Of Introvert Heaven and What to Do with Extroverts

March 16, 2020 Leave a comment

Photo by Anthony Tran on Unsplash

The Introverts must be taking over the world.  Utterance from official sources is that gatherings—if they must take place at all—should be narrowly restrained.  The new limit is to be 50, tops.  Governors in states from New York to California are ordering these social curbs or yet stricter limitations.

Private sector organizations are closing their doors entirely, some with a mentioned end date, others indefinitely.  Sporting events—professional, amateur, scholastic, even clubs—have been shuttered.  The local rec center has closed its doors.  Movie theaters are locking up, voluntarily or by official order.  New movies are rescheduling their start dates or being offered on-line.  Schools, government and private, are sealed (home schoolers remain unaffected, no reports on what home scholars think of that).  The list grows by the hour.

In short, it all sounds like Introvert Heaven.  Stay home, keep inside, work on the computer, read a book, watch a cable movie, play a video game, take a walk, go for a drive, do a puzzle.  As an introvert myself, I recognize that while I would soon tire of it, the thought of solitary confinement has never held terror for me.

I ask, but what of the Extroverts?  No allowance seems to be made for them.  Being the father of both, I know that the sense of being “cooped up” comes quickly to extroverts, who draw personal energy from human interaction, the bigger the group, the better.  Sustained restrictions on access to people are not easily tolerable.  Social media can be a temporary substitute, but a poor substitute, clearly suboptimal for an extrovert, who craves face-to-face association, the more the merrier.  Suppressed long enough, they will revolt—no hyperbole.

Sporting events, theater, parties and such like were invented by and for extroverts.  Since they may make up half or more of the population (the Internet hosts a mildly interesting debate on the exact proportion), the broad assault on extroverts surely will have societal consequences, ones for which the introverts who seem to be making the rules (or who fancy themselves exempt) manifest little recognition.  Promising that the restrictions are probably for no longer than eight weeks offers little comfort to extroverts.  Neither should introverts who must live with them find therein any comfort.

Filed under bureaucracy, civilization, culture, freedom, personality, quarantine, statism Tagged with , , , , , ,

Of Free Speech and Insensitivity Training

July 23, 2015 1 Comment

There is a poignant scene in “Lawrence of Arabia”, a movie with many poignant scenes, in which Lawrence demonstrates to a fellow officer how to snuff out a candle. He pinches the flame with his fingers. The other officer gives it a try but jerks back his hand when his fingers are scorched.

“That hurts,” the officer complains. Lawrence replies, “Certainly it hurts. The trick is not minding that it hurts.”

There is a lesson there, particularly important for a society that has become hypersensitive to injury, real or imagined. Hurt may come from something as small as a look—or failure to look. It may come from an article of clothing, either worn or neglected. Lately flags have been targeted as sources of personal and even societal pain. Hurt may come from something as small as a word. Indeed, I think that most often today and in our society, both words and our sensitivity to words have become sharpened.

If we are to preserve freedom of speech—in all its important varieties—we need to develop some insensitivity, as in not minding when it hurts. Freedom of speech only matters when someone hears something he does not like. The choice then is intolerance and silence or freedom and not minding the hurt.

Another way to look at it is that we most desire freedom of speech when we are the speaker. From the point of view of listener, we may have mixed emotions. We may like what we say, but when we do not like what we hear do we wish to silence the speaker, or do we accept the options of free speech, to turn away or to endure another’s unpleasant rodomontade?

Freedom of speech was made part of the First Amendment, because rulers and monarchs were at pains to inflict genuine physical hurt whenever they took offense at the words of their subjects. The First Amendment’s protection of free speech was needed to protect people using words that hurt people in government, that offended people in power.

Even though enshrined in the Constitution, freedom of speech has to be won by each generation, because it is constantly in jeopardy. Americans are nearly unanimous in their support of freedom of speech when it is speech that they like, speech that reinforces their own views, and especially speech that praises and flatters. We do not particularly need the Constitution to protect that kind of speech. Speech that is unpopular, speech that goes against the grain, speech that is obnoxious to our opinions, speech that challenges our beliefs, that is the speech the Founders fought to protect. Most of human progress has come from that kind of speech. It is speech that is worth protecting today and that many try to silence.

President Obama and his political friends are fond of declaring that “the debate is over,” whether referring to Obamacare, the Dodd-Frank Act, climate change, same-sex marriage, or other important issues of significant disagreement. I expect that soon we will hear President Obama, Secretary of State Kerry, and other administration spokesmen insist that the debate is over with regard to the nuclear deal with Iran. In a free republic, can the debate ever really be over?

This is nothing new; it is a continuation of a very old struggle. Despots great and petty since early ages have exercised what power they might to silence ideas and expressions they did not want to hear, or did not want others to hear. The gallows, flames, and torture chambers of yesteryear are matched today by bullets, bombs, and bayonets from radical Islam and totalitarian governments. In the West, where constitutions solemnly embrace free speech, voices are silenced by public ridicule, elaborate and intrusive regulations on what can and cannot be said and when and where—reinforced by government fines, restrictions, confiscations, and jail time.

I recently visited my son at his new job at a large factory. He was very careful to spell out to me a lengthy list of subjects I should not bring up, whether from fear of his colleagues, company policies, or federal, state, and local regulations. I have been given similar training at my place of work.

When I was young I was taught to be courteous and not seek to offend. I was also taught to be slow to take offence. Do children today repeat the rhyme I heard as a child? “Sticks and stones may break my bones, but names can never hurt me.” I wonder. Or are our children taught today that there is great reward in being the sensitized “victim” of someone else’s “offensive” words? Where do we find freedom in that?

