Listening to a McCain stump speech, he just used the line "...we didn't become a great nation by spreading the wealth, we became a great nation by creating new wealth."
Where has that John McCain been all fall? Or his whole previous life?
The problem is that McCain does not feel "in his bones" that free markets and capitalism are good. Nor is he any kind of principled advocate of free speech or other individual rights that the American Founders fought and died for.
He is patriotic in his own way, but it tends towards a "national greatness" form of patriotism which is more oriented towards the collective rather than the individual.
Basically McCain is no defender of freedom or individual rights, not in any fundamental sense. For that reason, he lost my vote a long time ago.
(None of this should be construed as any kind of support for Obama, whose policies I find frightening, dangerous and anti-American.)
Rand Simberg wrote:
None of this should be construed as any kind of support for Obama, whose policies I find frightening, dangerous and anti-American.
Any support I have for John McCain is strictly faute de mieux.
Jim Harris wrote:
Any support I have for John McCain is strictly faute de mieux.
At this point, that's all the support that anyone has for John McCain. The message from his supporters is, don't blame us for anything that he does wrong. Since they're that chicken about it, that's why he's losing.
The conservative/libertarian movement is in a bind though, because if they had fielded someone that they really liked, he would have been another Barry Goldwater.
Actually, conservatives need another Barry Goldwater. We need both the message of libertarian conservatism (strong defense, small government, pro-free market and government out of people's personal lives) and the overwhelming defeats of the old system and old message. We're getting the latter, but not the former. The Republicans of today are in fact the anti-Goldwaters, what Goldwater himself would have called Rockefeller Republicans: strong defense, big government, corporatist and socially intrusive. We need another Goldwater to renew the message, so that we can have another Reagan to implement it.
And yeah, the number of people who support McCain for himself is fairly small in comparison to the total. But then again, the number of people who support Obama, as opposed to the idea of Obama, is pretty small, too. It's just that McCain has enough of a record and enough honesty that it's easy to tell the difference, and Obama has maintained a nearly blank slate through his limited career to date.
McCain will deliver Republicans the beating they deserve for being, in effect, Blue Dog Democrats, and hopefully we'll then have someone who can bring out the message of why we lost and how to win the battle of ideas, that precedes winning the battle at the ballot box.
Jim Harris wrote:
But then again, the number of people who support Obama, as opposed to the idea of Obama, is pretty small, too.
Which goes hand in hand with the certitude that Obama is lost without his teleprompter. That is, it's backwards: The Republicans have been running more against the idea of Obama than against the actual candidate.
But your comment is a perfect description of Sarah Palin. I don't know if you noticed in last night's debate that Obama praised Palin for a few things and didn't criticize her even once. That wasn't because he thinks that she's great. He calculated that he shouldn't bash a celebrity image, and that the real Palin doesn't matter.
Jack Peterson wrote:
Any support I have for John McCain is strictly faute de mieux.
Isn't that always the case? The only politician I remember genuinely supporting, as opposed to loathing marginally less than the other guy, was Harry Browne, and he didn't have a hope in hell of winning.
I should qualify this by saying that my field is physics, not economics, but I think there's a strong argument you can make about the financial crisis that is not at all an indictment of the free market. My understanding of the financial crisis is that there's three primary culprits: 1) a systematic underestimation of credit risk, 2) excessive subprime lending, 3) mortgage derivatives linked to the excessive subprime lending (credit default swaps, CDOs that apparently no one knew how to quantify).
(1) seems to me the underlying factor. One interpretation of this is that bankers just used the wrong probability distribution to estimate risk (a normal instead of a Lorentz distribution, and a gaussian decays much faster than a Lorentz function, which follows a power law). Alright, but why? One answer, I guess, is that bankers (to paraphrase the unlamented Rumsfeld) didn't know what they didn't know. If you're modeling a chaotic system containing lots of recursive feedback loops, and things seem to be following a roughly bell-shaped curve, to start with, why aren't you working from a t-distribution? Where are you getting your variance? Another, possibly more convincing answer, is that bankers just assumed that even though their mathematical model was incorrect, it wouldn't matter, because they could just use (in my opinion, absurdly complicated) derivatives to push the risk off onto the big investment banks, by way of Fannie Mae and Freddie Mac. Which are, of course, government-sponsored enterprises, which had, as I understand it, fairly explicit instructions from Congress to encourage subprime lending. At least some of the complex credit derivatives, and the special legal classifications built around them, were created by Fannie and Freddie, as well.
