Abuse of power in Washington D.C.

(What follows are excerpts from a House committee hearing focused on the investigation of AIG and the recent bonuses paid by AIG. For the full source of this transcript, click here and here.)

Barney Frank (D-Mass) is currently questioning Edward Liddy, CEO of AIG, a man who took the thankless job of cleaning up the insurance giant for $1/year salary.

FRANK: But let me ask you this now, and you said some people are giving the -- the bonuses back. I'm now asking you to send us the names of those who received bonuses who have not given them back. Can you do that?

LIDDY: Sir, I -- I will, if I can be absolutely assured that they will remain confidential.

FRANK: Well, I -- I won't give you that assurance, sir. And so if that's the condition, it would be my intention to ask this committee to subpoena them.

And I would -- this is a situation where there's a lot of public activity. I ask you to submit the names of the people who've received the bonuses, noting that they paid them back or not, and I won't accept them under confidentiality, personally. In fact, you submitted some confidential information and I, frankly, threw it away after reading it, because I was afraid I would inadvertently breach the confidentiality.

But I -- I do ask that you submit those names without restriction. And if you feel unable to do that, then I will ask the committee to subpoena them.

LIDDY: Congressman, if -- if you'll -- if you'll let me explain, I very much want to comply with your request. I would hope it doesn't take a subpoena. If -- if it does, then we will obviously comply with the law.

I'm just really concerned about the safety of our people, so let -- let me just read two things to you. "All the executives and their families should be executed with piano wire around their necks." "My greatest hope: If the government can't do this properly, we, the people, will take it in our own hands and see that justice is done. I'm looking for all the CEOs names, kids, where they live, et cetera."

FRANK: I -- I understand that. Many of us get these kinds of threats. Clearly, those threats are despicable, people who engage in this kind of threat. And I would say to my colleagues, the rhetoric can get overheated, so we ought to be very careful.

I will be willing to be guided to some extent by what the security officials may say, but this is an important public subject. And my guess is that there are probably threats aimed, without too much specificity, about people who work there.

So I am going to keep that request on the table. I will consult with the law enforcement people, including the federal law enforcement people. And if they tell us they think there is a serious threat, we will have to take that into consideration.

But I -- I do want to keep that request on the table, and it is subject to our being persuaded. If I ask for a subpoena, it would be a committee markup. It's not a unilateral decision. And, yes, it's legitimate to take into account.

The Artful Dodgers in Washington

Well, folks, they're livid. And we're livid. They're livid because we're livid. And they're busy squawking about just who our ire should be directed at.

I'm talking, of course, about our Congressmen and Women in Washington. You know, the ones that spout endlessly about standing up for you and me, the little folks. The big, bad villian of the day that they are nobly taking on for us are the greedy, no-good folks at AIG who (gasp!) were awarded bonuses (BONUSES!) after taking $185 billion of government bailout money.

When the news of that broke a couple days ago, the Republic was (how to put it politely?) royally pissed. And we have every right to be. It is an utter disgrace that our capitalistic system has continued to allow those who have failed to make good use of the capital to reap rewards commensurate with success.

Our trusted officials in Washington were mighty quick to join us in our gnashing of teeth. Senator Chris Dodd (D-Conn) is planning on holding hearings into how the bonuses came into being. Rep. Barney Frank (D-Mass) was disgusted, offering that "Maybe it's time to fire some people. We can't keep them from getting bonuses but we can keep them from having their jobs." Sen. Richard Shelby (R-Ala) summed up the sentiments: "This is horrible. It's outrageous."

Even President Barack Obama weighed in on the matter, saying that he was "choked up with anger."

That sure is a lot of righteous anger going around up there in Washington. There's only one problem. There was an amendment to the $787 billion stimulus bill passed by both houses a month ago that states the following:

"The prohibition [on bonus payments] required under clause (i) shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11, 2009, as such valid employment contracts are determined by the Secretary or the designee of the Secretary."

This amendment fully justifies the bonus payments that were part of the contractual obligations between the recipients and AIG, as negotiated prior to February 11, 2009.