Filed under Barack Obama, choice, Constitution, demagoguery, Dodd-Frank Act, free speech, freedom, global warming, Iran, Islamists, media, opposition, politics, republics, statism, tyranny Tagged with , , , , , , , , , , , , ,

Of Warming Planets and Cooling Economies

May 31, 2015 Leave a comment

Did you notice when the Obama Administration paused in its ballyhooing about global warming? President Obama and his officials had been busily hustling the warming of the planet and its attendant disasters—which they insist can only be fixed by increasing government control of our lives, from birthing to breathing. The President was in Florida, blaming the future hurricane season—which has not yet happened—on global warming. “The best climate scientists in the world are telling us that extreme weather events like hurricanes are likely to become more powerful.” What President Obama did not mention—anywhere in his speech at the National Hurricane Center in Miami—was that the scientists predicted a “below-normal” hurricane season for 2015. Was that mercy because of or in spite of global warming?

Perhaps we should not blame the President for leaving that little item of information out, since for each of the last several years the cited “best climate scientists” (whoever they are) had predicted extraordinarily active and destructive hurricane seasons. Since each season turned out to be unusually mild, the official forecasters have now changed their tune, putting themselves solidly in-sync with recent trends. Do not put yourself at risk with a long investment on it either way.

As for global warming, however, the President and those who say they agree with him insist that the debate is over (in either science or a free nation can the debate ever really be over?), meaning that it is unacceptable to disagree with them. If you can’t say something calamitous, then don’t say anything at all.

Then, suddenly and quite unexpectedly, the global warming talk stopped. There was a mercifully, if brief, moratorium on warming warnings. Instead of predicted calamity, a real calamity was at hand that required some ‘splaining. The most recent report on the nation’s economic growth was announced. Not only had growth slowed, as measured by government number crunchers, the economy had actually declined in the first 3 months of 2015. That seemed to come as a surprise to no one who is either without a job or working in a job that is something less than the job held before 2009. But it was unwelcome news to the Administration that has been working on economic revival for going on seven years.

Instead of global warming, the Administration needed cold weather to blame for the decline in economic activity during January, February, and March. The lead official White House explanative was, “harsh winter weather”. I did not make this up, and you are not supposed to notice how convenient White House excuses are. It was better that global warming talk was cooled for a moment lest people recognize the contradictions in the official propaganda and begin to wonder whether White House policies were working.

Winter weather is not a novel excuse for failed government programs. The old Soviet Union blamed repeated crop failures on harsh winters (in Russia? Who knew?). The similarity in excuses used by the Obama White House and the Soviet Politburo is not accidental. Central planners can survive only if they have at the ready a list of excuses of things beyond their control. The list could be a long one, since in the end there is not very much about the economy that central planners can control, if control means making things go they way intended. To quote the character Jayne Cobb, in Serenity, “what you plan and what takes place ain’t ever been exactly similar.”

Filed under Barack Obama, communism, demagoguery, economic growth, economics, environmentalism, free speech, freedom, future, global warming, government, jobs, recession, Russia, science, socialism, Soviet Union, statism Tagged with , , , , , , , , , , , , , ,

Of Signs and Deception

May 17, 2015 Leave a comment

It may seem immodest of me to point out how “insightful” was my posting, published at the very doorstep of the 2008 election of Barack Obama as President of the United States. I think I am in no danger, however, as the predictions were all too easy to make, the signs too clear then to justify special credit now. More significant, I believe, are how the lessons taught then apply as we enter another presidential election season. Give the greatest weight to what candidates do and what they have done, particularly when such evidence is distinctly at variance with what they say.

 

A well-known principle of propaganda is that if you are going to tell a lie, the bigger the lie the more believable it will be. Most people are so trusting that they do not want to believe in the enormity of a big lie. They do not want to believe that someone can intentionally say something appallingly false. Rather than disbelieve the liar, they will want to disbelieve the person who exposes the lie.

One of the biggest of lies is asserting something to be exactly the opposite of what it is. Such is the warmonger who claims to be the leading pacifist, the thief who claims to be the victim of theft—and accuses the real victim of being the criminal—or the bigoted radical who accuses opponents of intolerance.

In recent travels on the streets, roads, and highways I notice at this time of the year the beautiful Fall foliage—and the many political campaign signs. While for some there might be a distaste for seeing these, I feel to rejoice in the signs as evidence of a vigorous system of subjecting our political leaders to public vote.

Having said that, I do draw the line at the steady growth of the mega-yard and curb signs, the five-foot by eight-foot broadsides. So, already inclined to dislike such construction-size boards, I have been particularly disturbed to see what appears to be a planned series of Obama-Biden signs advocating policies that these two Washington insiders have long worked hard to oppose.

I have noticed three in this series. There may be others. The ones that I have seen show the names of the two candidates, followed by a motto reading something like, “Better Schools,” “Lower Taxes,” and “Energy Independence.”

If facts matter, and I believe that they still do (even if they are optional in the mass media), such messages on the signs of these two politicians should be jarring to the honest in heart. The political record of Obama and Biden are unequivocal on these three issues. They both have strongly and consistently opposed school reform, supporting doing more of the same old stuff that has been steadily undermining the quality of government-run schools since the 1960s.