So, as a political football (and it's nothing if not that), there's plenty of blame to go around. From what I've read, there was plenty of bona fide stupidity involved. (Anecdotally, the guys I knew in college who went into banking didn't seem like the brightest folks around, but they were geniuses compared to the people who wanted to go into politics.) My understanding is that both John McCain and Barack Obama were complicit, although they're both dissembling ferociously and scrambling for the moral high ground. Not having Rick Davis blathering on his behalf has probably helped Obama in this regard. Congressional Democrats have firmly exonerated themselves, which makes no sense, but the Republicans see the whole economic mess as such electoral poison (economic issues tend to favor the Democrats, etc.) that they're not making an issue of it. This is reasonable short-term (read: electoral) but disastrous long-term politics, to say nothing of policy. The worst part is that the argument is so simple: the Republicans could really drive home the point that 1) the housing and financial markets were actually heavily regulated, 2) these regulations were a big part of the problem, so 3) in reality it wasn't anything like a free market, so this isn't an indictment of free market economics.
This doesn't mean the bailout is good or bad, and I really have no idea what ought to be done at this point. But I think the near-universal consensus that this was caused by an unregulated market run amok is wrong, and while I do think the bailout itself has to be very carefully regulated, I don't think a blind charge into more regulations on this or other markets is necessarily going to help. Obama's been quite vocal about McCain's history of deregulation, but unfortunately, McCain's response to this has been to recklessly invent schemes to out-regulate the Democrats. But hey, who needs principles when you can change the subject?
Sigh.
Larry J wrote:
One interpretation of this is that bankers just used the wrong probability distribution to estimate risk (a normal instead of a Lorentz distribution, and a gaussian decays much faster than a Lorentz function, which follows a power law). Alright, but why? One answer, I guess, is that bankers (to paraphrase the unlamented Rumsfeld) didn't know what they didn't know.
One explaination is that lenders have been under pressure for over 10 years to lend to people with poor credit ratings or risk being labeled racist. The lenders would then sell these toxic loans to outfits like Fannie Mae who'd bundle and sell them as investment articles. The borrowers did what people with poor credit records so often do - they failed to repay the loans and the people who bought the mortgage backed securities that contained the toxic loans got burnt. This impacted not only individuals but also governments around the world and businesses.
Paul Breed wrote:
I believe it went so far as for the government to require Fanny and Freddie to buy the mortgages
developed to help the discriminated against minorities buy homes.
It was all a result of the government meddling in the free market. No rational free market organization would have issued those loans, Fanny and Freddie were required to.
Paul Milenkovic wrote:
I am going to go out on a limb here and say that the cause of the financial crisis had been the price of oil.
The price of oil had been climbing, climbing since ever since 2000 or so. There are a lot of factors -- the growth of the Global Economy, the boom-bust cycle in petroleum, the Hugo Chavez's and Vladimir Putin's of the world, the War. I just saw a snarky bumper sticker "we went to war and all I got out of it was these high gas prices." Too bad I couldn't counter that by hanging a copy of Douglas Feith "War and Decision" from my back bumper in the hope someone would read it to understand what the issues were.
The way these cycles work is that oil climbs in price until it causes major amounts of pain, the Global Economy goes into recession, demand destruction kicks in, the price of oil plummets, the price of oil plummets even more because the oil supply developed by projects funded in the times of high oil prices finally reaches market (there was a thing on JD's PeakOilDebunked by someone "in the oil industry" that "we have been drilling like crazy and not meeting demand" -- we have been drilling like crazy, and it takes some years for all this to kick in -- everyone seems to want immediate gratification).
So oil will crash again, and we will go through yet another one of these cycles. So what does this have to do with the financial crisis? Oil went to 50, then 60, 70, 90, 100, 150 dollars a barrel -- some thought it would go to 200 dollars. What determines how high it goes is not so much long-term shortages or costs of production, rather it is what people are willing or able to pay for the stuff. The price of oil got to the point that heating a house with it began to approach the cost of property taxes, which for a long time had been the major financial burden (the mortgage is not, because you are paying of the cost of the house and getting a house you can sell in the end: you have nothing to show for the property taxes apart from it didn't burn down because there is a fire department and you didn't get pillaged because there is a police department and a County Welfare Department so poor people have a safety net apart from crime in the first place.)
