Monday, July 28, 2008

There's no such thing as a free war

The Bush administration is now suggesting privately that the next fiscal year's budget will be at $490 billion. This is in the Neverland world in which the war in Iraq, which has been going on since 2003, is not a regular expense item. Add another $80 billion for that.

Then add another $180 billion of so for the Social Security surplus, which is going to be needed in another few years. If we're going to maintain that the SS Trust Fund exists, then its money is not also the general fund's. The general fund must be running a deficit of more like $750 billion. According to Wikipedia, "earmarks" are also off budget and run around $50 billion a year more.

$490 billion may be optimistic, since the administration probably expects a shallow recession, which may not be the case. I wonder how much the $490 billion depends on cheaper oil than we are now experiencing. The U.S. government is a huge consumer of petroleum products.

All of this, however, is very little compared with the rate at which the government is incurring actuarial liabilities for future retirees. It also assumes that foreigners will continue to lend America the money to fund its twin deficits while experiencing a declining greenback and low interest rates.

But why worry. It's summer. Everything's going to be just fine.

Monday, July 21, 2008

Too Big to Fail: Fannie, Freddie, Iran

If we had waited on Iraq and today faced the problem we did five years ago, I doubt we would invade. We wouldn't risk their oil production. With Iran today, it's even more important to the US economy that Iran keep pumping oil. This morning, oil prices are headed back up just because Iran didn't say nice things about their nuclear program. I'm not sure who expected them to, but oil traders get nervous just because of the perceived threat.

I'm firmly of the opinion that Iran realizes that its greatest asset is the appearance of wanting nuclear weapons. Actually having them would be futile. It would be suicidal to use them pre-emptively, probably unrealistic to expect them to be deployed if the US decided to take them out, and runs the risk of an Israeli attack. Actually, if they were known to possess them, that is probably the certainty of an Israeli attack.

On the contrary, the appearance is of great benefit. It keeps tensions high and adds to the price of their primary product. Knowing that they can't actually attack without ruining their own economies, the Western powers are offering more economic incentive to a country that is wallowing in cash already. I see no benefit to Iran in resolving the crisis, so I expect it to continue for a long time.

Too much of Fannie and Freddie debt is held outside the U.S. by people whose credit we will continue to need. The people who sold overpriced houses will keep the proceeds. The people who bought them will keep their houses. People who prudently avoided the bubble will pay for it with taxes. The music goes round and round.

Thursday, July 17, 2008

Jackson, Sharpton, and the word "nigger."

When I was very young, my mother explained to me that a rhyming game I was playing, which involved the use of the word "nigger," was inappropriate (she probably used different language) and I should never use that word. So I haven't since, except within quotation marks.

There are several things that are very irritating about the current "controversy." One is that Jesse Jackson, who preaches the public avoidance of the word, uses it in semi-public. He wasn't being broadcast, but he was in a newsroom.

Next, that anyone pays attention to what Al Sharpton says about it. It's akin to listening to what Jamie Lynn Spears says about her motherhood. It irks me that such people get publicity.

Finally, that people don't know the purpose of putting a word in quotation marks. At that point, you are talking about the word as a component of English. You should be able to talk about essentially any word that way, although since there are few legitimate reasons to use George Carlin's famous seven words except to shock and offend, I can legitimately see how they should be kept out of most writing and conversation.

But the word "nigger" is completely different. It clearly does not shock and offend Black Americans, because it is used casually. We are supposed to believe that they are shocked and offended when white people use the phrase, ever, for which reason we are not allowed to put it in quotation marks. We are obliged to refer to the "N-word" as a transparent euphemism.

When some words are so offensive to certain people that they never hear them spoken and prefer that, it's legitimate to shield them with a curtain of polite speech. But when a word itself is commonly used, this doesn't apply.

That Jesse Jackson used "niggers" to refer to American blacks doesn't bother me except for the hypocrisy. If Bill O'Reilly had used the same word in the same context, I would have thought it very bad taste. However, if people are going to get upset because in a blog, discussing the word and its political importance at this time, I come right out and skip the euphemism, then it's an indication of a complete misunderstanding of legitimate words in the language.

Out of the Iraq Skillet and into the Afghanistan Fire

Did the Surge work? Right wing commentators seem to think so and to imagine that Obama is now embarrassed at missing this golden opportunity. Think back a year, however, and recall what the Surge was supposed to achieve. We were going to send some more troops to Iraq to create a security situation in which the Iraqis could negotiate a peaceful arrangement among themselves.