Both have been leading advocates for raising taxes and opposing tax cuts. Even in the current campaign they advocate new tax hikes. They try to disguise their intentions with the assertion that their proposals supposedly would reduce taxes on 95% of Americans (including the 40% who pay little or no income taxes), while raising them on the rest. Either they failed with the simple math, or they hope that voters cannot or will not be able to apply simple math, but you cannot get enough taxes out of 5% to pay for genuine tax cuts for 95%. In fact, their proposals are just another camouflage for the old tried and failed policies of tax and spend. Not only does that always put more power into the hands of the politicos who take and then redistribute, but it is a highly dangerous thing to do in the teeth of an economic downturn. Taxes fall on income and investment, and whatever you tax you get less of. Now is not the time for less income and investment.

And as for energy independence, both Obama and Biden support programs that will yield little and have yielded very little new energy—at very high expense in government subsidies—while staunchly opposing expanded use of the energy resources that are abundant in the United States, particularly oil, coal, and nuclear energy. Independence seems to me to increase reliance on your own resources. Obama and Biden are consistent supporters of policies that keep U.S. energy resources under lock and key.

This should not be surprising from two candidates who campaign on change while advocating the oldest political formula in the history of government, that government knows best, that decisions about spending, whether for health, education, or job creation, are best made by power brokers in the halls of Washington power centers, rather than by families in their homes. Calling that change may be the biggest lie of all.

(First published November 2, 2008)

Filed under Barack Obama, deception, education, elections, energy, government, investment, media, politics, recession, statism, taxes Tagged with , , , , , , , , , , ,

Of Humanism and Religious Freedom

April 26, 2015 Leave a comment

Can a creed that claims to be non-religious be itself a religion? Is the professed irreligion of the leading social elites not only a religion but America’s state religion, reinforced by Federal, state, and local governments?

Consider a typical school commencement ceremony, whether college or high school. A speaker declares that we must leave all talk of God behind, toss into the dustbin the dogmas of religion that divide us, and embrace a view of life that brings people together in a common cause of humanity, a village of fellow passengers on this tiny planet as it wends its course through the universe. At another similar commencement ceremony a different speaker declares that we should rise above the hates and lusts of mankind and embrace the love of God, join together in our common heritage as children of the family of God, learning to live with each other here that we may all the better live with our Heavenly Father in the eternities. Which of these, today, is likely to receive the greater applause and public commendation? Which of these speakers, on the other hand, is more likely to be censored and not even permitted to present his views, perhaps under threat of a lawsuit? Or, to make the question easier to answer, which is more likely to receive favorable coverage in the media?

Expressions of skepticism about God and His existence are embraced, praised, and rewarded in contemporary American society. Declarations of faith in God meet anything from patronizing smiles, to hostility, to punitive sanctions under the prevailing culture. The predominant American society, while professing to be neutral about religion, has some very strong opinions about religion and its expression.

In a land of constitutional free speech, that allows no state religion, this should seem an odd discussion, a throwback to history. Cursory familiarity with the historical chronicle would bring to mind other places and times when an incautious word on religion could earn a speaker severe punishment, not excluding cruel execution. Deviation from the local religion was certainly risky business anciently. We also may recall tales of the Spanish Inquisition and the bloody controversies of the Protestant Reformation, as well as the perennial anti-Semitism that has followed the House of Israel throughout its Diaspora. Social revolutions have dealt harshly with religion, from the French revolution to every communist regime, while clumsily endeavoring to create new secular religions (that failed miserably to engage adherents).

The malodorous plant of state religion followed the colonists to America, but it had trouble taking root, particularly among the English colonies. The freedom of wide open spaces, and the need for an armed populace, made oppressive government difficult to maintain. Thomas Jefferson considered the establishment of legal guaranties of religious freedom in Virginia to be among his life’s most important achievements (the other being the founding of the University of Virginia). The principle of that law was later made a part of the United States Constitution with the adoption of the First Amendment.

The public outcry from media and politicians (with little echo from the general populace) over recent efforts of states to reinforce freedom of religion against encroachments by regulatory dicta and court edicts strongly suggests that there is one—and only one—protected national religion in the United States today. It needs no protection offered by these state laws, because its tenets are the motivating heart of the government actions threatening all of the other religions. It goes by many names—as do many broad religions—and includes a variety of sects, also not uncommon among religions. For facility of discussion, I will refer to just one of its appellations, Humanism.

The religion of Humanism has a core belief—shared by all of its sects and denominations—that man is the measure of everything. Man decides what is truth, what is good, what is real. Yes, that is more than a bit narcissistic, which is probably the key to its attraction, particularly among the intelligentsia and the elites. The chief corollary to this main tenet is that God does not matter, whether you believe in Him or not (some Humanist sects tolerate a belief in God or some sort of Supreme Being for reasons of nostalgia and to broaden popular acceptance).

Humanism has an elaborate set of dogmas, commandments, taboos, and rituals. It has its own liturgical language, which is required to be used, for example, in all doctoral dissertations—especially those in the social sciences, though its linguistic hegemony is now reaching to hard sciences as well—and in more colloquial versions observed by all media outlets, especially broadcast journalism. Humanism has its sacred texts along with its college of revered and beatified Humanists of yore.

I was going to write that Humanism has its own seminaries, but, frankly, that includes nearly all colleges and universities in the nation. The clergy of Humanism is largely self-appointed, though it has intricate, Byzantine hierarchies, with no one at the top for long, though all presume to speak for everyone. The clergy are supported by varieties of orders of acolytes and sycophants, the gathering of disciples a key method of rising in Humanism’s hierarchy, and the loss of disciples a sure path to disfavor and obscurity.

