Review: Titan

Titan by Robert Kroese
My rating: 4 of 5 stars

This is a 4-star review which is a fair representation of my experience with this book.

There are a lot of moving pieces to this book. Our protagonist, Kade Kapur, dreams of starting an aerospace company to help humanity make the jump from Earth to the stars. He is in turn driven, charming, and a techno-geek hesitantly feeling his way through the world.

Unlike past generations of world-changing titans of industry, Kade comes of age at a time when the last free (or at least semi-free) nation is slowly tightening the regulatory and taxation vise that stifles innovation. He is a modern John Galt adapting as quickly as possible; slithering through the closing gap of government interference like Indiana Jones escaping an ancient, trapped tomb.

The story includes native elements about electronic currencies, blockchain systems, privacy concerns, and space mining technologies. The primary characters are engaging and fully realized. Some of the secondary characters are mildly two-dimensional.

The primary reason why this didn't get 5-stars is the economics treatises that get info-dumped in the middle of the story. Most of these come in the form of monologues from an 18-year old prodigy. At some point, the dense economic info-dumps coming from an unlikely source turn into a case where the sub-text supersedes the text. The ideology displaces the story.

The preaching upstages the entertainment.

This was largely an enjoyable read. I look forward to reading the next installment at some point.

View all my reviews

The Indispensable Podcast Listing

I got into listening to podcasts a while back.  Most of those early podcasts were focused on the Fantasy & Science Fiction genre(s).  My early interest was motivated by a couple of different factors.

The first factor is that I love the genre and have hopes (more probably ethereal ravings) of writing in the field some day.  Even if I never get a chance to pursue that interest, it is always interesting to hear about authors, their writing process, and their challenges within the industry.

The other factor at the time was in learning more about the industry due to my interest in the Sad Puppies imbroglio.  I didn't learn as much about that, but it was an early motivating factor.

My podcast list grew from there due to my continuing interest in a few public radio programs.

While I know that the trend is to make everything seem to be larger than life these days, this list really, really isn't indispensable.  It isn't huge.  Or huuuuuuge! in modern presidential parlance, I suppose.

However, it is a great starting point for people that are curious about podcasting.  Take a look, and then give a listen.

I have scored each podcast in three areas; Production Values, Entertainment, and Information.  Production values represent the recording quality, the voice quality of the participants, and the general organization of the podcast.  Entertainment is pretty self-explanatory; how much does the podcast engage me from an entertainment perspective.  Essentially, the giggle factor.  Information is equally self-explanatory; how much new information does the podcast present.

There may be some bleed-through from one category to another.  For example, a regular participant with a less than entertaining voice may drag down both the production values and the entertainment scores.

I don't listen to all of these podcasts every week.  Some are on hiatus.  Some come out on an irregular basis.  A few of the podcasts will provide re-runs to fill in on weeks when they don't have something new.

I have filtered through some podcasts and dropped many that just were not worth the effort.  While there are some overtly political podcasts on the list, I think that most of these programs are worthy of consideration.  For someone new to podcasts, this list is a decent place to start.

Government Picking Losers

One local downtown eatery closed recently.  The owner had not been paying all of the taxes that he should have paid.  But there was more to the story.

Darryl Hoskins is an Army veteran that refined his culinary skills to the point that he was running one of the best restaurants in a nearby town.  So he decided to take a shot at owning and running his own restaurant.  Until this recent demise, I considered Darryl's Downtown to be one of the two best places to eat in the county.

Not that we are a center for culinary excellence, but that ain't exactly a bad rating given the competition.

Darryl prepared a selection of tasty dishes and presented them in a tasteful environment.  I had a chance to meet him a couple times.  He is a genuinely nice guy and a talented chef.  I hope he comes back from this setback with further culinary success.

But there is more to the story.

As a part of setting up shop, he took out a loan to by the building.  He didn't have enough money to cover the rest of the purchase, so the guy that owned the building gave him a small-ish loan to cover the gap.  Then the city of Jackson gave him an US$80,000 loan for renovations.