Some have referred to this as the Chris Dodd amendment and suggested that, by inserting this amendment into the bill, Senator Dodd is doing a complete about face on his original position on bonuses.

Look deeper, however, and it may have become evident that certain folks in the Obama administration threw Dodd under the bus in order to save their own butts and deflect critism from themselves.

Regardless of how the amendment got in there, 60 Senators, 246 Representatives and one President cannot escape the fact that by voting for and signing the stimulus bill, they all but guaranteed those bonuses would be paid at AIG.

Now one begins to understand the haste with which our officials joined us in casting stones at the terrible, amoral corporate fat cats. If they didn't pick up the stones quickly and start throwing, we might just realize who was really to blame.

Should we rely on politicians to educate?

Recent (published) letter to the editor of the Raleigh News & Observer. I was responding to another letter writer who was encouraging Congressmen and women to educate their constituents on the stimulus package and what it meant for the economy.

First, his letter:

Our elected officials are there to help streamline the decision-making and represent the consensus of the people they represent. They also have to be teachers. Every good leader is a teacher first. I am too young to remember politics before George W. Bush, but having experienced his term, he might have had an easier time if he had taught. His politics were hidden behind shadows; very few people understood him and hated his decisions for it.

President Barack Obama's example now should be followed by the rest of the government: Go back to those whom you represent, get airtime on local stations, get in touch with as many of those you represent as you can, and explain to them what is happening, what it is hoped to accomplish, and how. We've heard where money's supposed to go. Now the big question is how is this going to help and how is it going to be implemented.

The workings of the government need to be made bare to the people it represents. Give us the benefit of the doubt; if we are to be educated then it should begin with knowledge of how our society works.

Now, my response:

The writer of the Feb. 25 letter "Obama the teacher" suggested that it is the responsibility of our elected officials to teach electors about the functions of government and the economy, particularly when it comes to explaining what is broken in our current environment and how recent legislation will fix it. Methinks thou dost trust too much.

I would contend that we the people should not count on our government to teach us but should educate ourselves in order to know when politicians and such are pulling the wool over our eyes.

Republicans and Democrats have far different ideas of what action (if any) is needed to rescue our economy. Which ideas are right? Well, that would depend on who is teaching, wouldn't it? If we need to be educated, we need to take that responsibility upon ourselves. The worst thing we could do is rely solely on the proponents of a particular plan for such enlightenment.

Letters to the Editor

As much as I rely on electronic media (blogs, online news, newsletters, etc) for my information these days, I still value the print edition of the local newspaper. Perhaps it's because I come from a lineage of journalists (my grandfather was Editor of the Charleston Daily Mail and Pulitzer Prize winner; my aunt is Editorial Page Editor of the same paper). Or perhaps it's because reading the newspaper was such a staple in my household growing up.

I know for certain that one of the reasons is that there is a lot to be said about professional journalists who put the time and energy into digging into the many angles of a story and writing them down for you and I to consume. There is a depth of information and analysis in print journalism that certain areas of the electronic medium still cannot compare to.

Being a loyal subscriber to our local Raleigh News & Observer, for those reasons above, I feel a sense of duty to speak my mind when something appears on their pages that I disagree with. Sometimes I feel a need, as a member of the local community, to offer a competing point of view with one of my fellow citizens. I use the Letters to the Editor avenue to offer such opinions.

I have written several dozen letters to the editor over the years, starting with a horrible and ignorant rant to my university paper about the illusions of importance in student government. That was when I was foolishly contemptuous of most things and people of which I was too cowardly to be a part.

I can't remember if I have posted any yet, but I will begin posting my letters to the editor on this blog. If my letter is a response to a particular story or another writer's letter, I'll print the source material as well so that you, the reader, may judge my own opinions. After all, it is my feeling that those who read this blog (I know there are a few) are part of my community as well. It is my only wish to exchange my ideas with others in my community, of course that I might persuade some to my points of view, but also that I might be persuaded on issues in which my depth of knowledge is wanting.