While most religions preach exceptionalism, exclusivity, or preeminence, whether in faith or favor with God, Humanism may be the most intolerant of all. Being the state religion, it uses the full power of legislatures, regulators, law enforcement agencies, and the courts to advance its cause and bring in to line people who disagree with its tenets and prescriptions, who violate any of its taboos—particularly who utter any of its taboo words—or who remark on the foibles of its revered demigods. Significantly, any practice by any other religion that interferes with Humanism must yield to Humanist demands, not excluding the profligate use of federal, state, and local moneys to fund its projects, prescriptions, and priests.

Therein lies the explanation for both the desire of various state legislatures to reaffirm religious freedom and the inveterate and fierce hostility to these efforts from the media and a bevy of national celebrities. Freedom of religious belief and practice is a threat only to an established national religion, erecting obstacles to forced conformity with the state church. Failure of efforts to reaffirm the protections of the First Amendment will result in an increasingly intimidating society, constraining intellectual freedom and unauthorized religious observance to a degree unseen in the United States since 1787.

In a letter to Dr. Benjamin Rush, September 23, 1800, Thomas Jefferson wrote, “I have sworn upon the altar of God eternal hostility against every form of tyranny over the mind of man.” Those words are the most prominent inscription in the Jefferson Memorial. Jefferson might get into trouble saying such a thing at a modern commencement ceremony at the University of Virginia.

Filed under academia, atheism, communism, Constitution, courts, federalism, free speech, freedom, God, heresy, humanism, media, organized religion, religious freedom, statism, tyranny Tagged with , , , , , , , , , ,

Of the Federal Reserve and Taking from Savers

April 4, 2015 Leave a comment

Ben Bernanke has a blog. You can find it here, courtesy of the Brookings Institution. Of course, what would the former Chairman of the Federal Reserve Board write about, other than decisions he made as Chairman, and why people who take issue with them are wrong? One would expect no less, and reading the light he sheds on previous decisions—offered in Fedspspeak at the time that they were made—is surely the chief lure of Ben Bernanke’s blog. Allowed to communicate in regular English, not worried about how Fed Watchers might construe or misconstrue everything he says and does not say, Ben is more able to speak his mind clearly.

The former Fed Head chose for his first blog post a vigorous defense of price controls on interest rates. In the process Bernanke demonstrates the assumption that we are safe letting government economists control the economy—an assumption continually disproven by real-world experience.

In fact, as a result of entrusting much of our economic freedom in the United States to government economists, we do not have a free market for interest rates, at least not short term rates, and we pay for that every day. The Federal Reserve sets short term rates in this country, and so far the market has had zero success in moving rates from the near zero interest rate range that the Federal Reserve has decreed and maintained for some years. Keep that in mind the next time you wonder why you earned $1.73 in interest on your savings account last year.

If you borrow money—when you can get a loan—then you might consider yourself lucky. The biggest borrower of all, in the whole world, is the United States Government. Uncle Sam must be feeling very lucky, because he is paying comparatively little on the $18 trillion of U.S. Government debt, increased by another half trillion dollars last year.

If you save money, though, especially for your retirement—and if you have to live off of those savings in retirement—you might not feel so fortunate. By keeping interest rates lower than the market would set them, the Federal Reserve is daily transferring many billions of dollars from savers to the Federal Government. And you thought that only the IRS takes your money.

Let me illustrate with an example. For the last three months of 2014, all of the banks in the United States, all of them together, paid no more than $11 billion to people who had their money in banks. Is that a lot of money? It depends. When that is the interest paid on nearly $12 trillion in deposits, the answer is, no, that is not very much money at all.

Do not blame the banks, though. They are in the saving and lending business, too. Try as they might, with the Federal Reserve controlling interest rates, banks could not pay any more interest to depositors. If a bank did, it would have more money than it could lend as people shifted their deposits where they could get a better return. To pay interest on deposits, banks cannot get much more interest from the loans they make than the Federal Reserve price controls allow, and many relatively good loans present more repayment risk (banks do need to be paid back) than those low interest rates would cover. Low interest earned means low interest paid.

All the banks in the nation have a little over $15 trillion in loans and other assets, on which they earned last year about the same amount as they did five years ago, when they had $2 trillion less in loans and other assets. In an environment of low interest rates, banks have to concentrate their lending on the safest borrowers.

That is how the low interest rates controlled by the Federal Reserve are oppressing the economy. When savers and lenders can only get a few cents on a hundred dollars lent, they place their money with the very safest of borrowers, since they cannot afford to take any losses. Someone who has a really good idea—which like all good ideas may or may not succeed the first time—has trouble getting the money to give his idea a go and hire people to help him try.

Ben Bernanke claims that the Federal Reserve’s near zero interest rate policy—called ZIRP—has been stimulating the economy. If so, where is the stimulation? Why has the recovery been so weak? There has been stimulus, but it has gone primarily to support Federal Government spending and to pay down the debt of the largest and healthiest businesses that can trade in their higher cost loans for the Federal Reserve’s lending bargains. The biggest increases in bank loans have been in Treasury debt and deposits at the Federal Reserve.

Ben Bernanke, in his blog, reminds me of the story of the lawyer representing a client charged with stealing a car and returning it damaged. The lawyer says, first, that his client never had the car; second, that he returned it in perfect condition; and, third, that it was already irreparably damaged when his client took it.