They have decided to forgive that loan.  The justification for that action is two fold.  First, the money actually came from the US government as part of a HUD block grant.  So the city didn't lose anything.  HUD has indicated that they do not care if the money is ever recovered.  If HUD ever recovered the money, they would simply recycle it back to Jackson as part of a future grant anyways.  The second reason is that the city is third in line to be repaid and thus it is highly unlikely that they will ever see a dime.  So why should they spend money on lawyers when they never expect to see any money back?

The loan from the city was contingent upon a couple of conditions.  One was that it be used for renovations.  Darryl was required to spend US$600,000 of his own money with the HUD funding covering the gap.  We have no idea if that condition was met, but a lot of renovation work was done with someone's money.  Also, he was supposed to create 16 low-to-medium income positions.  At the peak, he had 14 such positions.

He never re-paid a single dime of the money.


So the city of Jackson ended up spending money that was collected from other area restaurants (and other taxpayers) to subsidize their competition.  It is precisely this sort of government created market distortion that we really need to avoid.  But it is the sort of distortion that government excels at creating precisely because government agents are not impacted by the success or failure of their decisions. 

They will not have their pay cut as a result of their poor decision.  They will not lose their jobs.  They will go on blithely moving other people's money around.

Just one more area where we could cut spending and improve our economy by not burdening successful businesses with the responsibility of subsidizing their competitors.

Economics, Like Gravity

What do you do when the price of gasoline rises?  Do you adjust your driving habits?  Do you consider purchasing a more fuel efficient vehicle?

If you are a normal person with a normal budget, then you do some combination of the above.

Why should we expect normal people running normal businesses to behave any differently?

If government regulations impose additional costs for people that work more than twenty nine hours a week, then normal people will limit employees to twenty nine hours.  If government regulations impose additional costs if you have fifty employees or more, then normal people will limit their number of employees to forty nine.

These are the normal, predictable consequences of poorly developed government policies.  Courtesy of Mr. Obama and the Democrats, a whole lot of people who are already struggling to survive will find themselves less able to find full time employment at wages that will allow them to live something close to a normal life.

The Straw

...that broke the camel's back.

Professional golfer Phil Mickelson has recently taken a little flak for indicating that he plans on leaving California in the wake of his announced plans to relocate to a state with lower tax rates.  Specifically, California has recently increased their income tax rates by roughly 3 percent for the next seven years.  The sales tax was also increased.  These changes were made in an attempt to close the current sizable annual budget deficit being run by the state of California.

My sympathies lie primarily with Phil.  We aren't even close to being in the same income range, but as a matter of principle, I believe that a person has a right to the income they earn that should not be cavalierly set aside.  However, there are a couple of issues that have been studiously ignored in this discussion.

The first is the matter of comparing apples to apples.

According to Mr. Mickelson, his future total tax rate will be a little north of 60% of his income.  This includes federal income taxes, federal FICA taxes, federal Medicare taxes, state income taxes, and one presumes that local income taxes are included if appropriate.  Some of his critics have compared that tax rate with the 14% income tax rate paid by Mitt Romney and his wife.  That is an incomplete comparison designed to confuse the issue.

The Romney's most certainly paid payroll and appropriate income taxes for any wages they may have received.  Of course, if they did not receive any wages, then they didn't pay payroll or income taxes at those rates.

Under the area of comparable tax rates, the double taxation of dividends is also studiously ignored in these discussions.  Dividends are paid out of after tax profits by corporations.  When a further tax is then levied on the individual receiving those dividends, then the money is effectively taxed at the cumulative rate of the corporate income tax and the individual investment tax.

It is partially due to this double taxation that we have elected to charge a lower tax rate on investment income.  Good, bad, or indifferent; I make no assertion as to whether or not this is good public policy.

The second issue is the relative need for government to consume Mr. Mickelson's wealth.  Back in 2009 when Arnold Schwarzenegger was governor of California, Robb Allen of Sharp as a Marble had a partial list of agencies, commissions, boards, and other state government organizations.  At the time, the suggestion was that prisons would have to close and state police would have to be laid off to balance the budget.  The point at the time is that there were a great many other state agencies that could have been down sized or perhaps even eliminated in order to minimize cuts to critical prison and law enforcement budgets.

A similar case can be made with respect to federal government spending as well.

As a former resident of California, it truly pains me to watch the current fiscal debacle unfold.  The roots of that debacle can be found in the lack of government fiscal restraint.  Poor spending priorities can never be solved by increasing taxation.