A more peaceful situation has resulted, but the negotiations never panned out. Yet the "fragile" peace is looking ever better. Why? Mostly because the politicians want the money that expensive oil can bring them, but they can't publicly abandon positions of supposed principle. I don't think many of them have real principles beyond profit maximization, so this shouldn't be an obstacle to their finding a modus vivendi so we can go home.

But, alas, that's not what the Surge is going to deliver. Obama actually has something of a problem here, because it appears that with the success in Iraq, we are merely freeing more troops to go to Afghanistan. To sound pro-Jingoist, he has allowed himself to say that we should have put our efforts into Afghanistan rather than Iraq because that's where (roughly) Osama Bin Laden is.

But it's hard to say we should have in the past without being stuck saying we should now, and Afghanistan is a genuine quagmire. In Iraq, the terrain is mostly flat with little vegetation and our military can prevent the build up of any significant fighting force. Not so in Afghanistan, as we are increasingly seeing. We want the Paks to jump in. Not damned likely. They know this region and they are not fools.

It's interesting that we have so much more European support for our objectives in Afghanistan than in Iraq. Maybe it's some vast Machiavellian plot through which the United States bankrupts itself and the Euro becomes the international reserve currency. It seems to be working.

Wednesday, July 16, 2008

Obama, tne New Yorker, and Satire

I just read a commentary in the Sun-Times about New Yorker's cover controversy. The point of the article is that "of course it's satire." One of the public commenters noted that anyone with a fifth-grade education would realize that it's satire.

Unfortunately, this race will be decided, in the end, by the opinions of the booboisie. There may be few voters who don't actually have a fifth grade eduction, but if you include those who, as adults, have no mental acuity greater than that of a well schooled fifth-grader, then you haven't sat around in a greasy spoon cafe and listened to the banter.

Presumably the readers of the New Yorker recognize that much of what is said about Obama, and everything about his Muslim connection, is nonsense, but this is certainly not true of the electorate as a whole and some people will see confirmation in that cover. I'll certainly defend their First Amendment right to publish as they see fit, but it's also my right to say that it was tasteless and showed bad judgment.

Sunday, July 06, 2008

Sandra Harding -- can anything more be said?

After my last post about Obama and the Denver convention, it followed a tortuous path through cyberspace and wound up at the Wikipedia article on Sandra Harding, a feminist theorist. The article ended with the following controversial statement by Ms Harding:

One phenomenon feminist historians have focused on is the rape and torture metaphors in the writings of Sir Francis Bacon and others (e.g. Machiavelli) enthusiastic about the new scientific method. Traditional historians and philosophers have said that these metaphors are irrelevant to the real meanings and referents of scientific concepts held by those who used them and by the public for whom they wrote. But when it comes to regarding nature as a machine, they have quite a different analysis: here, we are told, the metaphor provides the interpretations of Newton's mathematical laws: it directs inquirers to fruitful ways to apply his theory and suggests the appropriate methods of inquiry and the kind of metaphyiscs the new theory supports. But if we are to believe that mechanistic metaphors were a fundamental component of the explanations the new science provided, why should we believe that the gender metaphors were not? A consistent analysis would lead to the conclusion that understanding nature as a woman indifferent to or even welcoming rape was equally fundamental to the interpretations of these new conceptions of nature and inquiry. Presumably these metaphors, too, had fruitful pragmatic, methodological, and metaphysical consequences for science. In that case, why is it not as illuminating and honest to refer to Newton's laws as "Newton's rape manual" as it is to call them "Newton's mechanics"?

This is a woman who has spent a lifetime in academia, writing books, holding important posts, evidently generating widespread if not universal respect. I ask you to consider what any freshman, at any university in America, would be told if they wrote something like this in a paper and turned it in to a professor? An "F" certainly, and perhaps a request to enroll somewhere else. But Ms Harding is in fact Sandra Harding, PhD. That means she must be taken seriously.

Wikipedia, with its usual deference to objectivity, commented:

This article or section may be inaccurate or unbalanced in favor of certain viewpoints. Please improve the article by adding information on neglected viewpoints, or discuss the issue on the talk page.

I gave it some thought, but in the end, if this is an accurate quotation, what is left to say? Apart from editorializing, as I am doing here, I don't know what could be added that would not dignify an absurdity.

Democrats still think a command economy works

First, I'm an Obama supporter. He makes me nervous, but I attribute this mostly to the pressure of running a campaign where the results will be decided by, as H L Mencken so aptly put it, the "booboisie." An honest and intelligent presidential campaign is essentially an oxymoron, so I'm giving him a lot of latitude.