Good money after bad

The Houston City Council, thankfully, rejected today a proposal to use leftover money from emergency appropriations to help pay down certain debts of first time homebuyers in the city. The thinking (if you can call it that) was that people whose credit scores were only 10 or 20 points shy of allowing them to qualify for a mortgage could be helped over the threshold if only their balance sheets were given a focused little nudge by city government. The city would give up to $3000 for these individuals to use on car loans, credit card balances and other debts.

This is wrong on so many levels, it's crazy easy to just tick them off, so I will:

• It is not the city's money to give, it is the taxpayer's.
• How would you feel if you were told to pay your neighbor's credit card bill so that s/he could buy a home?
• Isn't the whole reason we're in this housing mess because banks made loans to borrowers that were not creditworthy? Will paying off someone's debts make them creditworthy? Maybe on paper, but not in practice. That's like putting makeup on a pig and calling it a supermodel. Giving loans to people who make the grade artificially will only set the system up for more problems in the future.
  
• Speaking of calling pigs supermodels, there's a reason a high percentage of lottery winners find themselves broke within ten years. Wealth is not something you have, it is a state of mind. So is broke. If a broke person wins the lottery, s/he is still broke, even though s/he happens to have money.

If you happen to be reading this and are one of the people who are missing a credit cutoff yourself, or are finding yourself behind in your finances, all things being equal (i.e. you haven't been laid off or had some other negative life event), take this opportunity to right your mind. Get out of the broke thinking and broke mindset. Because no matter who bails you out or how much, you'll still end up in the same difficulties unless you change the playing field, which is your thought process and practices regarding your personal finances.

GM and Chrysler should be allowed to die

Businesses come and go. Which ones survive in a free-market model (such is the direction the U.S. is currently skewed) is determined by whether they are able to deliver profits to their shareholders. For some time now, GM and Chrysler have not been able to do this. Ford, the third of the so-called Big Three automakers, has been able to pull itself up by the bootstraps and limp along while it's adjusted business model and product offerings heal its balance sheet.

The fact that GM and Chrysler are continuing to have a tough go at it is reflected in their announcement that they need still more money from the government to maintain operations (they are asking for tens of billions more, in addition to the 15-odd billion they got a couple months ago). Ford says it is fine for the rest of 2009. Economic Darwinism, or survival of the fittest in a business sense, mandates that GM and Chrysler either be dissolved, sold, or allowed to die.

Yes, there will be some pain if Chrysler and GM go away; ebbs and flows, pain and ecstasy, are inherent parts of an economy that is left free to grow naturally, without government intervention. The survival and health of Ford and foreign automakers should soften the blow, though.

The only other alternative is likely government control of the auto industry. Though they are asking for a loan, look at what is happening to banking. Surely, there are people in legislative power licking their chops at an opportunity for the government beauracracy to get its hooks in this new industry.

Government is notoriously bad at running businesses; there is ample evidence of this throughout history. Business and industry grows when allowed to select experts to direct their growth. Government has no such experts. Nationalization of the auto industry would mean greater pain in the long term than allowing two-thirds of the Big Three to come to their natural end.

Latest readings

For the past several months I've been working my way through "Rise to Globalism" by Stephen Ambrose. It is my first Ambrose book and my first history book since college (nay, high school) and I have to say I am enjoying it thoroughly.

It is an easy read that begins before WWII and tracks the evolution of American foreign policy up until the first Gulf War.

I am spending more time reading it lately so I can get it on up to my
sister, who is also reading up on history I think (aside from tort history that is). In addition, I have a pile of new books to start getting through thanks to a B&N gift card from my sister and brother in law.

"Rise to Globalism" is a good start for a just-enough-depth overview of the history behind out foreign policy.

Where do you get your milk money?

Our local rag, the Raleigh News & Observer, reported on a decision by the federal government to stop paying for whole milk for pregnant and nursing mothers and children older than 2. Why did they do this? Because whole milk is more fattening than the alternatives, of course! And with childhood and adult obesity rates skyrocketing...