When taxation levels are high enough to represent injustice to the people earning that money, precautions to limit exposure to confiscatory taxation are more than justified.  The camel has no obligation to stand still as the last straw is dropped in place.

They Just Are Not Serious

Recently, Mr. Obama signed a presidential order ending a current presidential order that freezes pay for all federal civilian employees.  As a result, federal wages will go up in April.  The cost per year is roughly US$1 billion.

And yet our federal deficit is running well past US$900 billion per year.

Apparently he is still not serious about solving our nation's deficit spending problems.  I'll start to take his proposals more seriously when he starts addressing the problem in a serious manner.

Pay To Play?

As we get ready for a day of parades and collegiate football, this might be a good time to reflect on the real cost of all this frivolity.

Brad Flory, a local newspaper fixture, had a recent column where he points out that going Bowling is largely a money losing proposition for colleges.  Brad is a pretty credible guy, so I do not doubt that these bowls can end up costing colleges money for their teams to participate.

This is another story of having too much of a good thing.  We went from having a handful of bowls presenting a few high caliber teams to having 35 "bowls" that include teams with losing records.

Collegiate football programs generally make money over the course of a season.  In fact, they make enough to significantly subsidize other sports in many programs.

But does it really make any sense to spend some of those profits to send a team with a losing record to a bowl that the fans will not attend?  Much less watch?

Does anyone know about the New Era Pinstripe Bowl?  Does anyone really care?

This development seems to be yet another sign of the times where everyone gets a trophy for participating.  It is also another sign of excess marketing.  In the process, we have diluted the accomplishment of a truly high caliber team making a bowl appearance while simultaneously lining the pockets of those that promote this excessive number of events at the expense of students.

Brad closes his column with:

Sanity demands this must stop. At minimum, public universities should take a stand by refusing to participate if their money must guarantee ticket sales to marginal games.

Football coaches and bowl promoters may not like that stand, but it is simple financial prudence. We still demand that from public institutions, don’t we?

Brad hasn't been paying much attention to Washington D.C. lately...

Paying The Bills

Having been following trends in education for some time, I was particularly surprised to find that the theoretic economic benefits of a college education that are sold to high school students fell so short.

We cannot continue subsidizing educations that do not make economic sense.  Students cannot continue to sign up for a lifetime of indebtedness.  Like every other economic bubble in the world, this one will break eventually.

Wouldn't we be better off by not having our government create them in the first place?

The obvious...to me....solution is to put colleges on the hook for the debt if students are not able to find fiscally rewarding employment within their field of study.  And to require colleges to advertise the benefits of what they are offering on a "by field of study" basis.

Most kids are smart enough to avoid a train wreck, if they can see it coming.

The Change Is A Comin'

Or at least we will have it if Congress decides to the smart thing instead of the popular thing.  Recent history isn't encouraging on that perspective.

In any case, we really need to do away with the paper dollar and replace it with coins.  I'd even go so far as to suggest that we copy Canada and establish a $2 variant.

I know a lot of people don't like the current $1 coins due to size issues that make is slightly similar to the current quarter.  We have managed do deal with pennies and dimes that similar in size, so I'm not sure why this is such a big deal.

However, the government might consider making two-tone coins for easier visual recognition.  They might also consider using other features (scalloped edges, a hole in the middle, etc.) that will make it easier to tactilely differentiate the $1 coins from their $0.25 cousins.

The GAO's Lorelei St. James told the House Financial Services panel it would take several years for the benefits of switching from paper bills to dollar coins to catch up with the cost of making the change. Equipment would have to be bought or overhauled and more coins would have to be produced upfront to replace bills as they are taken out of circulation.

But over the years, the savings would begin to accrue, she said, largely because a $1 coin could stay in circulation for 30 years while paper bills have to be replaced every four or five years on average.

"We continue to believe that replacing the note with a coin is likely to provide a financial benefit to the government," said St. James, who added that such a change would work only if the note was completely eliminated and the public educated about the benefits of the switch.

Even the $1 coin's most ardent supporters recognize that they haven't been popular. Philip Diehl, former director of the Mint, said there was a huge demand for the Sacagawea dollar coin when production began in 2001, but as time wore on, people stayed with what they knew best.

