A Failure of Capitalism?
There is still a lot of confusion over how the current financial crisis started and thus why we are in the mess that we are in. Some argue that it is the failure of Capitalism. Others argue that it was cause by government not doing enough, an absence of regulation. There does seems to be a general agreement that it had something to do with the housing bubble, and many assume that it was Bush’s fault because he was in office at the time.
While the former is correct, the latter is only partially correct, and both miss a very key aspect of the problem. The subprime mortgage crisis following the collapses of the housing bubble was the initial cause of our current problems. Yet rather than the banks being too greedy, the housing bubble was caused by laws such as the Community Redevelopment Act, which literally forced banks to make loans that they had before considered too risky. Unsound policies at government sponsored Fannie Mae, and Freddie Mac also played a major role in this. Bush actually warned about these growing risks, and sought reforms that might have avoided, or at least lessened, the problem in 2003 and again in 2005. Both times Democrats were successfully able to block any reform. Still, while the collapse of the housing market started the current problems, by itself, the recession that followed would probably have been a mild one.
The real missing piece to the puzzle is that on Nov 15, 2007 the US Financial Accounting Standards Board issue rule 157 which imposed Mark to Market (MTM) on companies as they started their fiscal year after that date. MTM says that assets had to be valued at what they would be worth on the open market if you tried to sell them. This is fine for assets that can be easily sold at any time such as gold, and it is normally not a problem for long term assets in a growing economy. But in a downturn it can be a real problem. There was a reason that FDR repealed MTM during the depression and its re-imposition beginning in late 2007 was a huge and very costly mistake.
Given the collapse of the housing bubble, as MTM was phased in nobody wanted to buy mortgage backed securities so they had to be valued at basically zero, even though they were long term assets and most people were still paying their mortgages. The bottom line was that companies that otherwise were doing ok had to post huge losses because of an accounting rule change. Even worse, companies which were required to keep certain levels of assets, because of MTM, suddenly found themselves short and scrabbling for loans to make up the difference. Yet given all the uncertainty, nobody wanted to make any loans. The negative effects of MTM rippled through the economy all through 2008 as more and more companies began their fiscal years. By Sept, 10 months into MTM, a real crisis was developing.
This is when the government did step in with Toxic Asset Relief Program (TARP), but TARP was at best a bandage for the symptom and did not actually address the real problem. Therefore, not only did it not work, it only made things worse. The economy plunged deeper and deeper. It did not cease its slide until March 2009, virtually to the day that it was announced that MTM was being repealed yet again. The short experiment with MTM lasted 17 months, but did trillions of dollars in damage to the economy.
Once it was repealed, many of the institutions that needed bailouts, suddenly recovered and were able to pay back their loans. While the core problem was fixed at that point, and markets did bounce back a bit, by then the economy had been so damaged and burdened down by all the “Fixes” that the government had tired, TARP, the bailouts, the Stimulus, etc, that it continued to struggle. It is rippling effects of the now repealed MTM, government’s ‘fixes’ and the ‘fixes’ to the ‘fixes’ along with the uncertainly caused by the Obama administration’s policies, such as Obama care and increased regulations, which are what are harming us now.
So, bottom line, this was from start to finish a crisis of government’s making. It was not a failure of capitalism, or a lack of government regulation. If fact it was the opposite. Government regulations distorted the housing market causing the housing bubble in the first place. MTM then threatened to turn a problem in to disaster. Finally when Government tried to fix things, they did not address the root problem and in fact only made things worse. So it was not a failure of capitalism, but a smothering of capitalism that has caused the current problem. This solution is a return to capitalism.
(A more complete discussion of this can be found in Preserving Democracy pg 245-263, particularly 255-263.)
Gate-Rape vs the Fourth Amendment
We were “lucky” enough to have taken a vacation around the first of the month. Thus we left before the new pat downs but flew back with them. I had no problem, but an elderly woman with us who is phobic about touching to begin with (think of the TV detective Monk) had a hip replacement and pins in some of her fingers because of arthritis. She is still having nightmares several weeks later and will probably never fly again. What kind of country do we live in where the government can do this to a person, simply because they wanted to take a vacation?
Some think the aggressive and invasive pat-downs are just to break down people’s resistance to what have come to be called the naked scanners. If they are then that is in and of itself a pretty scary thought – that the government would subject its citizens to such searches in order to break down their resistance to something they oppose. Others say that they have no problem with scanners and that they should just drop the pat downs and use the scanners.
But I do have a problem with the naked scanners, and not because I am modest, or think the TSA controls are weak. Remember these are just version 1. Think very early Black and White TV. Like all technology, if used they will be improved in years to come. If these scanner are allowed here, in a few decades we will have the full color HDTV versions which will also be much cheaper and thus will spread to more places.
