even implying that disagreeing with the global warming hypothesis (an estimate of the future based on inherently uncertain computer models) is analogous to the anti-Semites who deny the Holocaust occurred (a historical event).

The proper attitude of anyone toward those who argue by denunciation is to assume their claims are false since, if they were true, they would argue with facts and logic. And to demand the thuggery to stop.

So it is time that global warming advocates present the world, with data that is verifiable, with a rational argument that addresses: is the world warming and to what degree? what are the possible causes of the warming? how likely and important is the warming due to emissions from human-activity? is it bad, good, or indifferent to humanity if the Earth warms? is the cost to stop the warming worth the benefit?

The last two questions are critical and often lost in the shuffle, as if any change must be bad and any cost must be appropriate to pay to stop such change. It is important to realize that warm weather is generally more supportive of life than cold (note the death rate is lower in the summer than winter) and that there has been a massive migration of people in America from the cold north and Midwest to the warm south and west.

People's real choices belie the concern that global warming is necessarily a bad thing, assuming it is true and is caused by human activity. And Bjorn Lomborg has dramatically highlighted that the cost to effect changes in the climate are staggeringly expensive for trivial change, while many other problems are so pressing.

Saturday, December 5, 2009

Obama to U.S. Military: Die for Nothing

Barack Obama's "thoughtful" review has produced the worst of all outcomes in Afghanistan: adding troops without a clear commitment to winning the war. By saying that the additional troops are temporary, with their withdrawl beginning 18 months from now, Obama sends the message to the enemy that they can wait us out.

For people we hope to keep or recruit to our side, from the Afghan and Pakistani governments to the Afghanis living with Taliban forces or sympathizers nearby, they have to worry we will abandon them later - and if so, they should abandon us today and accommodate the Taliban today.

But worse of all is the message to America's military personnel. We are sending you to fight, and some to die, but we don't have the courage or capacity to see the war through to victory. It would be more honorable to withdraw them all now, and not have a single soldier die, if we won't fight to win.

It is a despicable decision by the President.