Category Archives: Business

The Problem Is Bigger Than Them

Jim Manzi has some useful thoughts:

Commentators on both the Left and Right seem to think that if only we could get the right person to take over these companies and clean up the financial mess, everything would be OK. All it takes is somebody competent and honest, because the answers are so obvious. A rotating series of scapegoats has been created. Paulson? Fool. Geithner? Moron. Liddy? Stooge. It’s funny how their idiocy didn’t seem to surface so much in their prior careers.

Maybe the issue isn’t with the men we’ve selected, but with the problem we’ve asked them to address. Some problems don’t have solutions. The American electorate seems to be intent on re-learning the lesson that how to effectively manage socialized means of production is one of them. The tuition for this course tends to be pretty steep.

I’m sure that Liddy is deeply regetting that he took the job, particularly given the (lack of) financial compensation. The notion that a government, or any one person, is smart enough to run an economy is what Hayek called the fatal conceit.

[Update early evening]

James Pethokoukis:

It’s cliché to say there’s a lot of blame but going around — but there is a lot of blame to go around.

Everywhere you turn in this mess, you can find government right there. To say this is a private-sector failure is ridiculous. It’s like Forrest Gump, where he keeps showing up at historic moments. Everywhere you look in this mess, again and again, you see government.

The most infuriating thing about these clowns, both in Washington and the press, is how a non-existent free market and “deregulation” keeps getting falsely blamed for this as an excuse for bigger government and more regulation.

Making Orwell Proud

Some examples from VDH:

Guantanamo is still open, but there are no longer “enemy combatants” there (Perhaps the name of the camp can be changed next?). The old campaign snicker that a naïve McCain really believed that a then-stronger economy is “fundamentally sound” is now the new Obama gospel about a far weaker one. There are to be no more earmarks in spite of 8,000-plus new ones. A $3.6 trillion-dollar budget is proof of commitment to financial responsibility; the remedy of Bush’s borrowing profligacy is to increase the deficit from $500 billion to $1.7 trillion. Bush’s signing statements bad; Obama’s signing statements good. An end to lobbyists in an administration ensure there are over ten; the highest ethical standards mean the nominations of Daschle, Richardson, etc. The changing meaning of words really does trump memory and reality itself.

Not to mention what a disaster that it would be to make health insurance benefits taxable, which was one of the many mendacious ways by which they slithered into the White House, except that now, maybe it’s not such a bad idea:

Now that Mr. Obama has begun the health debate, several advisers say that while he will not propose changing the tax-free status of employee health benefits, neither will he oppose it if Congress does so.

Let me translate: “Yes, I don’t want to take responsibility for it, because even my lapdogs in the media might find that too much hypocrisy to stomach after all my demagoguery on the issue last fall, but I’ll sign the bill when it gets to my desk, so go for it.”

Well, actually, I’m not sure that it would make Orwell proud. More likely sad at his own prescience.

The Country Is In The Very Best Of Hands

Congressman on the space committee, meet the real space program:

At one point he raised a few eyebrows when he said America’s position in space depended “particularly on funding from the US Congress. Only governments can really afford space.” That was a rather odd comment given the number of people in the room who do business in, and make money from, space, without relying on the Congress for funding. Asked about that comment in the Q&A session that followed his speech, he amended his comments somewhat. “Fundamental research has to come out of the government and then our private sector will partner with us as a government to improve it and make it more ubiquitous, so to speak.”

Later in the Q&A came the topic that is almost inevitable in any discussion of commercial space policy in the US these days: export control, or ITAR. “Can you comment about your thought on ITAR and the ability for US companies to sell products overseas?” someone asked. Griffith had a blank look on his face. The questioner, and others in the audience, repeated and elaborated on the question: you know, ITAR, export control restrictions, that sort of thing? “Is that a ‘Buy America’?” he asked. “I’m not quite sure.”


Well, at least, given that he’s completely innocent of the issue, he might be amenable to being persuaded into a sensible position on it. I’d rather have someone who is educable than someone who is damned sure of the wrong answer.

What Did We Get For Spendulus?


…that prediction and the job calculations cooked by the president and his economic advisers have already been proven wrong. A Republican insider on Capitol Hill explains that the “forecast for saving or creating jobs is based on the stimulus ensuring that the unemployment rate not exceed 8% between now and 2014.” But we are already passed the 8% mark.

