The Great Bailout

"OMG! The _____ is in trouble! What are we going to do!!!?!"

When government people say things like this, it is always a precursor to the government proposing itself as the solution to the problem. The problem is so dire, that only the government can solve it. Of course they will need more money and more power to solve the problem. Oh, and if you don't think this is all true, then you are too dumb to understand the problem or you are just un-American because you don't care about all of the Americans who could be hurt by this grave danger.

Mr. Dave Winer makes the point that the current administration has used this argument before. Only then it was Colin Powell making the case for war in Iraq. Now it is Henry Paulson doing the same thing but with regards to the banking meltdown. Dave is right on all of this. He then goes out of his mind by suggesting that Bush/Cheney should resign, Nancy Pelosi be made President, and Paulson's plan to move right ahead. The problem is not just Bush/Cheney, and Pelosi is definitely not the solution. The problem is Paulson's request for power and money. It's like saying it would have been ok to listen to Colin Powell and attack Iraq, but only if Al Gore would have been president. It didn't matter who was President, attacking Iraq was wrong in every possible way. 

Of course Ron Paul has some interesting things to say about the bailout. His opinions are largely grounded in the Austrian economic theory that the government makes business cycles more extreme (bigger booms and bigger busts) by causing malinvestments, like buying subprime mortgages for example. Like all things in Austrian economics, it is a matter of "belief" as these are statements that are purposely impossible to scientifically verify. However, it is hard to dispute that the U.S. government has encouraged high risk loands for the purpose of buying real estate, and that the very financial institutions who did this most are now the ones that are going bankrupt.

The point is that our government does not have a good track record here. Maybe it has been the main source of the problem, as Paul suggests, or maybe not, but it certainly has been part of the problem. Now it wants unprecedented (in this country at least) power and money to solve the problem that it has been at least complicit in. Given that, how can we support this idea?

Oh, but what is the alternative? I don't know, and I don't think the government knows either. Yes, there will be banks that go under. Does that mean that we'll all be out of money? No, of course not. Anyone's savings are already guaranteed by FDIC. Not to mention that even in the case of bankruptcy, creditors (that would be people that bank borrowed money from, i.e. depositors) have first priority. Nobody is going to lose their savings. 

But surely there will be other disasters, right? If so many go out of business, how will we get loans for houses, cars, or new businesses? Well perhaps not all of the banks will go out of business. Certainly there are those that have been buying up these insolvent banks. Or maybe other companies will take the opportunity to expand into the banking vacuum created by the insolvent banks. I'm not sure, but I'm not willing to let FUD from the government convince me to give the government the kind of virtually unlimited power that they are asking fo.

Distractions

Distractions are everywhere. Some people say that Ron Paul is a distraction. Is Sarah Palin a distraction? Or maybe it was Hurricane Gustav. I say that the economy is a distraction.

The focus of the election has become the economy. The economy is important, right? For two years in college, I actually double-majored in economics. If I wouldn't have been so lazy during my senior year, I would have a degree in it. However, it is not the most important issue in this election year, at least not to me. That distinction is still the war.

Sometimes other libertarian leaning people question me for voting for Democrats. I always say that I would rather have my economic freedoms violated than personal freedoms. In one case I am broke, in the other I am in jail. I don't want to be broke, but I really don't want to go to jail. There are worse things than jail, namely death. U.S. foreign policy has been dealing out death in a big way over the last eight years. War is worse than any economic or personal freedom violations. Of course war actually cause these violations as well.

Look at the Patriot Act. Clearly a war-time measure that is one of the most egregious violations of personal freedom in the checkered history of the United States. Look at our budget deficit and how much money we are spending on wars. Go beyond that and look at the weakness of the dollar and the problems that is causing.

If you keep looking, you'll soon notice the price you pay for gasoline. How much did gasoline cost before we started waging war in Iraq? I know better than most that correlation does not imply causality, but what do you think the price of gasoline would be today if the United States never invaded Iraq?

If we gasoline was in the $2/gallon range, the deficit was a fraction of what it is currently, and the dollar was stronger, do you think the economy would be much of an issue at all?

