Life, Liberty & The Pursuit of Happiness

Global revolt of the masses?

by Rakinder Grover

In today's WSJ, Daniel Henninger writes that electorates around the world are casting no-confidence votes against incumbent politicians and bureaucrats.  While I personally am not ready to call this a sustainable trend, it's something to keep an eye on - "green shoots"?  An excerpt:

Some search for an ideological trend toward the left or right in these votes, but the only evident trend is to strike out at whichever blob is currently in power. Even as Americans turned over their country to liberal Democrats, opinion polls showed that the British people were turning toward the Conservatives for relief from listless Labour.

What accounts for the global electorate's growing disgust with the political overclass? Try this: No matter the ideological cast of these governments, they all hold in common one policy: the inexorable upward march of national indebtedness. It has arrived at the edge of the cliff.

We can't get reform with backroom deals

by Rakinder Grover

This post in Mish Shedlog's blog is quite revealing.  Do we think we'll get real change/reform if the government cuts such deals and lines the pockets of the existing players? Liberals like Arianna Huffington are getting quite upset about this. And this is certainly not the free market working.  In a few years after the excitement of "doing something" dies down and when people start to realize that things have not really changed (and likely have gotten worse), see insurance and pharma companies still making profits - they'll blame the free market and capitalists.  The problem is the "reformers", even those with "good intentions", are not working to cause real reform.  That requires breaking the cozy relationship of government and business and they are not going to bite the hand that feeds them.

Recession: Picking Signal From Noise

Talk to most people about the economy: the weary smile response is "the worst is over", "green shoots are emerging", or some token grunt of hope. The main stream media - along with Quantitative Easing & Fiscal Stimulus crowd - are trumpeting the end of recession just around the corner. If this is not the case of hope triumphing over experience, it is certainly the case of hope triumphing over facts.

For a sobering look at facts, uncluttered by government propaganda or industry biases, check out: The End of The End of Recession.

Double Double Speak: Socialism Is Capitalism Is Socialism

by AW

Long observed by the defenders of liberty, a common bi-partisan pattern among politicians is this: use free market rhetoric to practice socialist policies. More precisely, blaim market "failure" to put in place statist policies that increase government control of economic & social activities. Bush did it without apology (steel tariffs, no-child-left-behind, etc.) and Obama does it with impunity (GM takeover, saving favored banks, etc). 

Funny & Instructive

by Reena Kapoor

If you're like me you're getting pretty tired of people who can't or refuse to see what's wrong with what our government is doing with regard to 'stimulating the economy'. This blog post by Tim Naughton is worth reading: My Personal Stimulus Package.

Enticing private capital? Call it a rescue effort, not a bailout.

by Rakinder Grover

Some information on the "toxic assets plan" expected to be announced by the Treasury next week has begun to surface.  It includes a lot of enticements to get private capital to participate in the purchase of "troubled mortgages".  One of the biggest potential obstacles in getting this all to "work" is politics.  An excerpt from an article in the NY Times:

"Still, the Treasury Department’s biggest obstacle may be the current political environment in Washington, where Democratic lawmakers are furious about the pay packages and bonuses received by executives at companies being rescued by taxpayers.

Many investment executives said they were worried that participating in any bailout program would expose them to political wrath and potentially steep new restrictions on their own pay.

Treasury and Fed officials have remained firmly against imposing any restrictions on pay for companies investing money in the rescue effort rather than receiving money from it."

Is there much of a difference between highly subsidized "investing" and just receiving money?  I expect some polished sales talk from the Treasury and the Administration to try and prevent the populist anger from rising as it did this last week. Oh, the sad circus continues....  if only the government would just stay out ...

A Lynch Mob! ... and the disengagement of private enterprise

by Rakinder Grover

A good article by David R. Kotok in The Big Picture compares the recent action in the House of Representatives with that of a lynch mob.  Besides the issues of the violation of the rule of law, the abrogation of contracts and property rights, that have been raised by some over the last few days, he also highlights the real and immediate risk of businesses becoming extremely cautious.  Careful, lest their profit seeking activity attract the ire of a populist lynch mob, private enterprise is likely to try and stay as far as it can from government. With the expanding scope of government, that is becoming increasingly harder to do, so the risk translates to a retrenchment of private enterprise unsure of the rules, risks and rewards.  This does not portend well for economic recovery, innovation and freedom in general.

"How We Got Into This Frackin' Mess" Chart

by Anurag Wadehra

Stephen Hicks has a conceptually elegant but simple chart explaining the pathologies of a mixed economy - when free market is "mixed" with government intervention. For fancier titles of the chart, Dr. Hicks suggests...

Academic title: “The Sociology of Dysfunctional Nonstandard Political-Economic Systems.”

Public Intellectual title: “The Evolution of the Mixed Economy.”

I wonder if there is a similar attempt by the Socialists to explain their worldview. At least their arguments - good, bad and ugly - could be laid bare.

AIG: Moral Hazard and Corporate Looting

by AW

AIG is the mother of all TBTF ("too big to fail") institutions; it has already received 180 billion dollars of taxpayer money so far. This bailout is larger than that for any other financial institution, and it is widely expected to go higher. How could a staid insurance company be in the center of this?

James Hamilton in his EconBrowser blog explains the moral morass of "selling insurance" like snake oil. Here is an interesting story line that is emerging.

Bad Banks: The Road To Economic Hell

by Anurag Wadehra

Simon Johnson, of the brilliant blog Baseline Scenario, made two posts of exceptional clarity:

How to save the banks proposes a clear solution, the best one I've heard so far. Simply put, it is:

• Government should fire the bankers and maybe the board
• Then mark all illiquid assets to market value
• Sell all or parts of the bank to new private equity investors
• And then get out.

To do this, government shouldn't use stock with voting rights but warrants which convert to common stock after the restructuring, giving taxpayers the best shot at upside.