People keep saying that gas was only "so many dollars a month more" or heating was "so many other dollars a month", but the ramp up in prices finally got to where people who were "leveraged" in their home ownership and consumption started to miss payments, and then you know the rest.
Lary, the problem is not really that folks with poor credit fail to repay their loas. If you make a 10,000 loans a certain percent will defaut, no question about it.
The probem is that the models used to predict how many of these folks will default broke down. As a consequence the valuation of the secureties broke down as well.
For Jack, think quantum mechanics. You may have a normal Gausian distribution, but at any one momet when you measure you may take a measurment that is considerably different than the predicted value. The financial markets basically failed to take into account that the average risk was not necesarrilly the actual risk.
Jack Peterson wrote:
It was all a result of the government meddling in the free market. No rational free market organization would have issued those loans, Fanny and Freddie were required to.
I guess I should append to my comment that the actual unregulated markets were the secondary markets (credit default swaps and collateralized debt obligations), and it's the fact that each default had a huge number of derivatives attached to it that allowed the subprime crisis to amplify to the point where it could sink these huge investment banks. This is, of course, what everyone's focusing on, and why the Republicans are so leery about confronting the issue: the deregulation of the secondary markets was, I think, pushed through by Republicans. But the key point that often gets missed is that this only became an issue because of the heavily (but poorly) regulated mortgage market. To draw the analogy out a bit, everyone's up in arms trying to figure out how the signal got amplified (which is important), and completely ignoring the faulty wiring that produced the signal in the first place.
Jack Peterson wrote:
For Jack, think quantum mechanics. You may have a normal Gausian distribution, but at any one momet when you measure you may take a measurment that is considerably different than the predicted value. The financial markets basically failed to take into account that the average risk was not necesarrilly the actual risk.
That's a good point. The probability density function would have a (probably very complicated) time dependence, which would be lost in a time-averaged distribution. But my point was even more basic than that: even ignoring time-dependence, the distribution wasn't Gaussian, but everyone assumed it was, so they underestimated the size of the tails.
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This page contains a single entry by Rand Simberg published on October 16, 2008 10:17 AM.
The problem is that McCain does not feel "in his bones" that free markets and capitalism are good. Nor is he any kind of principled advocate of free speech or other individual rights that the American Founders fought and died for.
He is patriotic in his own way, but it tends towards a "national greatness" form of patriotism which is more oriented towards the collective rather than the individual.
Basically McCain is no defender of freedom or individual rights, not in any fundamental sense. For that reason, he lost my vote a long time ago.
(None of this should be construed as any kind of support for Obama, whose policies I find frightening, dangerous and anti-American.)
None of this should be construed as any kind of support for Obama, whose policies I find frightening, dangerous and anti-American.
Any support I have for John McCain is strictly faute de mieux.
Any support I have for John McCain is strictly faute de mieux.
At this point, that's all the support that anyone has for John McCain. The message from his supporters is, don't blame us for anything that he does wrong. Since they're that chicken about it, that's why he's losing.
The conservative/libertarian movement is in a bind though, because if they had fielded someone that they really liked, he would have been another Barry Goldwater.
Actually, conservatives need another Barry Goldwater. We need both the message of libertarian conservatism (strong defense, small government, pro-free market and government out of people's personal lives) and the overwhelming defeats of the old system and old message. We're getting the latter, but not the former. The Republicans of today are in fact the anti-Goldwaters, what Goldwater himself would have called Rockefeller Republicans: strong defense, big government, corporatist and socially intrusive. We need another Goldwater to renew the message, so that we can have another Reagan to implement it.
And yeah, the number of people who support McCain for himself is fairly small in comparison to the total. But then again, the number of people who support Obama, as opposed to the idea of Obama, is pretty small, too. It's just that McCain has enough of a record and enough honesty that it's easy to tell the difference, and Obama has maintained a nearly blank slate through his limited career to date.