How did they do this? Because they can, quite simply. This is the better story, because it may be a portent of things to come. He who pays, decides. This applies to dietary decisions or to health care. I certainly can't say I fault the government for doing this (nevermind the potential health benefits of whole milk over skim). They have to keep costs under control, and it's cheaper to care for children and their parents of a "healthy" weight than obese folks. Same goes for health care. Want those cutting edge drugs that can save your life, even if for just 5 more years? If you're not paying for them, you probably won't get to decide.

If this is the government you want, it's the one you'll eventually get. Again, be careful what you wish for.

"Four score and seven years ago..."

Do you remember those words? I think just about every kid had to memorize them at one point in his or her life. Abraham Lincoln's speech on November 19, 1863 was just 10 sentences long, and was over in under four minutes. Most of the people in the audience, weary from standing for hours in Gettysburg, barely realized what he was speaking about before Lincoln was finished. That was evident from the scant and hesitant applause that he received. Lincoln returned home thinking he had bombed it. It wasn't until the Gettysburg Address was reprinted in newspapers across the Union that it really caught on and people saw the tremendous value in the words he spoke.

Do you remember what it was about? If you had asked me before yesterday, I probably would have said that it was all about slavery. I would have been wrong. (I was probably confusing it with his other milestone, the Emancipation Proclamation.)

Not until I was reading an account of the speech to my daughter last night did I remember what it was all about. It was about the historic and tragic battle there in Pennsylvania, in which 40,000+ Union and Confederate troops were killed or wounded during the three days of fighting. More so, though, it was about what they had fought, and died, for.

Lincoln considered the American Civil War a test of not only the Union, but the whole foundation on which the Union was founded -- the idea that all men are created equal. He knew that if the principle couldn't be upheld for the slaves, then freedom and liberty for any of us might someday be at risk. When you have men deciding who should enjoy the blessings of liberty and who should not, then those decisions are subject to the frailties of men.

In some ways, we are still fighting those same battles today. So, it is important to read those words again today, as the bicentennial of Lincoln's birth is noted by our lawmakers and executives. Read them yourself, and remember who has gone before you and why they offered up their lives.

"Four score and seven years ago our fathers brought forth on this continent a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal.

"Now we are engaged in a great civil war, testing whether that nation, or any nation, so conceived and so dedicated, can long endure. We are met on a great battle-field of that war. We have come to dedicate a portion of that field, as a final resting place for those who here gave their lives that that nation might live. It is altogether fitting and proper that we should do this.

"But, in a larger sense, we can not dedicate—we can not consecrate—we can not hallow—this ground. The brave men, living and dead, who struggled here, have consecrated it, far above our poor power to add or detract. The world will little note, nor long remember what we say here, but it can never forget what they did here. It is for us the living, rather, to be dedicated here to the unfinished work which they who fought here have thus far so nobly advanced. It is rather for us to be here dedicated to the great task remaining before us—that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion—that we here highly resolve that these dead shall not have died in vain—that this nation, under God, shall have a new birth of freedom—and that government of the people, by the people, for the people, shall not perish from the earth."

Unconstitutional? Who cares?

"I do solemnly swear that I will faithfully execute the Office of President of the United States, and will to the best of my Ability, preserve, protect and defend the Constitution of the United States.'' -- President Barack Obama, January 20, 2009

Like every president before him, Barack Obama uttered these words on his Inauguration Day. They are just barely three weeks old, and we may see soon how quickly they will have lost their meaning to him.

It is immensely obvious that the Constitution itself has lost its meaning and importance to many of your Congressmen and Congresswomen.

In a recent column, George Will writes about the District of Columbia House Voting Rights Act and its attempts to subvert the Constitution. In summary:

• The act, covered in H.R. 1905 and S. 160 would create a permanent seat in the U.S. House of Representatives for a Representative from the District of Columbia.
• The Constitution states that the House "shall be composed of Members chosen...by the people of the several states."
• The District of Columbia is not a state. Rather it is the "Seat of Government of the United States."
• Though the Constitution is rather vague on the steps necessary to add a new state to the Union, Washington D.C. is a special case since it is already identified as a territory within the Union (though not a state) by the Constitution. Therefore, an amendment to the Constitution would be the only way to modify the status of D.C. to that of a state.
• Again, Washington D.C. is not a state and no amendment has been ratified recognizing it as such.
• Since D.C. is not a state, as holds forth in the Constitution, it cannot have representation in the House of Representatives.