There is a price to pay for war. We have tried to push all of that cost to our children in the form of budget deficits, but it has not worked. We are paying it at the pump. We are paying it at the grocery store. We are paying it when we buy "cheap" goods at Wal-Mart.

War is the most important issue. The only hope for less war is to vote for Obama. I wish Obama would pull all of our troops out of Iraq and not even leave behind any bases. I am frightened that he will expand military activities in Afghanistan and maybe Pakistan. He is not a perfect choice, by far. But in the interest of Country First, he is the only responsible choice that I can make.

Super Tuesday

Obviously I'm voting for Ron Paul. I really thought that the Republican race would still be clouded. Oh well, I was wrong. It does mean I will get to vote against McCain twice this year! More on that in another blog... Let's talk about the more interesting stuff on the ballot in California tomorrow: The Propositions!

Prop 91 -- Places restrictions on tax money earmarked for transportation infrastructure. Definitely a yes.

Prop 92 -- The key here is that this freezes community college fees. Wait, so I "own" (pay taxes) a business (state government) that produces a product (community college education) and I want to fix what my business charges for that product, even if I have to pay more (pay professors more, etc.) for it? That is stupid. It will only cause community college education to suffer just like all other forms of public education... No.

Prop 93 -- Reduce term limits from 14 to 12 years ... I am against term limits. Let people vote for who they want to, so No.

Props 94-97 -- Ah, the new Indian gaming "compacts". First off, Indian casinos are state backed monopolies. They get special privileges from the state, and in turn pay the state a percentage of profits. Personally I have nothing against Indian tribes having casinos, I just have something against laws that prevent non-Indian tribes from having casinos. So I have to vote against these measures. No.

The Economics of Dr. Paul

My biggest reason for supporting Ron Paul is because I am sure he will get us out of Iraq. The war in Iraq is the most important issue of the day. It is the first time in America's history that we have attacked another country without provocation, conquered the country, and the installed a government there backed by our military. Everything else pales in comparison to Iraq.

However, Dr. Paul is also well known for his economic principles. I don't always agree with all of these, so I thought I would dissect his new plan for economic revitalization.

Also, I would like to openly challenge my "collectivist" friend to give his own thoughts on Dr. Paul's plans.

Tax Reform -- This is the biggest part of his plan, clearly. Now several of his tax cuts sound a lot like typical Republican "Reaganomics". For example, eliminate taxes on dividends and savings, eliminate capital gains tax, accelerate depreciation on investment, repeal the estate tax. All of these would benefit wealthy individuals and corporations much more than middle class Americans. The idea is that they would encourage economic growth.
In principle, I favor the first two issues. Taxes on dividends, savings and capital gains are all cases of double taxation. You pay taxes on your income. You take some of that income and invest it, and then get taxed again on that investment. Yes, this will favor the rich, but so what? Do we support something that is logically unfair just because the unfairness is concentrated on a minority group (rich folks) ?
I am more neutral on the other two issues. Reducing corporate tax rates seems like a more direct way to encourage growth, but I would probably put much lower priority on this. The estate tax is "unfair" in the sense that it only taxes estates worth over $2M. It is also a case of double taxation. Again, this would benefit the rich (folks with estates worth over $2M) more than anybody else, but so what? Also, hard coded numbers like $2M are always dubious. You could live where I live and have an estate worth over $2M without being very rich at all.
Spending Reform -- I definitely favor reducing overseas commitments. Well in particular, just get us out of Iraq and stop spending $800M/day there. Freezing non-defense and non-entitlement seems a little too cut n' dry. I would favor freezing or cutting many of those things, but maybe not all. It's hard to know, and hence my reservation from using a simplistic qualifier like "non-defense and non-entitlement."
Monetary Policy Reform -- Yes please! People should know what the heck is going with the Fed (or any other powerful agency.) How can you oppose this? As for allowing precious metals to be used as money ... it would be an interesting experiment to say the least.

Regulatory Reform -- I definitely favor repealing Sarbanes/Oxley. I can tell you first hand that this has a hugely negative effect on companies big and small. It was a classic case of knee-jerk legislation. Now for "Remove Costly and Unnecessary Federal Regulations"... sounds good on paper! More details should be given. I do favor HR 1869, though.