McCain will deliver Republicans the beating they deserve for being, in effect, Blue Dog Democrats, and hopefully we'll then have someone who can bring out the message of why we lost and how to win the battle of ideas, that precedes winning the battle at the ballot box.
But then again, the number of people who support Obama, as opposed to the idea of Obama, is pretty small, too.
Which goes hand in hand with the certitude that Obama is lost without his teleprompter. That is, it's backwards: The Republicans have been running more against the idea of Obama than against the actual candidate.
But your comment is a perfect description of Sarah Palin. I don't know if you noticed in last night's debate that Obama praised Palin for a few things and didn't criticize her even once. That wasn't because he thinks that she's great. He calculated that he shouldn't bash a celebrity image, and that the real Palin doesn't matter.
Any support I have for John McCain is strictly faute de mieux.
Isn't that always the case? The only politician I remember genuinely supporting, as opposed to loathing marginally less than the other guy, was Harry Browne, and he didn't have a hope in hell of winning.
I should qualify this by saying that my field is physics, not economics, but I think there's a strong argument you can make about the financial crisis that is not at all an indictment of the free market. My understanding of the financial crisis is that there's three primary culprits: 1) a systematic underestimation of credit risk, 2) excessive subprime lending, 3) mortgage derivatives linked to the excessive subprime lending (credit default swaps, CDOs that apparently no one knew how to quantify).
(1) seems to me the underlying factor. One interpretation of this is that bankers just used the wrong probability distribution to estimate risk (a normal instead of a Lorentz distribution, and a gaussian decays much faster than a Lorentz function, which follows a power law). Alright, but why? One answer, I guess, is that bankers (to paraphrase the unlamented Rumsfeld) didn't know what they didn't know. If you're modeling a chaotic system containing lots of recursive feedback loops, and things seem to be following a roughly bell-shaped curve, to start with, why aren't you working from a t-distribution? Where are you getting your variance? Another, possibly more convincing answer, is that bankers just assumed that even though their mathematical model was incorrect, it wouldn't matter, because they could just use (in my opinion, absurdly complicated) derivatives to push the risk off onto the big investment banks, by way of Fannie Mae and Freddie Mac. Which are, of course, government-sponsored enterprises, which had, as I understand it, fairly explicit instructions from Congress to encourage subprime lending. At least some of the complex credit derivatives, and the special legal classifications built around them, were created by Fannie and Freddie, as well.
So, as a political football (and it's nothing if not that), there's plenty of blame to go around. From what I've read, there was plenty of bona fide stupidity involved. (Anecdotally, the guys I knew in college who went into banking didn't seem like the brightest folks around, but they were geniuses compared to the people who wanted to go into politics.) My understanding is that both John McCain and Barack Obama were complicit, although they're both dissembling ferociously and scrambling for the moral high ground. Not having Rick Davis blathering on his behalf has probably helped Obama in this regard. Congressional Democrats have firmly exonerated themselves, which makes no sense, but the Republicans see the whole economic mess as such electoral poison (economic issues tend to favor the Democrats, etc.) that they're not making an issue of it. This is reasonable short-term (read: electoral) but disastrous long-term politics, to say nothing of policy. The worst part is that the argument is so simple: the Republicans could really drive home the point that 1) the housing and financial markets were actually heavily regulated, 2) these regulations were a big part of the problem, so 3) in reality it wasn't anything like a free market, so this isn't an indictment of free market economics.
This doesn't mean the bailout is good or bad, and I really have no idea what ought to be done at this point. But I think the near-universal consensus that this was caused by an unregulated market run amok is wrong, and while I do think the bailout itself has to be very carefully regulated, I don't think a blind charge into more regulations on this or other markets is necessarily going to help. Obama's been quite vocal about McCain's history of deregulation, but unfortunately, McCain's response to this has been to recklessly invent schemes to out-regulate the Democrats. But hey, who needs principles when you can change the subject?
Sigh.
One interpretation of this is that bankers just used the wrong probability distribution to estimate risk (a normal instead of a Lorentz distribution, and a gaussian decays much faster than a Lorentz function, which follows a power law). Alright, but why? One answer, I guess, is that bankers (to paraphrase the unlamented Rumsfeld) didn't know what they didn't know.