The logic is fairly clear. This is not to say, though, that the people of D.C. should not and can never be allowed representation in Congress. The only thing needed is an amendment to the Constitution. With such an amendment, D.C. would be awarded at least one Representative (or such a number as reflective of their population) and two Senators.

So why the push for this legislation, that clearly flies in the face of the Constitution? Easy:

• The Democrats currently control both the House and the Senate.
• The voters of Washington D.C. typically vote over 70% along Democrat lines.
• The Democrats (who introduced the respective bills) would be most assured of gaining one more seat in the House. Similar efforts to award two seats in the Senate for D.C. (and for the Democrats), is not far off should this legislation be signed into law.

Barack Obama, who, as a Senator, supported an earlier attempt at the legislation, will undoubtedly sign this into law. His oath of office will have become a farce, he will become (again?) like all the rest of the power-hungry politicians, and our Constitution will once again be rendered insignificant.

Nobody's perfect? Is that the best you've got?!?

Responding to questions about former U.S. Senator Tom Daschle's viability as DHHS Secretary due to his $130,000 tax "mistake," White House Press Secretary Robert Gibbs remarked that "Nobody's perfect."

I don't expect anybody to be perfect (except myself, and I am more often let down than not). I certainly don't expect perfection out of career politicians. Hell, I don't even expect them to try, since their standards of perfection are leagues different from mine (their definition of perfection is winning the next election and staying in power).

But I do expect some modicum of competence from them. I do expect that they will not insult my intelligence by offering up candidates such as Tom Daschle and Tim Geithner who apparently have no repect for their "patriotic duty to pay taxes" (in the words of Joe Biden).

Daschle is the second of Obama's cabinet-head appointees to have been caught with more than a forgivable "mistake" in their income taxes.

Geithner, now Treasury Secretary (of all things, he is now the head of the IRS!), failed to declare income he made while working overseas for the IMF for a string of 4-5 years. His unpaid bill? About $45,000. What did it cost him, politically? Nada, nothing, zero, scratch. He was deemed to be the only man capable of seeing us through this economic turbulence, and given a pass. He was "too important to fail."

This is a guy who failed to pay taxes for 4 years and got audited by the IRS for 2 of those years. When the IRS made him aware of his mistake, he adjusted his returns for those 2 years and moved on with his life. Did he adjust for the other 2 years? Not until he learned that he may be the next Treasury Secretary. Then, and only then, did he go back and fix the rest of the problem.

Daschle failed to pay taxes on certain benefits he received from his employer, such as a private limo and driver at his disposal. He also failed to pay taxes on speaking fees. He claims that he didn't know speaking fees were taxed. Are you joking, Tom?! You're an ex-Senator! You know better than anyone that anything even remotely smelling of income will most definitely be taxed.

Again, this tax cheat will likely be given a pass. Why? Senator Max Baucus (D-MT), Chairman of the Senate Finance Committee offers a suggestion. When it comes to helping reform health care, Daschle has been "an invaluable and expert partner." Looks like another appointee has been declared too important to reject because of a bothersome little thing like tax evasion.

Two weeks into his first term, Obama has been caught with his pants down three times already (don't forget the former lobbyist William Lynn he has nominated as Deputy Secretary of Defense, after issuing an Executive Order pledging not to nominate former lobbyist).

The media and fellow Democrats (and many Republicans) seem to be ignoring these flubs. As do you, America. Is it that Obama, the Uniter, cannot be allowed to fail, even a little bit? Why don't you demand that he does right by you, and withdraw these nominations and at least offer us people who have not cheated their country? Do you care?

Market heal thyself! - Part 2

In the first part of this post, I showed on a couple graphs the clear bubbles that had formed in the stock market during the late 1990s and in the real estate market in the early part of this decade.

There are two main questions that this second post hopes to answer: (1) Why the bubble? (2) What should be done about them?

