Consider Gillibrand Carefully

It seems that the new Senator Gillibrand of New York is not entirely appreciated within her own party in her own state. That may be a good thing.

She's catching flak for her opposition to illegal immigration, for which she has earned the term "xenophobe." Note that senators are sworn to uphold the laws of the country.

I'm not going to defend her extreme enthusiasm for personal weaponry, but it's a fair statement that few of America's crime problems are due to people with properly licensed guns. Some deranged people have gunned down people on campuses, but I'm not aware of any of them who had a concealed weapons permit. Statistically, it would make more sense to require everyone attending classes to pass the test of earning such a permit.

But I digress. More important is Ms Gillibrand's opposition to the bailout last fall. Representative Peter DeFazio (D-Oregon) also opposed it, and he's fairly well established in the progressive wing of his party. We're used to Peter being an heir to the maverick Oregonian tradition, a much longer established theme than that of Arizona or Alaska. New York should be able to tolerate some dissent, even with their dependence on the financial industry that was bailed out. After all, Gillibrand and DeFazio lost and the bailout passed.

And interestingly, the consequences that it was supposed to prevent just seem to keep on coming down the pike. The taxpayers have forked over hundreds of billions, hundreds of billions are to follow, and yet bank lending is tight, bank solvency is questionable, the stock market has dropped to the area that people were fretting about, and generally everything stinks.

I'll be interested to hear her position on the stimulus, a much more benign word than "bailout." I'm getting very skeptical myself. It all seems like a Ponzi scheme, where we keep borrowing money to pay interest on what we borrowed before while distributing bread and circuses to the mob.

Rather than being a formula for recovery, it looks a lot more like a guarantee that there will never be one. Because we're only able to sell all this federal paper because people are so loath to invest in anything else. But if things once start to go back up, there's going to want their money back in order to invest in alternatives, and the treasury won't be able to handle it.

Some day we're going to have a run on the people we've designated to prevent runs on banks. I have no idea what happens next.

Is The Stimulus Another Bubble?

It seems that more Americans favor the big burst of federal spending to regenerate the U.S. economy when tax cuts are included. The number of opponents falls by about one third under those conditions.

I'm starting to think we're looking at the third bubble in a decade. When the dot com mania was peaking, I noticed that Amazon was valued at more than the total revenue of all bookstores in America from 1776 to date. Forget profit, just revenue.

Then after the stock market crashed, we saw people shifting their assets into real estate. It became a retirement plan for many Americans to buy a larger house than they could realistically afford, live in it for a decade, and sell it to someone else for enough money to retire on.

That's a plan that may work for an individual, but it doesn't work for the economy as a whole. Eventually, we learned that what the economy can't afford, huge numbers of individuals can't benefit from.

So here we are in the wreckage of that insanity and a third bubble seems to be developing. We've screwed up and lost much of our wealth as well as personal income. So we'll have the government print a bunch more money and everything will turn out fine.

Of course, we're dressing this up and not calling it printing money, but it works out the same. The government acts on our behalf and we pay an even smaller portion of it. President Bush refers to the aftermath of the immediate past bubble as a hangover. Nobody is talking about what the aftermath of printing a few trillion extra dollars and injecting them into the economy will be.

In September when TARP was proposed, commentators were speaking darkly of future years in which our taxes would rise or government services would fall as a result. Nobody says that anymore. We are bailing out segments of the economy, maintaining government services, and reducing taxes now. Maybe later, we'll increase them, but only back to where they were.

Are we thinking that this stimulus will put the economy back above its old trend line, so that future tax revenues, at old rates, will generate the cash to repay all this borrowing? Not likely.

I've long held the view that inflation is God's way of restoring reality when people insist on doing things on a large scale that just don't compute. This is one of those cases, leading me to the following bold prediction. The stimulus won't work well. We are headed further down and government spending won't do much to reverse it.

Eventually, people who are loaning money to the government at trivial rates will calm their nerves and want to do something different. At that point, interest rates will soar. I don't have a crystal ball, but 2010 is not going to be one of those spiffy, zippy recoveries from a recession that people are so hoping for.

Metric System -- the Best Infrastructure Investment

At present, there are three countries worldwide that have not adopted the metric system (SI). Besides the United States, they are Liberia and Burma. Not the greatest company for the world's preeminent economy.

Barack Obama is calling for a stimulus package that will have immediate impact on employment and a long-term impact on the competitiveness of the country. I can't think of anything better than to begin the conversion to metric. There are a million small expenses. We need to begin with highway signs that display both systems. You could have people at work doing that in a month.

Some things are going to be difficult and expensive to convert. Buildings that have studs spaced in inches are going to be a challenge for decades. Nevertheless, this must be done eventually and there's no better time than when the economy is slow and much of the productive capacity is idle anyway.