 The sooner the better.

How Did We Get Here?

I have been mulling a longer piece on the causes of the 2008 fiscal meltdown, but really haven't been able to motivate myself to get it done.  But this piece in the Washington Examiner lays out a couple of the causes that have been largely neglected in the media.

The media narrative has been that the 2008 meltdown was caused by greed; specifically corporate greed.  I happen to agree that corporate greed played a huge role in the collapse of the housing market.  Companies like Countrywide created mortgages where there was a significantly reduced probability of repayment.  Companies like Goldman Sachs....primarily Goldman Sachs...monetized those loans and then created worthless derivatives based on those loans.  When the fiscal house of cards collapsed, they were left holding all the money.

A nice deal....if you are Goldman Sachs.

I also think that individual greed played a role.  Specifically, the individual desire to have more than you can reasonably justify based on your income.  It isn't enough to just be able to "make the payments".

I can recall discussing mortgages back in the early 2000s with a friend.  Someone in his family had just taken out a mortgage where they would not be required to repay any principle.  They just had to make the interest payments.  We both thought they were nuts.

How did the market develop loans for which there was no expectation that the principle would ever be repaid?

It turns out that there was a program created during the Carter administration called the Community Reinvestment Act.  It was designed to help some folks obtain mortgage financing that might not otherwise be able to do so.   A big deal to those that qualified, but not really a big deal in the larger home finance market.

The Clinton administration took that program and put it on fiscal steroids with his National Homeownership Strategy.  The Bush administration changed the name, but otherwise kept the same program in place.  This program broadened the pool beyond otherwise credit worthy poor people to include people who had no rational expectation of repaying those loans.

I don't have the video, but I do recall seeing Mr. Clinton on TV in the fall of 2008 saying that perhaps his administration had been a little too aggressive when it came to boosting home ownership.

With more people buying homes, the price of homes went up.  Speculative investments were made on speculative investments.  Leveraging of debt occurred.

You would still think that the private risk incurred in creating such debts would cause financial institutions to shy away from the so-called "sub-prime" mortgages.  Here is where the government doubled down on a bad idea.

The amount of private risk was minimized by the federal government.  At the time of the meltdown, the U.S. government was almost the sole purchaser of sub-prime mortgages due to the efforts of Fannie Mae and Freddie Mac.

Essentially, the government created the mandate for the loans and then created a market that would offer the loans.  The net result is a tale that should have grown old by now; privatized profits and public risk.

From the article linked above:

"All of us participated in the destructive behavior -- government, lenders, borrowers, the media, rating agencies," said Warren Buffett. "At the core of the folly was the almost universal belief that the value of houses was bound to increase."

There are naturally other elements to the saga.  The influence peddling between members of Congress and companies like Countrywide that prevented the Bush administration from limiting the number of risky mortgages that Fannie and Freddie were snapping up.  The lax enforcement of investment laws by the SEC during the Bush administration.  The gutting of the Glass-Steagall Act (passed by a GOP led congress, signed by a Democrat President) may have also played a role.

It is corporatism...government imposed policies that favor certain corporate interests...writ large.

And the results were unsurprising to anyone that has spent more than a few moments studying American history.

Double, Double, Boil, And Bubble

For those that have been following the news, we had the dot-com bubble, then the housing bubble, and now we have the education bubble.  The education bubble is the government subsidized debt that students (and their parents) acquire in pursuit of a college/university degree.  The primary problem is that we have too many former students carrying more debt than their incomes can support.

While there are a lot of issues in the education bubble to unpack and explore, one big issue is the type of degrees that colleges and universities are selling.  Altruistic issues aside, colleges and universities are businesses that get paid up front based on the theoretic economic benefits that their products can create throughout a person's life.

Unfortunately, some people graduate from college and still cannot get a job that is worth having.  One list of collegiate majors suggests ten careers where borrowing money to fund the necessary educations is foolish.

• Anthropology
• Fine Arts
• Film and Photography
• Philosophy and Religious Studies
• Graphic Design
• Studio Arts
• Liberal Arts
• Drama and Theater Arts
• Sociology
• English

I'm not sure of the best way to resolve the impending economic crash due to education related debt.  I do think that colleges are behaving in precisely the same manner as more traditional businesses; particularly businesses that specialize in investing such as Goldman Sachs or Countrywide.  They are most certainly not advising students about the logical conclusions of accumulating large amounts of debt while not simultaneously acquiring a degree that will enable the repayment of that debt.