The answer to the first question is easy. In both cases, it was greedy speculation that drove stock values up higher than they ought to have been. Do you remember the hype in the late '90s about the "new economy" where silly and arcane things like fundamentals (ha!) didn't matter anymore? Do you remember the people who poked fun at that old (billionaire) fuddy-duddy Warren Buffet when he cautioned that those antiquated fundamentals didn't support such a astronomical valuation in the market?

I remember making thousands of dollars in a single trade. I owned one stock that went up 50% in one day, then another 35% the next. It was crazy! You could be a total idiot and make money in the stock market for a year or two there. And that's just what happened...the idiots got into the stock market, thinking that there was nothing to it. They just had to jump on board and enjoy the rising tide. I know people who invested thousands in Enron when it plummeted to penny-stock values.

All that speculation just put more pressure on the bubble until the inevitable.

The same thing started happening in real estate around the same time that the tech stock bubble burst. When the enforcement of the Community Reinvestment Act started forcing bankers and lenders to invent creative ways to finance the home purchases of folks who couldn't afford, or qualify for, a conventional (safe) loan, more people started buying homes. When Fannie Mae and Freddie Mac began purchasing securities and bonds backed by these weak mortgages, more and more lenders got comfortable underwriting the riskier loans. The secondary market for these bonds just fueled the home purchases. The flood of purchases raised the median value of homes in the U.S.

Now, people saw another chance to profit, another wave to ride (and another way to speculate). Middle class folks began buying vacation homes, lake homes, beach homes, rental homes. They started buying homes that hadn't been built yet just to turn around and sell the unbuilt home for a 25% profit! Folks who wanted a home began to see their dream slipping away as prices soared almost out of their reach. So they jumped into a bidding war and paid $800,000 for a house that had been put on the market for just $600,000, just so they wouldn't lose the chance to own a piece of the pie.

All that speculation just put more pressure on the bubble until the inevitable.

In both cases, the stock market, and the real estate market, the inevitable happened, as inevitables often do. The bubble burst.

Now the second question: What to do? This one is easy, but I'm going to have to turn up the volume to make sure you can hear...

ABSOLUTELY NOTHING!!!

In case you missed the bold headline today, "U.S Existing Home Sales Rise on Record Price Slump." Wait, what? I thought we needed the government to come in and prop up home values for us? You mean that when prices fall far enough (in this case, 15% in the past year) for them to become attractive to buyers, buyers will come out again?

That's right...supply and demand. It works in the stock market and in the real estate market. In the stock market, we are seeing companies whose fundamentals cannot possibly support their lofty valuations going out of business left and right, whose fundamentals were compromised by risky business decisions and blind greed. As company value falls to meet the trendline of supportable growth, so does the stock price. Companies and stock value are wiped out in the process. Pruned, to make room for healthier growth.

Real estate cannot simply go away, so values just drop until that supportable trendline is met, where buyer and seller can be happy, so to speak. Home values are cut down to support healthy, supportable growth.

The markets (especially the housing market) don't need any "help" from central government. If home prices are artificially supported at bubble levels, the inevitable will still occur...it will just be postponed. If sick businesses are propped up through cash infusions from the government, the inevitable is again delayed. Worse, the bad is sustained artificially choking out the new growth through normal competition.

It's time for a bit of a swing back in the direction of laissez-faire policies. Not at the sacrifice of smart regulation, but to save us from ourselves.

Market heal thyself! - Part 1

I'm going to make things fun. Today, I have some graphs for you to look at (ooh, pictures!). They are graphs showing the tech bubble in the stock market as it formed and then burst nearly 10 years ago, followed by the real estate bubble forming and bursting.

First, though, understand that I recognize that the basis of my analysis here is extremely elementary, and completely lacks any consideration of the many facets of the economic conditions surrounding the dot-com bust, or the more recent collapse in real estate prices. The graphs and my purpose for them is merely an exercise in common sense, and devoid of any sophistication. Value it as you may.