However, I'm not a fan of the Democratic Party. Or the Republicans, the Greens, the Libertarians, or Socialist Labor, but it's the fact that Obama belongs to the Dems that concerns me. Witness the botched job that they are making of the upcoming Denver convention.

First, the lavish expense on office space, $100,000 plus $50,000 for rented furniture per month. The attitude appears to be, "It's not our money and we deserve this." It's not an appealing attitude and makes you wonder how they would run the country if they had the chance.

Second, there's the deal with the caterers, who are being told, probably by people who don't know a lot about catering, exactly how to construct each meal, down to the presence of fried foods (not) to the combination of colors. It's the kind of top down thinking that didn't work well in the Soviet Union and doesn't here either. The potential caterers are not showing much interest and time is running out.

I don't know why the Dems are so intent on having a "green" convention. It has nothing to do with the political imperatives. Who do they think they'll sway? The handful of people who might otherwise drive to Nader? There's no need to have a green convention. Eat hot dogs, drink beer, wave flags, cheer, vote, go home and start an exercise plan to wear off the extra calories.

There is a serious political reason, however, to appear to be competent. If the DNC runs around, tilting at politically correct windmills and failing to deliver an efficient convention within the budget, then it will reflect badly on Obama.

Kiwanis and the Internet

I recently returned from the International Convention of Kiwanis in Orlando. It was generally a stimulating and valuable experience, but as an active Kiwanian, I'm concerned that the organization is not fully incorporating the power of the Internet into its programs.

This is most glaring in its approach to membership growth. Like all the large, established service organizations in America, Kiwanis has been losing members. Those that remain are, on average, older than before. It's a bad trend since the need for the services provided, which focus on children in Kiwanis' case, has never been greater.

Yesterday, I found a site for an Oklahoma-based church, LifeChurch.tv, which has gone so far as to adopt its domain name as its DBA. In a list of past achievements, and referring to the year 2006, they say on their site:

"In April, the LifeChurch.tv Internet Campus was launched. This revolutionary campus provides live church online for people around the world with the ability to engage in genuine community, unique volunteer opportunities, online LifeGroups, and even mission opportunities on the Internet."

I have no idea whether I agree with their theology, but their technology looks right on the money. Kiwanis should be doing this as well. It's where the future will be found.

Legalize Drugs and Prostitution

It would have been almost enough to vote for Ron Paul just because he wanted to get us out of Iraq and to legalize drugs. Unfortunately, he came with enough baggage that I could never quite bring myself to seriously support him.

But as an article in the LA Times points out, the war on drugs has set us back $2.5 trillion since its inception and shows no evidence of progress. This is serious money to be spending on futile public relations.

One of the great thinkers of the nineteenth century, Lysander Spooner began his 1875 book Vices are not Crimes as follows:

Vices are those acts by which a man harms himself or his property.

Crimes are those acts by which one man harms the person or property of another.

Vices are simply the errors which a man makes in his search after his own happiness. Unlike crimes, they imply no malice toward others, and no interference with their persons or property.

In vices, the very essence of crime - that is, the design to injure the person or property of another - is wanting.

It is a maxim of the law that there can be no crime without a criminal intent; that is, without the intent to invade the person or property of another. But no one ever practises a vice with any such criminal intent. He practices his vice for his own happiness solely, and not from any malice toward others.

Unless this clear distinction between vices and crimes be made and recognized by the laws, there can be on earth no such thing as individual right, liberty, or property, and the corresponding and coequal rights of another man to the control of his own person and property.

For a government to declare a vice to be a crime, and to punish it as such, is an attempt to falsify the very nature of things. It is as absurd as it would be to declare truth to be falsehood, or falsehood truth.


The argument against drugs is that some people will fall into the habit if drugs are legal. Possible, but the fact is that we give up regulation, taxation, and provide incentives for drug pushers to promote the substances. The moral argument against prostitution is pretty weak, since there are lots of women in degrading relationships based on sex and this isn't illegal. The crime that supposedly gravitates naturally around prostitution is mostly related to drugs, so this is circular.

For a small fraction of the expense of the "war on drugs," we could offer free treatment for any addict who chooses it. We could also treat addiction as a terminal disease, when the addict is indigent and refuses treatment, and provide enough of whatever substance they want so they can over time kill themselves. They're going to do it anyway, and this would be more humane.