Were we talking about any other industry, the howls of outrage would be deafening.

Now I can hear other howls right now.  I am not being "anti-education".  People should still go to college.

But they should be aware of their choices.  If you have a college fund and can afford to spend $200,000+ on an Ivy League BA in sociology, then have a great time!  But if you are borrowing money to get the same degree, then perhaps you ought to consider a local community college for the first two years before transferring to a more affordable four year school.

The flip side of that coin is that colleges and universities should be providing the sort of detailed counseling that will give accurate information to prospective students.  As of a few years ago, the standard collegiate sales technique was to say that possessing a level of education (associates, bachelors, masters, doctorate) was worth "X" amount of additional income over a person's lifetime...on average.  What they did not do was to break down the different fields of study so that the prospective student knew that the average BA in fine arts was using the phrase "would you like fries with that, sir" in their current employment while the average BS in engineering was earning three to four times (or more) what burger flippers earn.

I have felt less slimy after talking to certain used car salesmen.

This is not a problem that is solely limited to the "squishy" fields of study.  The Blogfather continues chronicle our nation's over-production of lawyers.  Law schools continue to heavily solicit students for their programs while knowing full well that a significant portion of those students will not be able to find jobs in their career field.

Again, the less slimy feeling and used car salesmen come into play.

Fixing the problem seems pretty straightforward.  Colleges and universities should be required to publish detailed and accurate average earnings information for their graduates broken down by field of study.  An accurate description of the jobs held by those graduates should be included.

And loans given to students should be conditional upon the college or university rebating a portion of the tuition received if a graduating student does not find work that pays enough for them to repay those loans.  Institutions of higher learning need to have "some skin in the game".

So What Changed?

One of the facts about our federal budget is that federal revenues have remained pretty consistent at about 18% of GDP.  I didn't realize exactly how consistent that was!

Pretty much, revenue as a percentage of GDP hasn't changed since 1950.  Yet today we face some pretty serious budgetary challenges.  So what changed?

Spending.

Back in the 1950s, we fought global communism and won.  We sent men to the moon, and brought 'em back, too!  We built a national highway system.  We were able to be a real force for good in the world.

Today, military spending is the lowest it has been ever!

Now a reasonable discussion of spending priorities ought to leave many options open.  But one thing that should be crystal clear is that those options are being limited by our fantastic growth in social spending.

Freedom Works....

....each and every time it is tried.

That is particularly true when one considers the impact of freedom...including free market economics...on the percentage of people living in poverty.  A small hint: the more freedom there is, the fewer people living in poverty.

"Nations in the top quartile of economic freedom had an average per-capita GDP of $31,501 in 2009, compared to $4,545 for those nations in the bottom quartile," says Cato. The rate of extreme poverty is 2.7 percent in the top quartile and 41 percent in the bottom one.

Among many people a generation ago -- and among a few today -- free markets and private property were seen as the cause of poverty. But the number of adherents has dwindled in the face of repeated refutation.

The latest cover story in The Economist magazine is: "Cuba hurtles toward capitalism." Cuba! Even communists eventually have to make peace with reality.

Don't Ask, Don't Tell

Powerline has a great follow up to my recent post about Warren Buffett's tax-paying habits.

Mr. Buffett's rejoinder? Shut up.

Apparently, when a successful billionaire investor like Warren Buffett demands changes to the tax code, the rest of us are expected to bow, scrape, and make the usual subservient intonations.  We aren't supposed to ask questions about the purported facts in support of those proposed changes.  We are supposed to defer to our "betters".

Screw that!

First Mr. Buffett and his secretary can release all of the tax information that supports...or not...the current rhetoric.  Then we can have a discussion about how whether the facts support...or not...the proposed policy.  Then we can have a discussion of how that policy change would affect the rest of the country.

If Mr. Buffett wants to be a personal example for policy change, then he can accept all of responsibility that goes along with being such an example.  And that does include more than a modest amount of scrutiny regarding his personal life.