What would have happened without the stimulus? According to the administration’s calculations, we would then hit 9% unemployment. But that is the very figure that many economists now predict we will hit in a matter of months. Some predict we will hit 10%. Four states have already hit that figure.

This is the biggest financial fraud in history. It makes Madoff look like a humanitarian.

Mark To Market Thoughts

In discussion from this post from a couple days ago, a commenter makes what seems to me a plausible point:

I firmly believe that the destructive effects of FASB’s change to a mark-to-market accounting standard in November 2007 cannot be overstated. It never made any sense, and the proof of this is that neither Paulsen nor Geithner have been able to do what they set out to do, which was to buy up the so-called “toxic assets.” The problem? They can’t determine a fair price for assets which have been devalued on paper to effectively nothing because of the new mandated accounting standards.

Yet Geithner said recently that these assets have “inherent value” that is not reflected by their current market price, which is an implicit repudiation of the mark-to-market standard. It’s also the reality he has to face. Hence the problem, a kind of Catch-22 of his own making. (He and others, to be fair.)

To buy up the toxic assets at higher than mark-to-market value would admit what everyone knows but won’t speak: that these assets are worth a lot more than the mark-to-market value and always were. If the government hadn’t forced the financial companies to grossly understate the value of their assets in the first place, this banking crisis might never have occurred or at least not nearly at this degree of severity.

Furthermore, if Geithner believes the assets are worth more than the mark-to-market value, then why not simply change the FASB rules back to what they were pre Nov2007 and let the financial companies mark them up on their own balance sheets instead of selling them back to the government? Same reason. Because if the government were to now admit that these assets are, in fact, worth quite a bit more — and that they always were — the smoking gun would be revealed. And so would the fingerprints of all those who helped pull the trigger.

I would hate to think that this is behind the resistance to restore the status quo ante 2008, but sadly, it wouldn’t be surprising. It would also be amazing to think that we wrecked the world economy with a single rule change, and could undo much of the damage by reversing it, but it can’t be ruled out.

[Update a few minutes later]

Commenters are accusing me of naivety, or lack of understanding of the situation, and in rereading my post, I can understand why.

No, I don’t really believe that if the rule hadn’t been changed, all would now be hunky dory, or that by changing it back, housing prices would skyrocket and all would be well with the world, and we’d rewind back to 2006. I understand that there was a huge bubble, perhaps more than one, and that supply and demand had to correct at some point. It’s why, after buying our house in South Florida five years ago, (unlike some of our neighbors) we weren’t going crazy and flipping condos a couple years later.

I am just pointing out that it might have played out differently, or more gradually, and perhaps even in a way that might have resulted in less panic in Washington last fall. I do think that our biggest problem now is not the underlying problems with the economy, which always work themselves out if allowed to, but panicked governmental responses to them that are exacerbating the situation. I do think that mark to market, or at least a sudden change in the rules, played a role in that. I think that it forced fire sales in the banking sector that might have been handled more gradually.

Good Point

A couple days ago, I asked: If Obama really wanted to wreck the economy, would what he be doing differently? Lance Burri has an answer:

How about tariffs? Have we got much in the way of tariffs so far?

Well, no, not yet, though there were some attempts at trade restrictions in some early versions of Spendulous. And he’s made a lot of noise about them in the campaign, but no, so far he hasn’t been that Hoover like. Yet.

My Home-Town Newspaper

…is cutting back to three days a week, with a lot of layoffs and pay reductions. Same thing with Saginaw and Bay City. The Flint Journal has been around for many decades, going back to the nineteenth century, before the auto industry existed, but it looks like it’s on its last legs, as Michigan’s economy continues to swirl down the drain. A good friend of mine from college is an editor there. Hope she has a parachute.

Why Jon Stewart Attacked Jim Cramer

Pethokoukis explains. This really appears to be part of a government/media war on investors.

[Update a while later]

More thoughts on the matter from Mark Hemingway:

Anyone who has tuned into his show and seen Cramer strutting around a soundstage that looks like the helm of the Starship Enterprise as envisioned by the Teletubbies’ set designer and pushing buttons that make wacky sound effects could tell you that Cramer is to stock-picking what The Daily Show is to TV news: something not to be taken too seriously.