After all, terrorists have already begun to target less hardened locations than airports. Thus it is not at all hard to imagine a few years from now that you will need to subject yourself to a virtual strip search to go to a ball game, travel a subway, or even to shop at a mall. What does the 4th amendment mean in such a world? Becoming a police state in order to avoid the imposition of Sharia law is not a good trade off.
And they still will not be 100% effective. Terrorists have already placed bombs in body cavities. So what is next? Beep and you get a full cavity search? What about surgically implanted bombs? The bottom line is that terrorists can always be better at hiding weapons than we are at finding them. This is because we are always looking for the last hiding place, not the next one.
Perhaps one of the most despicable statements has been that if you do not want to submit to the new pat downs or virtual strip searches, then don’t fly. This is basically if you want to keep your 4th amendment rights, then you can’t exercise your freedom to travel. Whatever happened to living in a free country?
And what happens when these scanners are installed in government buildings as they certainly will be. What happens when they are in a court house, and you are summoned for jury duty? Can you just not go? Then there is the issue of safety. It is far safer to fly than to drive, so as more people choose to drive more people will be killed in auto accidents. Thus it is very likely that the new security measures, rather than saving lives, will result in more deaths.
Why Obama Failed
There was a lot of discussion over, and distortion of, Rush Limbaugh’s statement at the beginning of President Obama’s term that “I hope he fails.” Fast forward to today and it is hard to find anything that is going right.
The economy is trying to bounce back but is weighted down by so much uncertainty about what Washington is doing, going to do, and in some cases has already done, (e.g. health care) that it can’t do more than sputter. Unemployment is still near 10 percent and would be even worse except for those that have given up. Deficits have risen to heretofore unimaginable heights. Last year this was explained away as TARP and the various stimulus plans, but this year’s deficit is even larger without them.
With a whole slew of tax increases slated to kick in (the new tax on tanning salons just took effect this month) the economist Arthur Laffer wrote in the Wall Street Journal that a lot of the growth we see now is from economic activity moved forward in an attempt to avoid next year’s tax increases. Laffer predicts that next year “the train goes off the tracks and we get our worst nightmare of a severe ‘double dip’ recession.”
Then there is the Obama administration’s handling of the oil spill that makes the Bush administration’s handling of Katrina look to be a model of speed and efficiency. On the foreign policy front, foreign leaders might like Obama because he bows to them both literally and metaphorically, but we are hardly more respected, nor is the world a safer place.
While major media, his stalwart defenders, are valiantly attempting to present things in the best light and deflect all criticism, there have even been a few cracks in their ranks.
Everywhere you look things are bad and getting worse. While finger pointing at Bush remains a major component of Obama speeches, as the months tick by, it becomes less and less effective. Blame may be of supreme importance in Washington, but in the rest of the country people just want the problems fixed.
So what went wrong? Hugh Hewitt thinks that it has to do with: “oiiohh” or “Obama Is In Over His Head.” There is a lot of truth in that. One of the things the country is learning from the Obama presidency is that having chief executive experience does in fact matter. The presidency is more than meetings, breakout sessions, and speeches. With all the left’s attacks on Sarah Palin, the simple fact is that, as a successful governor, she had more experience than Obama. Obama was really nothing more than a state senator and community organizer who, because of a botched campaign where his opponent had to drop out, got to the United States Senate. Once there, he almost immediately began running for president. His lack of experience is a factor and he does at times seem in over his head. But I think there is a deeper problem.
One of my various jobs while working my way through school was as a bank alarm installer and on one job I was part of a team changing the alarm system of a major Los Angeles bank. Not only was it a major bank, this was the first time this new alarm system was being installed so things had to go right. But they didn’t. The new system did not work.
For a couple of days my team leader spent hours on the phone with the engineers trying to get the new system to work, but to no avail. Since we had had to rip out all the old cabling to put in the new alarm, going back the old system was not an option. The bank was getting upset, and the head office pressing us to “just make it work.”
Since the bank alarm was somewhat similar to something I had worked on in the Air Force, I asked my lead if I could take a look at the schematics. In about two hours I found the problem. They had been checking, rechecking, and then checking again to make sure they followed the schematics, but the schematics were wrong. Once we confirmed this with the engineers, we rewired the alarm to the corrected schematics and it worked perfectly.
The problem we had at that bank is similar to Obama’s problem. His schematic of how the country works is wrong. During the campaign his supporters in the media told us not to pay attention to his past or those around him, but we should have. After all, no one spends twenty years in a church with a pastor like Jeremiah Wright unless there is some agreement there.
Obama’s schematic, or “blueprints” for the country have been formed by his life experience and the elite schools he attended, influenced by the writing of radicals like Saul Alinsky, focused by his work as a community organizer, and then seasoned by his friends such Pastor Wright and Bill Ayers, the sixties radical who bombed the Pentagon. In short, his blueprint for the country is wrong. The more he tries to “fix” the country using those blueprints, the more he will fail and the worse things will get.
