American Madness

Intelligent Criticism in the Service of a Better Nation




Self-funding regulation:
Another stupid idea

Posted by Josh Friedlander on | June 12, 2010 | 2 Comments

Response to Top Securities Lawyers Call for Self-Funded S.E.C., in which it is stated that “Forty leading securities lawyers urged Congress on Friday to allow the S.E.C. to keep the hundreds of millions of dollars in fees it collects each year and use them to support its operations”:

We select among a series of bad options. An externally financed bureaucracy leaves its leadership with perverse incentives to enhance their power by pushing for more staff and resources. This is, at best, only slightly correlated with the task with which the agency is tasked. A self-financed agency arguably has a worse incentive structure: Imagine telling the police that their salaries will be a function of whatever tickets and fines they can collect? Some will say that there should be no agency at all and people will have to protect themselves. That is clearly suboptimal (like, uh, having no police force!). Or: eliminate sector-specific regulatory agencies and meld them into a general justice department (fraud is fraud, right? Or is it?). There seem to be no good answers. I prefer Temple Grandin’s solution to regulation (in her case as applied to the cattle slaughter industry): Set clear rules and deal with violations. So, if we don’t want cows falling down on their way to slaughter, we institute a rule that slippery floors are forbidden and we define slippery as X cows falling in a given period of time. What we don’t do is say: You must have a floor no more than one degree from perfect flatness, that adheres to XYZ-level of friction, and so on. We don’t tell people how to achieve compliance, we simply define compliance based on outcomes. Clearly, there will differences of opinion as to how one defines compliance in financial services, but I’d rather have an outcome-based regulatory structure than one in which the SEC wanders around with a stick in one hand and a coin jar in the other. This proposal sounds like ancient French tax collection practices that involved eyeballing people’s possessions and that resulted in the French having a weird fetish for blinds on their windows (some apartments in Paris have retail store-type metal gates on the windows…even those facing out on locked gardens from several stories up!). Turn each regulator into a tax collector and you encourage enormous opacity.

“Stimulus” is a meaningless term

Posted by Josh Friedlander on | June 11, 2010 | Click to Comment

My reply to David Brooks (who now fancies himself an economist):

If economists had a clue most of them would work real jobs producing something. This is REALLY simple.

If you had a friend who was in debt to his eyeballs and had just lost his job and he asked for a loan to spend the weekend drinking bourbon and snorting cocaine, you’d turn him down, right? If he came to you and said, “I’ve gotten into this degree program to learn some stuff that will help me find work” it would be a different story.

The term “stimulus” is useless. Either a debt is incurred to invest in productive capacity or to blow on useless unproductive activity. That’s it. Really. There are no other reasons to incur debt. When private enterprise stops borrowing and spending, and individuals stop borrowing and spending–because they CAN’T borrow and spend any more–the only entity left that can borrow is the government (and even then there will eventually be a limit to what the USGovt can borrow).

The ONLY question that matters is whether the government borrowing and spending has been an investment in future productivity. Has the borrowing been to invest? Well, let me answer this for you: No. No, it hasn’t. We print money, spend it to import from other countries, they take our dollars and have no choice (realistically) but to reinvest those dollars with us.

We get cheap goods, they get IOUs on future US productivity that won’t materialize, and we get inflated asset prices resulting from petro-dollar and import-dollar recycling. Ultimately, they decide to buy their own stuff, stop selling to us at such cheap prices, stop denominating energy commodities in our ponzi currency, and we STILL win because they’ve created too much productive capacity while we’ve merely spent too much of our own monopoly money. We are therefore forced to cut back (eventually) and so are they. In the meantime, try to pretend this is easy to understand, because it is.

Tom Friedman math:
debt + inexperience = success!

Posted by Lord Halifax on | June 10, 2010 | 4 Comments

Thomas Friedman, the most “important columnist in America,” reminded New York Times readers on Wednesday that all is possible if you just pull yourself up by your bootstraps. Friedman’s latest footnote in America’s ongoing Horatio Alger narrative prescribes a new round of government tax cuts to help college graduates start their own businesses.

By Friedman’s twisted logic, the current dust bowl that passes for a job market offers few promising leads for graduates, so why not encourage students to make their own career opportunities? After all, small businesses are the traditional engines of job growth. If you combine this fact with the republican mantra that insists tax cuts are like Miracle-Grow for labor markets we have another Freedman breakthrough that smashes two unrelated ideas into an incoherent argument. He truly is the gift that keeps on giving. Read more

Have a Wonderful Summer Children!

Posted by Joel Friedlander on | June 8, 2010 | 2 Comments

In an essay of no more than 500 words discuss two of the following:

a.  Is Barak Obama really a Democrat?  In your essay, discuss foreign affairs, economics, equality of opportunity, progressive taxation, immigration reform, and social equality.

b.  Should the United States continue its support of the State of Israel?  In your essay discuss democracy, the Palestinian Question, the West Bank and Gaza, and any reasons for either continuing support or terminating same.

c.  Will integrating Gays and Lesbians fully into the Military adversely affect small unit cohesion?  In your essay discuss the American experience and the experiences of other countries military in connection with this issue.

d.  Should the term of service of a United States Supreme Court Justice be limited to 15 years?
In your essay discuss intellectual capacity, Altzheimers Disease, Dementia, Originalism, and logic.

e.  Should the United States go to a Parliamentary System as regards “Going to the Country,” when the party in power is unable to get legislation passed?  In your essay, discuss the benefits and liabilities of such a change.

Have a Wonderful Summer, read a lot of fiction, drink moderately, dance, sing, and play.  See you soon!

Palestinian “Humanitarian” Organizers Induce Predictable Response

Posted by Jason Ihle on | May 31, 2010 | 4 Comments

And the world falls into line just as their cynical behavior called for.

The humanitarian aid flotilla, while attempting to “bring aid” to the poor Palestinians in Gaza, engaged in live fire action with the Israeli military. Early reports are saying at least 10 people were killed.

According to the NY Times, some of the activists opened fire on the Israeli soldiers, who returned fire.

“That is a lie,” said Greta Berlin, a leader of the pro-Palestinian Free Gaza Movement, speaking by telephone from Cyprus. She said it was inconceivable that the civilian passengers on board would have been “waiting up to fire on the Israeli military, with all its might.”

The thing is, I think it’s absolutely conceivable that civilian passengers would open fire on the Israeli military. Having the return fire of the “Israeli military, with all its might” is exactly what they were hoping for. Like the flotilla itself, which is hardly about its trumped up “humanitarian” mission, it’s a cynical ploy to engage the Israeli government in action that will be viewed the world over as further proof of the blood libel. Read more

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