Bernanke begins by explaining that the Federal Reserve does not set interest rates, or that at most its ability to do so is only “transitory and limited.” He pleads that the Fed can only affect short term rates “in the short run.” He does not explain how seven years of ZIRP can be considered the short run. Then he progresses in his blog to describe how the Federal Reserve “influences” interest rates and then how the “Fed’s actions determine” interest rates. His argument, after denying that the Fed can set rates, is that the economy has been so weak that the Fed has had to lower interest rates for the nation’s own good. Bernanke next argues that the economy has remained so troubled (he does not say, despite ZIRP) that the Federal Reserve has had no choice but to continue with ZIRP, concluding that it is the economy after all the forces the Fed to do what it does. Do not blame the Fed Governors, they had no choice but to continue doing what they cannot do because it has not done any good so far. I think you need to have a Ph.D. in economics to make such an argument.

We cannot do it, we did what we had to do, and since it has not helped we cannot stop. I wonder how he reacted to those kind of explanations from his teenagers. Any responsible parent would reply, no, you cannot have the car, give me back the keys.

Filed under banking, economic growth, economics, Federal Reserve, government, interest rates, markets, personal finance, recession, socialism, statism, Treasury debt Tagged with , , , , , , , , , , ,

Of Banks and Over Taxed Regulators

September 27, 2014 1 Comment

Banks, who needs them? A quick question and a quick answer: a thriving, prospering banking system is essential for a thriving, prospering modern economy. Banks bring together the resources of savers and the needs of borrowers, particularly borrowers who seek funds to establish or expand businesses or families and individuals who use occasional borrowing to smooth out their income (good banking principles penalize people who would borrow in order to live beyond their means, but more on that at another time).

Banks also created and maintain the payments system, the means by which money is transferred quickly and accurately throughout the nation and even internationally. Bank services include as well a variety of wealth management tools by which individuals, families, businesses, and governments can store, grow, and make best use of their financial wealth.

Without banks, almost none of these services would be available. Many non-banks provide bank-like services, but they all come to find the need to rest their own services at some point on a bank.

Banking in the United States has grown with the nation, from very simple institutions in the eighteenth and early nineteenth centuries, to a wide variety of bank types, charters, and business models, as diverse as the financial demands of the customers of the largest and most diverse economy in the world. I once presented at a meeting in Chicago a list of about two-dozen different types of banks in the United States. We have national banks, state chartered banks, small community banks, larger regional banks, and very large banks with extensive national and international business products and services. All of these operate and compete together, with a body of customers behind each one who think that their bank offers the best available choice of services that they want. No other nation in the world has a banking industry like ours.

The recent recession and financial panic—and the inevitable politicizing of finance that came in its wake—have thrown much into confusion and imposed upon sound and prudent bank supervision harmful ideas born of reckless sloganeering and hubristic financial engineering. The complexity of banking—no more complex than information technology, communications systems, or modern manufacturing—has been superseded by even more complex bank regulation.

The rules governing banking are too much and too many to function reasonably. They have become more than the very human people in the multitude of bank regulatory agencies can manage. The disciplining role of markets and the valuable service of banker judgment have in large measure been replaced by bureaucratic procedures and the judgments of government officials. These officials have had little if any practical experience making loans, taking deposits and putting them to work, building financial wealth, or otherwise providing products to customers. Government officials cannot run businesses. Now, their government jobs have become so demanding and complex, that they will not be able to do their own jobs, either. Too much has been placed upon them.

Those most harmed by all of this are bank customers. For the moment, bank profits are up, but that is because their losses are down as they recover from the recession, not because services to customers are expanding. As a result of government interest rate policies, depositors earn almost nothing on the money that they place in banks. The expanding oversight involvement of bank regulators makes it dangerous for banks to offer new services to customers; the risk of breaking any of thousands of pages of regulations has become too great. It takes almost half an hour to open a new bank account, something that used to take minutes. Fewer credit-worthy borrowers today qualify for mortgages than just a year ago, before new regulations went into effect. The number of banks has been declining in recent years, dropping at the rate of nearly one for every business day, week in and week out. Only one new bank has been opened since 2010. We have fewer banks today than the nation had in 1893. A stagnant industry is less able to evolve to meet changing customer needs and preferences.

For the good of all of us who rely upon banking services, and for the sanity of financial regulators, we need to return to the principles of good banking. We need to restore a system of supervision that is measured, not by how much banker judgment it takes over, but by how it adds value to the ability of banks to serve customers. Government agencies—and the laws that they administer—that are derived from a founding document that begins with the words, “We the People,” should do nothing less, and nothing more.

On another day I would like to share some thoughts about how banks are being goaded to become their own enemies.

Filed under banking, BCFP, bubbles, Dodd-Frank Act, economic growth, government, interest rates, markets, prosperity, statism, wealth Tagged with , , , , , , , , , , ,

Of the Soviet Union and the European Union

April 8, 2014 Leave a comment

Do you remember when the Soviet Union disappeared? Do you recall how and why? I hope that Vladimir Putin does. An accompanying question that needs to be considered is, why is Ukraine so attracted to the European Union?

To answer the first question briefly, we have to turn our attention to the final days of the old USSR, then led by Michael Gorbachev. Russia, the largest member of the 15 “Republics,” was led by Boris Yeltsin. Under Yeltsin’s leadership, Russia chose to withdraw from the Soviet Union. He said that Russia was weary of carrying the burden—economic, military, and otherwise—for the others. Russia just left, and after a brief try there was nothing that Gorbachev could do to make Russia stay. Without Russia, there was not much left to the Soviet Union, and the other members said “enough,” too. The Soviet Union was gone with hardly a whimper and little lamented except by the class of privileged communist leaders.