The other option is that he could pay the $1,000,000,000 he currently owes the federal government.  He could write an additional check because he thinks he should be taxed more.  And he could write a bigger check for his secretary so that she isn't one of those "people who got the short straw in life" in his eyes.

Until that comes to pass, I have some advice for Mr. Buffett. He should be familiar with it.

Shut up.

The Myth Of A Free Buffet

Or a free Buffett...one of the two.

After months of the seemingly fallacious assertion that Warren Buffet pays a lower tax rate than his secretary, we finally have some facts to work with. 

The ever astute Mrs. Megan McArdle-Suderman has looked things over and found....surprise!....perhaps someone is stretching the truth a bit here.  Or comparing apples with bananas or kiwi or something.  She has a link to the original ABC report.

The summary?

While it is difficult to justify the exact percentages, it is pretty easy to see that those pushing the Buffett-secretary myth are comparing his secretary's total tax load (including payroll taxes, including the part paid by Mr. Buffett's company) with Mr. Buffett's cap gains tax rate (but not including the corporate taxes paid by his company).

Cherry picking has done been done.

A couple thoughts via Glenn Reynolds.  Mr. Reynolds had a secretary at Dewey Ballantine that made $50k per year back in the 1980s.  Mr. Buffett's secretary, Ms. Debbie Bosanek, only makes $60k today.  Not only could Mr. Buffett voluntarily pay more in taxes if he feels he is under taxed, he could also voluntarily bump Ms. Bosanek's paycheck if he feels that she is one of "the people who got the short straw in life."  Even a 90/10 split would be an improvement over the current situation for Ms. Bosanek.

Not that $60k in Nebraska is anything like a truly short straw.

The cold hard fact is that the number of super-rich that pay lower income tax rates than their secretaries is quite slim.  The number of the super-rich hedge fund managers that benefit from the "carried interest" rule is an order of magnitude smaller.  Changing the law so they pay income tax rates instead of the capital gains rate might be a good idea.  Doing so will not raise enough money to spit at when compared with our current deficits.

I'd love to have both people release their complete tax information so that we can truly compare apples to apples.

Even better would be to have Mr. Buffett put his money where his mouth is by writing bigger checks to the U.S. Treasury and to his most worthy secretary.  I'm betting that it will take pigs in the sky and ice in Hell before either happens.

Psssttt....Can Someone Do Something To Fix This?

It might help.

It took Bob Bertsch 25 years to build his construction business and just a day for it all to go away.

...

"I am tired of carrying all the tax load," Bertsch said. "I renew 13 licenses here every year just so I can spend money in this city."

Bertsch makes no attempt to conceal his frustration with the costs government imposes on small businesses like his.

"Government is killing small business. We used to have 24 employees at our peak. Now, all of those people who used to work here are in unemployment lines," he said.

...

Bertsch told a friend at the auction he is selling out because government was taking more out of his business than he was.

Or we can keep giving handouts to big businesses with ties to the government.  The whole idea of keeping everyone's taxes low is apparently over rated.

 

Link to the source.

Look Out For His Right

Attempts at government control of the economy always give me reason for concern.  The record for such control is not exactly stellar.

I wonder what trouble is lurking in our future.  In a modest bit of irony, the Federal Reserve in San Francisco has a model that you can play with that suggests where things might be heading in the near future.

Everywhere you look these days, it seems that ZIRP, or the Fed's Zero Interest Rate Policy, is the panacea to all the world's problems. In fact, ask any tenured economy Ph.D. what inflation is and you will get a stare down, be told you are a moron, that banks need to print more, more, more and that we are really roiling in deflation, with some latent mumblings about buying their economics textbook for the inflationary price of $124.95. Everywhere, that is except the Fed itself. Because in an extremely ironic twist, it is none other than the San Francisco Fed, which operates the "Be Fed chairman for a day" simulation, where you try to keep both unemployment and inflation within the "price stabeeleetee" barriers, that reveals the reality of ZIRP. The laughter really begins when one recreates precisely what the Fed is doing: namely the policy of Zero Interest Rates, now well in its third year, that things take a turn for the surreal. We challenge any reader to play the Fed simulation game, and to do what Bernanke has done: namely lock the Fed Funds rate at the legal minimum: between 0.00% and 0.25%. In our personal experience, we were dismissed as Fed Chairman after annual inflation literally went off the charts and hit 38.36% following 4 years of ZIRP.