First the Dow Jones Industrial Average from 1985 to the present (my apologies for the poor quality):



The red line is nothing statistical or algorithmic; it is just a straight red line that I drew to match what I saw as a fairly steady upward trend in the DJIA index in the first 10 years. As you can see, around 1995, the tech bubble begins to inflate. It continues until around 2000 and 9/11/2001, when we have that big turndown, then the market picks back up again, yet still above the long term trendline.

Notice that the red line meets the DJIA value again pretty much today, around an 8000-point value. Many a market watcher have claimed that 7500-8000 is the bottom of this bear market. Is it just coincidence that is the value predicted by the long-term even-growth trend line?

Moving now to the real estate market, and U.S. median home prices, with a bit longer timeframe:



Two data sets are on this chart (mostly it's because it's the first one I found). The first data set shows non-inflation-adjusted home prices (blue line) and the second shows those same prices adjusted for inflation (I don't know where the par value is for these).

Notice, again, the fairly steady rise in value for each of these graphs, followed by a strong deviation from that trend in the late 1990s. I drew red and blue lines to show my own, eyeballed, trendline, discounting the anomoly starting in the late '90s.

It is somewhat interesting, though not at all statistically significant, that both of my superimposed trendlines almost intersect at the same point on the chart. I would expect them to intersect at some point, since inflation is typically positive and so one will always be outpacing the other, but it's likely just coincidence that they come to that nexus near our present-day levels.

But what is the point of all this? Why do I put these graphs up here? If it is not obvious already, these graphs clearly show what has been called the tech bubble and the real estate bubble. Both are glaring short-term deviations from the trendline in values. And what do bubbles do, almost inevitably? They pop. And so they did here, too, sending both stock and home values plummeting back to where they should have been trending to all along.

More in Part 2.

Polosi's contradiction?

Happened to be watching "This Week with George Stephanopoulos" this morning (one of the Sunday morning talking head shows) which featured House Majority Speaker Nancy Pelosi (D-CA) talking about Obama's stimulus plan.

George S. asked the Madame Speaker about the merit of some of the spending choices (such as family planning services) reflected in the bill. Pelosi's response included a bit about the tax cuts in the bill.

"What the economists have told us, from right to left, there is more 'bang for the buck,' that's a term they used, by investing in food stamps and unemployment insurance than in any tax cuts. Nonetheless, we are committed to the tax cuts because they do have a positive impact on the economy, even though not as big as the investments."

This begs the question: If our country is in such dire straits at this moment that Congress needs to move quickly to approve $800+ billion of additional "stimulus" or "investment," wouldn't it be prudent to put all of that money in the place that will yield the biggest return? Why not spend the whole kit'n'kaboodle on food stamps and unemployment insurance?

I won't speculate as to why Congress is throwing a lower-yielding component into the bill (at least not here), but I offer the question as food for thought.

Is habeas corpus for non-citizens?

Today, President Obama signed four Executive Orders, some of his first substantive exercises of his new executive powers. One of those orders addressed the longevity of the prison camp at Guantanamo Bay, Cuba, which our military has used for years to hold so-called "enemy combatants."

One of the findings of this particular Executive Order reads as such:

"The individuals currently detained at Guantánamo have the constitutional privilege of the writ of habeas corpus. Most of those individuals have filed petitions for a writ of habeas corpus in Federal court challenging the lawfulness of their detention."

I know the Constitution explicitely denies the removal of such a protection in Article I, Section 9:

"The Privilege of the Writ of Habeas Corpus shall not be suspended, unless when in Cases of Rebellion or Invasion the public Safety may require it."

What I am unclear of is the history of this protection and whether it is extended to non-citizens of this country. I tried doing a little research, but found myself rather tied up in knots trying to follow the breadcrumbs of this topic through 200 years of case law. Being that blogging is not my full-time job, and law is only an armchair interest (at least until I send myself to law school), I don't have the time or patience to unravel this mystery.

Perhaps my sister, a first-year law student, or one of my several other legally-inclined family members can help me navigate this and understand (a) What was the intent of the Framers when it came to the rights of H.C. and non-citizens? (b) What is the most recent constitutional understanding of H.C. in this regard? and (c) How recently has it changed, if at all?