The word is that current Russian President, Vladimir Putin, wants to put the band back together, that he wants to reassemble the old Soviet Union, with the coercive influence of the Russian military as his chief tool. Not that he wishes to recreate the communist paradise of Lenin and Stalin. His vision reportedly reaches back to the great days of the czars—though presumably without the trappings of monarchy and royalty. Putin is through and through a Russian, so he wants to recreate a Russian Empire. Continuing along the path that he has set out, the path of creating an empire of the czars after the mode of the Caesars, he is unlikely to succeed. Been there. Tried that. Did not work.

It is hard to understand why Putin would choose that model. Why would he want to deal himself and the Russian people a losing hand? The Russian-dominated Soviet Union, assembled by the Red Army, failed. It did not fail because the Soviet leadership did not try hard enough, or was stingy in expending resources, or showed too little military muscle, to hold it together. It failed because—as Yeltsin recognized—it was costing too much to hold it together, draining too much life from Russia. The USSR was a bankrupt model (morally and financially) for building an empire, especially for keeping an empire. There were not enough hands to hold on tight to everything and everyone.

Perhaps Putin figures that without the burden of communism a strong Russian government could hold and control successfully where the commissars could not. In other words, he would reject the model of Soviet communism and embrace the model of a modern non-communist authoritarian regime, like the Third Reich. That one did not work so well, either.

There is a model available, tried and tested, that would work. It would unleash the power and greatness of the Russian people and at last make the most of the amazing resources of the Russian land. The results would exceed by far even the exaggerated dreams of czars and commissars. Does Putin have the vision?

I refer to the model of freedom, only briefly known to the Russian people, only occasionally offered in limited experiments, experiments that were always wildly successful, surprising only to the governmental leaders who tried them and then abandoned them, frightened by the successes. Applied boldly, we would see a Russian miracle that would change not only Russia but the world—all for the better. Free men and women, operating in free markets, protected by the rule of law enshrining individual rights, erected on the foundation of a constitutionally limited government, would be a model offering limitless growth and prosperity. Moreover, the variety of peoples and cultures in a land as vast as Russia could be recognized and accommodated, attracted and joined together, within a strong but genuine federation, united by the ties of thriving national markets, reassured by the rule of law supported by a just and independent judicial system to safeguard fundamental rights.

A dream? Perhaps it is, but a realistic one. This offers the answer to the second question. Why is Ukraine attracted to the European Union? Does not the European Union offer just such an option? Is not the economic prosperity and individual freedom—and room for national expression—found in the European Union obviously different from the offering of today’s Russia and the memory of the old empire? Is it not fear of the specter of the czars and commissars that haunts Ukrainians?

Was not the creation of the European Union once just such an impossible dream as a truly free and just Russian federation? For hundreds of years the fathers and mothers of the peoples of the European Union made war, large and small, upon each other, French against Germans, Germans against Austrians, Austrians against Poles, Poles against Germans, and round and round again. Today such wars among these same people are unthinkable.

Assembling such a federation takes time, patience, and skill. It may be too tempting for an impatient Putin to rely on his military muscle to make an empire. Perhaps for a brief time he could succeed by force to reassemble much of the old Soviet Union as a greater Russia. The greater challenge, the one that has proven impossible, is to hold such an empire together by force.

Such empire of force would very soon prove ungovernable, with rebellions large and small flaring up constantly. The brutality exerted to try to hold it all together would make the task of unity even harder and progress nigh impossible. It would drain away, once again, Russia’s strength in an unending effort, just as it eroded the strength of the USSR. Maintaining greater Russia by force has always proven a burden far greater than its worth, in the long run a losing effort that has collapsed in a weaker and vulnerable Russia. World War I was one example, the end of the Cold War yet another.

The people of Russia—along with its neighbors—can have a better and brighter future. A Russia built on individual freedom, free markets, free peoples, would unleash a new era of prosperity. Russia would become a beacon of wealth and success, with all Russians participating. Instead of Russians leaving to find their future, they would return to their homeland. If Japan can prosper on islands scarce in natural resources, imagine what free Russia could do, rich in resources, harnessed efficiently by the discipline of the markets.

Instead of an empire of force, a free and flourishing Russia would draw its neighbors to it as the European Union beckons to them today. No longer facing Russian fists, neighboring nations will come knocking at the door, eager to associate with Russia voluntarily, attracted by opportunities for betterment.

Of course, that is the theory. In practice, the more that Russia seeks the path of freedom and abandons the chimerical lure of military conquest, it will succeed. Russia would then achieve its real greatness in the world, the only way that it ever really could.

Filed under communism, economic growth, European Union, federalism, freedom, markets, military, prosperity, rule of law, Russia, socialism, statism, Ukraine

Of Incentives and Jobs

April 5, 2014 Leave a comment

Remember the early days of the recession and its intensification by the policies of Washington? Remember how the politics of envy ended up causing more job losses as the demagogues in the White House and on Capitol Hill lambasted incentives employers offered to successful employees? Good thing that the politics of envy are now behind us, that we have all grown up and recognized how foolish it all is to feel better by pulling other people down. Then again, maybe my blog post from 2009 still has some relevance today.

Weird things happen when we decide by law who should have jobs and who should not and we order how people and businesses should spend money. I am not referring to the legality of telling people who receive money from the government how to live their lives and run their businesses. I am referring to the wisdom of it. And by “weird” I really mean “bad.”

On Friday a press release came across my desk, issued by seven travel-meeting-event industry trade associations. Their basic message was that the public beating up of companies over the meetings they hold and the incentive programs that they have for employees is killing the travel, tourism, and meeting industry and the people who work in it. They estimate that 200,000 jobs were lost in that industry in 2008, and a larger number of job losses are predicted for 2009.