If this model published by the Fed is right, then we have some dark days coming soon.

Of course, if it is wrong, then it still leaves open the question as to whether or not the "quantitative easing" and other Federal Reserve policies are good for the long term health of our nation.  If they can't publish a reasonably accurate model, then how can we trust their other decisions?

Predictable Outcome Only Because It Has Been Predicted

Fans of "Atlas Shrugged" by Ayn Rand are doubtlessly familiar with the process that led to a government that would attempt such a thing.  They are also familiar with the most likely result.

This week alone has seen a ratings downgrade for Spain as well as a threat by agencies to review France's AAA status -- and the markets have taken notice. Once again, it would seem, ratings agencies are making things difficult for European countries.

Now, the European Union is considering doing something about it.


European Internal Market Commissioner Michel Barnier is considering a move to ban the agencies from publishing outlook reports on EU countries entangled in a crisis, according to a report in Thursday's issue of the Financial Times Deutschland newspaper.

Of course, that isn't good enough.  The EU also wants to put ratings agencies in a "no-win" position by:

The internal market commissioner appears to be taking a tough stance against the agencies. He is also pushing the 27 EU member states to take steps to ensure that investors can pursue civil action against agencies for "deficient ratings." He is also calling for addition ratings requirements for complexly structured financial products and steps that would create greater competition among ratings agencies.

Investors will find a place to invest.  If they cannot rely on ratings information for EU governments, then they will simply take their money elsewhere.  Given the need for financing and re-financing of government debt, this lack of cash will have predictable results.

Either the governments will start printing fiat Euros and thus begin a cycle of high inflation.  Or the governments will discover that dog catchers do not require 42 levels of supervision and a 1300 page handbook to catch dogs and cut their budgets accordingly.  Historically, the latter option has been the most effective solution as well as the most difficult to implement.

Ms. Rand provided the blueprint for the result of the former option.

Turning The Economic Engine On

Finally, some light in the tunnel that doesn't come from a train.

The president's decision marks the first bright economic move he has made to boost the nation's ailing economy. Dropping tariffs, opening markets and equalizing investment terms are a proven way to boost economic growth.

...

The legislative process will begin next week, and both the White House and congressional leaders say the votes are there to pass it. But they always have been - the big change is the end of the president's hesitancy to submit them and Big Labor's campaign to block it.

Now if we could just get his administration to stop demonizing "the rich" and threatening to raise taxes while minimizing cuts to the federal budget.

Keynesian? Really?

Nick Gillespie over at Reason makes the salient point that current federal spending is not really what John Maynard Keynes had in mind when he suggested that government spending in a down cycle might spur growth.

But Whalen isn't simply dumping on Keynesianism, he's bent on pointing out that even its latter-day adherents are straying far from their master's theory. And in this, he's surely correct. As Allen Meltzer has argued, Keynes was against the very sort of large structural deficits that characterize contemporary federal budgets and policy, believing instead that deficits should be "temporary and self-liquidating." And Keynes believed that any sort of counter-cyclical spending by government should be directed toward increasing private investment, not simply spending current and future tax dollars on public works projects.

Nick quotes Mike Whalen in an article posted at The Washington Times.  Mike suggests...

If the federal government announced a real road map to fiscal soundness, the impact would be truly stimulating. If American businesses and consumers saw that Washington was really cutting, not just reducing future increases, there would be tremendous relief and an increase in confidence across the country. Job creators would sing “hallelujah”; they would get off their wallets, start hiring, and then you’d see that Keynesian multiplier kick in.

Which is a point that the current Administration and their supporters keep passing over as if it did not exist.

A big part of the problem with the sluggish economy is that business owners can see current government spending, and future spending obligations as being capable of turning a sour economy into a really dismal economy.  Greco-Japanese dismal.

When they are convinced that their sidelined capital could be safely invested with the reasonable expectation of making a profit in the bargain, then they will begin investing.

All this talk of raising taxes on "the rich" and passing behemoth federal programs does nothing more than reinforce the idea that they are better off sitting on their cash.