Iowa and New Hampshire

It's a new year, and an election year. So time for some politics.

The Iowa Caucus and New Hampshire Primary were both mildly interesting. Iowa was interesting because of Mike Huckabee. It's amazing to think about just how diverse the Republican Party is. In many ways it is much more diverse than the Democratic Party (of which I am a registered member of.) I don't think anyone really thinks Huckabee could be win the Republican Party nomination, yet he won pretty easily in Iowa. And he won because of "evangelical/born again" vote. Will future generations look back and marvel at how the religious right and big business were allied together to dominate politics in America. And face it folks, the Republican Party has dominated for a long time now. One could argue that if it wasn't for the divisiveness of Ross Perot, the Republican Party would now be in its 28th consecutive year in the White House.

Anyways, the New Hampshire Primary was interesting because of Hillary Clinton. You have to wonder if her "moment of vulnerability" was simply a brilliant political move. It certainly seemed to give her a victory, and one could argue that a victory for Barack Obama in New Hampshire would have given him an unsurmountable advantage.

Finally, both elections were interesting because of Rudy Giuliani. He may prove to be a brilliant strategist by just punting on the early races and betting that there will be no clear front runner. This only works if he can win Florida and many of the Super Tuesday states. The whole thing reminds me of some kind of game theory problem I had to solve in college. Speaking of which, I once wrote a paper on the absurdity of Iowa and New Hampshire playing such important roles in American politics. If Giuliani winds up being the Republican candidate, he will make my position paper obsolete.

One last thing to note ... Ron Paul. As an understated supporter of Dr. Paul, I was sad to see him only register around 10% in both Iowa and New Hampshire. You would think that such fervent supporters and the money they have raised for him would be able to turn into enough publicity to get his word out, and in turn gain some votes. He actually did quite well among younger Republicans in New Hampshire, but this just once again proves that the "young vote" is irrelevant. It's hard for me to see Paul endorsing another candidate and thus using his followers to give somebody else a decisive advantage, so in the end all of the electronic buoyed hyped of Ron Paul could be for naught. That's too bad.

TextMate and the Weak Dollar

I started using TextMate as it is very popular with the Ruby on Rails crowd and I am writing a book on Rails. It is a great product, and I like using for all kinds of things now. So once my 30-day trial expired, I decided to purchase it. They use PayPal for processing payments, and they charge you in Euros. Luckily, PayPal easily handles the conversion for us Yankees. This brought a brutal reminder of just how weak the US Dollar is now:




1 U.S. Dollar = 0.68 Euros ... Ouch! Suddenly TextMate seemed like a pretty expensive text editor. I still bought it, but it really made me second-guess the most recent Federal Reserve rate cuts. That gives me one more reason to vote for Ron Paul!

Ron Paul and YouTube

There's been a lot written about the Ron Paul phenomenon. One thing I will have to do at some point is just talk about what I like about Ron Paul. I've been very apolitical this year though, so that will have to wait. One very interesting thing about Ron Paul though is his influence on YouTube.

My friend Chris wrote an interesting program to calculate the "influence" of political candidates via YouTube. Most of the major candidates have accounts (ok so it's surely their staffers, but whatever) on YouTube, and you can be their "friend." Chris looked at each candidate's friends and at what YouTube videos they had marked as favorites. He looked at the common favorites among friends of candidates. Here's a chart showing this data for Barack Obama:

The big red bar is the most common favorite among friends of Barack Obama. Why did I pick Obama here? Well he is the most popular candidate on YouTube (and on Facebook) as measured by how many friends he has. Anyways, back to the red bar. The most popular video among his Obama's friends is a favorite of 12 of his friends. #2 on the list is a favorite of 8 of his friends. Now let's take a look at the same chart for Ron Paul.



The #1 video among Ron Paul is a favorite of 34 friends, while #2 is a favorite of 17 friends. The video in question is a video of Ron Paul speaking at Google.

I guess none of this should come as a surprise. Ron Paul supporters are ... very passionate about Paul. It's that passion that infuriates many people. He is very much a fringe candidate right now, but the passion of his supporters may well push Paul into the mainstream. Is YouTube a place for that to happen? Probably not, but it's a start. To do my part, here's the video in question. Enjoy.