Even the old communist governments figured out that workers respond to incentives. Under the power of incentives people work harder, smarter, and more creatively. They may even enjoy their work more. Sometimes incentives that take the employee out of the normal routine can be very powerful. If left to their own devices, businesses will experiment with different packages of incentives to guide their employees into the most efficient ways to accomplish company goals and objectives. Will they get it right? Often they will not. When they get it wrong, they try something else.

What is the best set of incentives, and should the incentives include travel and recreation programs? I do not know, and neither do you. No one has enough information, smarts, or involvement to know. You may know what works for you, but are you willing to say that others should be offered the same rewards or that you should be given the same incentive program designed by someone somewhere else or in some other line of work? Everyone meeting company goals gets a set of golf clubs. That may work fine for Harry, but how about for you?

While it may be lots of fun to rant about businesses sending employees to Florida for a weekend, do we have any idea how that might figure into the incentive programs in those businesses? If you take that option away, what other option will work as well or as efficiently? Again, I do not know, and neither do you.

Up until recently, I did not have to know or pretend to know. We left it for businesses and their employees to figure out. In view of the efficiency of our businesses–which efficiency continued to improve and lead the world even in 2008–American businesses have been getting the incentives much more right than wrong. When we decide to make those decisions for other people, especially when we try do so through government force, we can be pretty sure we will get it wrong. Who wants to explain to the 200,000 travel and tourism industry people who are in danger of losing their jobs why businesses should not be holding meetings in Williamsburg or San Antonio or Nashville? Step up now; a frozen turkey if you get it right.

(First published February 8, 2009)

Filed under communism, compensation, demagoguery, incentives, jobs, knowledge, markets, politics, productivity, statism

Of the Rule of Law and the Separation of Powers

March 27, 2014 2 Comments

In the 1990s I was part of a congressional delegation to Argentina. At that time the Argentine economy was growing strongly and steadily, inflation was low, the currency was pegged to the dollar, convertible 1-for-1. Trade barriers were being lowered, commerce was booming. I recall asking Argentines what could possibly darken what seemed to be a very bright future. They were quick to reply: “Here in Argentina we have no rule of law. You can have no confidence in getting justice from the courts.”

That reminded me of Washington Irving’s observation on a European judge, from his famous work, The Alhambra:

It could not be denied, however, that he set a high value upon justice, for he sold it at its weight in gold.

Not long after that visit, the politics of income redistribution and confiscation threw the Argentine economy into turmoil, where it has remained.

I recently spoke with an economist friend of mine, who was waxing eloquent about the attractive monetary and tax policies in Bulgaria. I remarked that this would probably invite foreign investment. He replied, “No, there is no rule of law there.”

The point is that good economic policy cannot long survive inadequate legal safeguards. Many businesses that made major investments in China, attracted by a market of a billion people, have learned that the lack of a reliable legal and justice system in China has undermined much of the business value they thought to find. A similar story has been holding back investment and economic development in Russia.

Bringing that home, I would venture that concern for changing rules (or even lack of rules)—the substitution of arbitrary bureaucratic powers in Washington over objective rule of law—has been inhibiting more robust investment in the United States, a major cause for our current anemic economic recovery.

An ancient king in the Western Hemisphere, named Mosiah, warned, “because all men are not just it is not expedient that ye should have a king or kings to rule over you.” (Mosiah 29:16) Because men are not consistently just, freedom has historically rested upon rule by law rather than rule by men.

Fundamentally, that was the very reason for the American Revolution. Our revolution was based on the rule of law, an assertion of the rule of law, a response to violations of the rule of law by the English king and parliament. Most of the Declaration of Independence is a lengthy litany of violations of law by the English rulers. The Revolution was designed to take power away from man and men and rest it upon laws and rights, soon to be secured by a written supreme law embodied in the Constitution. Any erosion in the force and effect of the Constitution is an erosion of the rule of law and of the freedoms that rely upon law for their defense.

The Progressive Movement that thrived about a century ago, and found a major advocate in the federal government in President Woodrow Wilson, aggressively proposed an alternative to the rule of law. This program was the Rule of Experts. Their new view—and it really was a very old view though they dressed it up in modern-sounding rhetoric—was that there are Benign People, Experts, who know the process of modern government better than most people do, to whom we can safely yield governing authorities.

It sounds akin to the ancient theory of Divine Right of Kings, that the monarchs of the world are chosen by God and endowed with greater wisdom and perspective than the average man and woman. To their benign expertise and fatherly care was to be entrusted the governance of the rest of us.

The modern Rule of Experts people have much the same view, that these experts were endowed by their universities and other sources of expertise with ability far above that of most, and it would be wise to trust ourselves to their benign care. Not very democratic, and in fact these Benign Experts make no secret of their impatience with the Congress and other constitutional brakes on arbitrary authority.

As King Mosiah wisely pointed out that men are not always just, it is also appropriate to recognize that putting men in government does not make them any more reliably wise than the rest of us. The American Founders thought to address this problem by dividing political power among not only three branches in the Federal Government but also by embracing the federal system of dividing government with the States.

The current regulatory structure and program of the United States rest heavily on the idea that Benign Experts should be entrusted with authority for many of the big questions facing Americans and for many of the much smaller questions, too. That is certainly the structure of the Dodd-Frank Act, to offer one recent, prominent example among many.