While it is theoretically possible for Obama to realize his blueprint is wrong, even in normal circumstances this is very difficult. For Obama it is virtually impossible, for no other reason than that his blueprint is supported and reinforced by many others in his party and in the media. Psychologically it is much easier for them to simply blame Bush than to confront their own failings.
The only real solution is to stop the bleeding by changing control of at least the House of Representatives in November. If we add to this control of the Senate, then some minor corrections can be made. But any real solution will have to wait until 2013 when a new president, one with correct blueprints, can take office.
A Review of Preserving Democracy
It will open your eyes and quicken your heartbeat…I am learning things that make my jaw drop.
Memorial Day
Tom’s father had died a couple of years earlier in an accident, leaving a wife and four children. It was the middle of the depression and times were tough. Tom, being the oldest, worked while finishing High School, to help make ends meet. After he graduated, he joined the military, and after training he was sent to Nicholas Army Air Field in the Philippines. There he did what most military people do: perform their normal jobs while periodically being interrupted by various drills.
Tom could see the approaching storm that would become WWII and mentioned this in his letters home. He wrote of how they had received a shipment of fighters, but that they were in crates and needed to be assembled. They were still assembling them when the war started on December 7,1941. The Japanese invaded the Philippines the next day. Tom and the rest of the troops, along with their Filipino allies, fought valiantly. With their base destroyed they, retreated to Bataan.
Roosevelt promised reinforcements, so they struggled to hold out till they arrived. In March Roosevelt ordered MacArthur to leave and go to Australia. Tom and the rest of those left behind continued to fight on, till they could be reinforced. But in the end, there was no way to win. The promised reinforcements were never sent; food and ammunition ran out; and the Japanese force was too strong. Yet still they fought to hold out. Then their positions were overrun, and on April 10, 1942, exhausted, starving, wounded and sick (most had malaria and/or dysentery), they surrendered.
But as horrible as their ordeal had been, the worst was yet to come. The Japanese commander had ordered provisions be set aside for the expected 25,000 prisoners. But he was unaware that the real number of captured Americans and Filipinos was more than 75,000. Nor was he aware of just how bad their condition was. They had held out as long as possible and so when they did surrender were in very bad shape. In short the provisions he ordered to be set aside were nowhere near what was needed, and the Japanese army command structure did not allow for questioning orders, even to correct mistakes in information.
To make matters worse the Japanese viewed surrender, whatever the circumstances, as a dishonor. Thus it did not matter how valiantly they fought, how long they had held out, or how low they had been on food and ammunition, they had surrendered and did not deserve to be treated honorably. Since there were not enough trucks to transport all the them, what came to be called the Bataan Death March began.
Tom was not one of the lucky few whose guards, realizing how inhumane the situation was, just let their captives go. Even though he was sick, he was forced to march the 30 miles in the blazing hot sun to the rail center. Most had no food or water for the march. There was no stopping, and many were beaten. Many just died on the road; others were shot if they did not keep up. If Tom was fortunate, he would have still had shoes. Many didn’t and their feet burned as they walked on the hot asphalt as it baked under the sun. At the rail head in San Fernando Tom and other prisoners were pushed into a rail car with.
Because of the large numbers of prisoners, they were packed in as tightly as possible and in the hot sun, the metal walls of the cars burned unprotected skin. Many lost consciousness from the sweltering heat of the boxcars. Others suffocated in the cramped space. Yet they were packed in so tightly, the unconscious and the dead remained standing until the cars were unloaded at Capas.
Tom survived the trip to Capas. From there Tom was once again forced to march the last eight miles to Camp O’Donnell. Suffering from sickness, starvation, and exhaustion, Tom only lasted five days in Camp O’Donnell, dying on May 18th, 1942. He was 22 years old. Later Private Thomas A. Hushbeck would be posthumously awarded a Purple Heart.
When people ask me what Memorial Day means to me, I think of my Uncle Tom, even though he died thirteen years before I was born. For me it is his holiday, but not his alone. There were the eight who died on Lexington Green in that first engagement of the Revolutionary war, and all the others who came after them to secure our independence, along with those who gave their lives in the War of 1812, the Civil War, the Spanish-American War, World War I, World War II, the Korean War, The Vietnam War, Gulf War I and now the war on Terrorism in Afghanistan and Iraq, just to name the major conflicts.
Whenever there was a need, Americans like my uncle Tom have step forward, knowing what may happen. Like my Uncle Tom, many have paid the ultimate price, so that we can live in freedom. Many may consider “Freedom is not Free” a cliché, just another slogan for a bumper sticker, but the cost of our freedom was paid by my Uncle Tom, and all the others who have in the past, or will in the future give their lives in defense of this country. It is for them that we fly the flag on this day. It is because of them we can enjoy the time off and relax on this day. They have given all that they had, and suffered in ways we can never imagine so that we might live in freedom. So while I enjoy the day, I will remember them. For they deserved to be honored. and remembered.