Saturday, July 05, 2008

Oil Rules

The BBC has outlined the policy conflicts that are going on in several capitals regarding the prospect of war over the Iranian nuclear program. I am going to go out one a limb and state that cooler heads than Bush, Ahmadinejad, and the Israeli cabinet will prevail and no such attack will take place.

The reason is oil at $145/barrel. This is a precarious price and perhaps it won't stay this high, but it means that Iran's exports of oil, worth perhaps $150 million per day a year ago, are now worth $350 million. Their natural gas reserves are also much more valuable.

If they don't rock the boat too much, the average Iranian is going to get $1100/year more, which is about $3000 after considering local purchasing power. That's per capita, so figure $12,000 for the typical family. Enough to put them into the middle class by world standards. It's a lot to ask them to sacrifice this for a dispute in Palestine.

The Israelis must also understand that an attack on Iran would push oil towards $200, assuming moderately hostile response from Iran, which would in turn bring the U.S. economy to a halt. No other major power is blindly supportive of Israeli objectives, and they would risk losing their one reliable ally.

On the flip side, there's a rather Machiavellian option that the Iranians might be playing. Their nuclear program may not be doing as well as they, the Israelis, and the Bush Administration want everyone to believe. It's certainly not necessary to their wellbeing. They are being offered some incentives to dismantle it, but it might be vastly more profitable to them to have Israel bomb it. Another year of prices from $150 to $200/barrel, which they should be able to sustain with saber rattling, would bring them another $50 billion or so with no strings attached. They would push the United States into a deep recession and increase the diplomatic isolation of Israel.

I don't think Ahmadinejad is smart enough to figure this out, but he's motivated by some screwy religious concepts and there may be deeper thinkers over there who do see the possibility. Hard to know.

Meanwhile, I don't think this problem exists in Iraq. There's now just too much money available. They will settle their differences, although maybe not clearly enough that the U.S. can stop bankrupting itself with the occupation.

Friday, July 04, 2008

The Real Estate Wealth Illusion

My grandfather was a very religious man, although not in a particularly organized sense. When he sold his house in Seattle about 1953 to move to our family compound on the west side of Puget Sound, the fact that he would get more money for it than he had paid caused him some moral concern. Somewhere in the Bible it says you aren't supposed to make money without working for it. My grandmother eventually convinced him that it would be all right.

The reverse attitude was shown by the couple who bought a big house somewhere in the Riverside/San Bernardino area with the thought that having invested $1.4 million for much more housing than they needed, they could sell it in ten years for $5 million and retire on the gain.

There have been a few lucky people who have cashed out as a result of the real estate bubble, but I don't know how anyone ever thought it would work for the United States collectively. If we, the boomers, want to retire some day, we'll need to leave behind us highways, airports, factories, dams, bridges, and lots of other things with which our children will be able to produce goods and services, enough for themselves and us as well. Building excessive houses and living in them isn't going to lay the groundwork for a prosperous future for the country.

Don't short the USD, buy Pinot Noir

There's a growing concern that the production of pinot noir grapes in Oregon has put the industry in the state on track for a price crash in a few years. I don't think so.

Just consider the competitive situation. A large amount of wine consumed in this country comes from places like Europe and Australia, where the USD has fallen dramatically in the past two years. Buying patterns don't shift immediately and we can expect foreign governments to take actions to protect their domestic wine industries, but the principle of import substitution is going to rule.

Fortunately for the rest of the country, the Pacific Northwest produces great wine and Americans should be happy to buy Oregon and Washington wines instead of French. Good thing, because when the Euro reaches $2, they won't be able to afford their old habits.

Oil and dollar -- Are we in a feedback loop?

A year ago, the State of Oregon produced its official tax revenue estimate and commented that although there were some dark clouds on the horizon, one positive possibility was that the cost of oil would go down. The state economist figures that at $60/barrel, it was somehow inflated above its natural price level.

Now, with oil prices almost 150% higher than that, I'm starting to wonder if there isn't a financial feedback loop at work here. Gasoline is a highly price-inelastic commodity. If you need it, you buy it, and cut your expenses elsewhere. Over a period of time, people will come to own more efficient vehicles and perhaps live closer to where they work, but in the short run, this isn't much of an effect. Gas has doubled and consumption is down in single digits.

The problem is that so much of our consumption comes from foreign sources. As the price goes up in USD, the trade balance worsens and the USD drops relative to other currencies. Other countries find it easier to compete with the United States to buy the oil, raising the cost of oil in USD, driving down the dollar, etc.

Obviously, it can't go on forever, but it may explain why we've reached levels that nobody would have seriously even speculated on a year ago.