One explaination is that lenders have been under pressure for over 10 years to lend to people with poor credit ratings or risk being labeled racist. The lenders would then sell these toxic loans to outfits like Fannie Mae who'd bundle and sell them as investment articles. The borrowers did what people with poor credit records so often do - they failed to repay the loans and the people who bought the mortgage backed securities that contained the toxic loans got burnt. This impacted not only individuals but also governments around the world and businesses.
I believe it went so far as for the government to require Fanny and Freddie to buy the mortgages
developed to help the discriminated against minorities buy homes.
It was all a result of the government meddling in the free market. No rational free market organization would have issued those loans, Fanny and Freddie were required to.
I am going to go out on a limb here and say that the cause of the financial crisis had been the price of oil.
The price of oil had been climbing, climbing since ever since 2000 or so. There are a lot of factors -- the growth of the Global Economy, the boom-bust cycle in petroleum, the Hugo Chavez's and Vladimir Putin's of the world, the War. I just saw a snarky bumper sticker "we went to war and all I got out of it was these high gas prices." Too bad I couldn't counter that by hanging a copy of Douglas Feith "War and Decision" from my back bumper in the hope someone would read it to understand what the issues were.
The way these cycles work is that oil climbs in price until it causes major amounts of pain, the Global Economy goes into recession, demand destruction kicks in, the price of oil plummets, the price of oil plummets even more because the oil supply developed by projects funded in the times of high oil prices finally reaches market (there was a thing on JD's PeakOilDebunked by someone "in the oil industry" that "we have been drilling like crazy and not meeting demand" -- we have been drilling like crazy, and it takes some years for all this to kick in -- everyone seems to want immediate gratification).
So oil will crash again, and we will go through yet another one of these cycles. So what does this have to do with the financial crisis? Oil went to 50, then 60, 70, 90, 100, 150 dollars a barrel -- some thought it would go to 200 dollars. What determines how high it goes is not so much long-term shortages or costs of production, rather it is what people are willing or able to pay for the stuff. The price of oil got to the point that heating a house with it began to approach the cost of property taxes, which for a long time had been the major financial burden (the mortgage is not, because you are paying of the cost of the house and getting a house you can sell in the end: you have nothing to show for the property taxes apart from it didn't burn down because there is a fire department and you didn't get pillaged because there is a police department and a County Welfare Department so poor people have a safety net apart from crime in the first place.)
People keep saying that gas was only "so many dollars a month more" or heating was "so many other dollars a month", but the ramp up in prices finally got to where people who were "leveraged" in their home ownership and consumption started to miss payments, and then you know the rest.
Lary, the problem is not really that folks with poor credit fail to repay their loas. If you make a 10,000 loans a certain percent will defaut, no question about it.
The probem is that the models used to predict how many of these folks will default broke down. As a consequence the valuation of the secureties broke down as well.
For Jack, think quantum mechanics. You may have a normal Gausian distribution, but at any one momet when you measure you may take a measurment that is considerably different than the predicted value. The financial markets basically failed to take into account that the average risk was not necesarrilly the actual risk.
It was all a result of the government meddling in the free market. No rational free market organization would have issued those loans, Fanny and Freddie were required to.
I guess I should append to my comment that the actual unregulated markets were the secondary markets (credit default swaps and collateralized debt obligations), and it's the fact that each default had a huge number of derivatives attached to it that allowed the subprime crisis to amplify to the point where it could sink these huge investment banks. This is, of course, what everyone's focusing on, and why the Republicans are so leery about confronting the issue: the deregulation of the secondary markets was, I think, pushed through by Republicans. But the key point that often gets missed is that this only became an issue because of the heavily (but poorly) regulated mortgage market. To draw the analogy out a bit, everyone's up in arms trying to figure out how the signal got amplified (which is important), and completely ignoring the faulty wiring that produced the signal in the first place.
For Jack, think quantum mechanics. You may have a normal Gausian distribution, but at any one momet when you measure you may take a measurment that is considerably different than the predicted value. The financial markets basically failed to take into account that the average risk was not necesarrilly the actual risk.
That's a good point. The probability density function would have a (probably very complicated) time dependence, which would be lost in a time-averaged distribution. But my point was even more basic than that: even ignoring time-dependence, the distribution wasn't Gaussian, but everyone assumed it was, so they underestimated the size of the tails.