Charles Calomiris, of the Columbia University business school, described the theory of the Dodd-Frank Act and related regulations this way:

The implicit theory behind these sorts of initiatives, to the extent that there is a theory, is that the recent crisis happened because regulatory standards were not quite complex enough, because the extensive discretionary authority of bank supervisors was not great enough, and because rules and regulations prohibiting or discouraging specific practices were not sufficiently extensive.
(Charles W. Calomiris, “Meaningful Banking Reform and Why it Is so Unlikely,” VoxEU, January 8, 2013)

This program of federal regulation has been imposed increasingly in contravention of the basic constitutional principle of separation of powers, by merging legislative, executive, and judicial authority in “independent” regulatory agencies. The unelected federal regulator today decides the details and specifics of binding mandates, identifies violators of those regulations, assesses guilt, and applies penalties.

Taken together our current regulatory system, by merging rather than maintaining the separation of powers of the Constitution, is eroding the rule of law. It is returning us to the age old practice of rule by men, with all of the potential for abuse of rights and freedoms, abuses that fill up most of the sadder pages of human history.

During the debate over the creation of the new financial consumer Bureau, Senate Banking Committee Chairman Dodd boasted that with this new agency people would no longer have to come to Congress for the enactment of new consumer laws. The Bureau would take care of all that.

There are serious operational flaws—too often overlooked—in the program of governance by Benign Experts. First, the regulators are not dispassionate umpires, limited to calling the balls and strikes. These umpires are also players in the game, the federal agencies each having their own set of particular interests and incentives that they take care of first.

Second, reliance on Benign Experts assumes an unproven, undemonstrated level of knowledge, insight, and forecasting skills. AEI President Arthur Brooks, in his book, The Battle, provides one of many examples of this flaw:

Federal Reserve economists were still forecasting significant positive growth and moderate unemployment in May and June 2008. They believed that economic growth in 2009 would be 2.4 percent, and unemployment would be 5.5 percent. What we experienced instead was negative growth, double-digit unemployment, and the destruction of at least $50 trillion in worldwide wealth. No one can get the numbers exactly right, to be sure. But getting them this much wrong certainly lends a whole new meaning to the expression ‘margin of error.’
(Arthur C. Brooks, The Battle, p.46)

It is not that regulators are dumber than the rest of the population, but they are no smarter either. The regulatory problems are increasingly too great for any designated group of humans to solve.

Third flaw, mission creep: power attracts power. Even if the tasks are too great, require too much knowledge, insight, foresight, and other skills in unachievable degree, the regulators still take them on, especially if the task increases the reach and influence of the agency.

I offer two examples from an example-rich environment.

Basel III capital rules started from a simple idea, that banks all around the world should be subject to the same capital standards. Capital (the financial cushion a bank carries against losses) is one of the three key elements of sound banking, the other two being liquidity and earnings. These international rules did not remain simple. Developed by an international team of experts from around the world, who labored on them for years, the rules number hundreds of pages, affecting the entire financial structure and business model of a bank, any bank. Congress was not involved and has no particular role in approving the rules. When exposed to public review they attracted thousands of comment letters expressing dismay that they are a bad fit for the U.S. economy. In the end, though, the regulators can go ahead with what they alone think is best.

A second example would be the Federal Reserve. One hundred years ago this year the Fed was created with a specific, identifiable, and rather narrow purpose, to provide liquidity for the banking system in times of financial stress. Before long, the Federal Reserve gained control of monetary policy and built up the practice of controlling interest rates. Later, it was given the task of promoting maximum employment. Under Dodd-Frank the Federal Reserve’s role in supervising banks and bank holding companies was expanded to supervising any financial business considered to be significant for financial stability. Each of these powers has drawn the Federal Reserve away from its narrow, objective task, to broad fields of subjective authority.

Perversely, this expansion of authority into more judgmental areas is eroding the independence of the Federal Reserve, making it yet one more political player in Washington, with responsibilities that far exceed human ability to fulfill, but which reach to every business and every home. The Fed’s prolonged policy of keeping short-term interest rates at or about zero has penalized all who save and live off of their savings, transferring trillions of dollars from savers to borrowers, the biggest borrower being the Federal Government, a policy decided by a small group of Washington experts.

I offer a partial but simple solution to point us back toward strengthening the rule of law and reducing our exposure to the rule of man and men, however expert they might be. Return the lawmaking and the policy decisions to the elected representatives. It is a messy process, but exactly the messy process that the Founders intended to preserve freedom from the encroachment of arbitrary and oppressive government. The regulators, which are theoretically part of the executive branch, should be left with the duty of implementing the laws and policy decisions that the elected and accountable representatives make.

If Congress were required to write the rules and mandates and delegate to the executive agencies only the execution, the mandates of government would be circumscribed by the limitations of a legislative body forced to be directly accountable for what it has wrought. It is easy for legislators to complain about bad regulatory decisions, when all too often these are decisions that Congress never should have delegated to regulators in the first place.

We would still have laws and regulations, but the laws might be more direct and specific, and perhaps fewer and surely smaller. We would probably not have Dodd-Frank Acts that number thousands of pages read by no congressman or Senator, containing a cacophony of half-baked ideas and multiple solutions to the same problem, all left for the regulators to sort out.

And legislators might recall this caution, from Thomas Paine:

Laws difficult to be executed cannot be generally good.
(Thomas Paine, The Rights of Man)

(First published February 17, 2013)

Filed under Argentina, banking, bureaucracy, Congress, Constitution, Dodd-Frank Act, Federal Reserve, federalism, freedom, government, interest rates, knowledge, law, progressives, rights, rule of law, Russia, statism, systemic risk, tyranny, Woodrow Wilson

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