Was Obama accurate in his finding that habeas corpus does extend to non-citizens?

I'm not arguing one way or the other the moral aspect of any of this, simply the constitutionality of it.

A new era of responsibility? Yes...but whose?

Obama spoke for about 20 minutes yesterday, as he addressed the nation for the first time as President. If one phrase seems to have defined his speech for the nation (as chosen by the media), it is his call for a "new era of responsibility."

I like that. If there is one thing that is needed in this country, it is a renewed commitment to responsibility.

The so-called Masters of the Universe, those Wall Street "fat cats," need to understand, and heed, their responsibility to the economic system that they prosper under. The greed for power and money can only foment mistrust in capitalism and sabotage the very underpinnings of a free market.

Those who govern must cast aside their own personal ambitions and recommit themselves to their only Constitutional responsibility, which is to serve the governed.

We, the people, must resolve to take our lives into our own hands and realize that if we relinquish that personal responsibility we are, in turn, relinquishing our liberties.

The last of these is the most urgent, and the most consequential for the future system of government we choose to leave our children.

There were too many examples, during the election, of people who showed evidence that they had cast off the notion of personal responsibility in exchange for a handout, or assurances, from their government.

There was the infamous video of Peggy Joseph who was overcome with relief that with Obama in office she wouldn't have to worry about paying her mortgage or putting gas in her car.

There was the young lady who called into the radio show as I was listening who stressed her belief that the government needs to do more to regulate the stock market.

There was the man who wrote to our local newspaper, just last week, complaining that he had "done what [he] was told" and saved his money, invested in his 401(k), only to lose 40% of it in the past year. He wonders "Where is my bailout?"

It just leaves me to wonder: Where is the sense of personal responsibility that our parents' and grandparents' generation seemed to embrace? Where is the "Just leave me alone and I'll take care of it" attitude?

It also makes me wonder just what Obama meant when he called for this "new era of responsibility?" Looking at the rest of his speech, it does not seem to be personal responsibility that he is commanding us to commit ourselves to.

The first hint of this is in Obama's paraphrasing of the Declaration of Independence. He cites the "god-given promise that all are equal, all are free, and all deserve a chance to pursue their full measure of happiness." What are the actual words of the Declaration? That we are "endowed by [our] Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."

I may be accused of splitting hairs here, but the difference is important. All that God gives us, according to the Declaration, is the right to pursue happiness. In Obama's version, he says we are all deserving of a chance to pursue happiness. In the first, it is up to us to create the opportunities that might allow us to acheive our successes. In the second, the "chance" to do so must be provided by someone or something outside of ourselves.

The second hint comes midway through the speech when Obama states that we must not ask "whether our government is too big or too small, but whether it works -- whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified." None of this is anchored in personal responsibility; it is all rooted in what government can, and should, do for us.

Obama then talks about the purposes of the market and the economy. "The success of our economy has always depended...on the reach of our prosperity; on our ability to extend opportunity to every willing heart...because it is the surest route to our common good."

His notion that America's economic success over the years has always depended on how deep runs the wealth it creates is quite backwards. It is not how many people the prosperity reaches that determines the growth of the economy. It is, rather, the growth of the economy that drives prosperity to so many levels.

And, again, "extending opportunity" is not an intended function of government, nor does it drive our wealth. Opportunity exists, by default, as a result of our free market system.

Here it seems that this new responsibility that he beckons us to embrace is one of government towards its citizens, to provide opportunities, comforts, and securities.

The real responsibility we need to recall is to resolve to do our best to dig deep and work hard to make our own opportunities, and to reject the government's overtures to pave the way for us from cradle to grave, knowing that, if the latter is the course we embrace, our "full measure of happiness" will be as limited as it is defined for us.

Changing of the guard

Obama delivered his inauguration address today, as he took the helm of this 230 year old nation. He is the 44th man to take the oath of office. The amazing thing about American government, and what always moves me, is the grace with which we change.

Aside from some classless idiots who have still not moved past the election nor their visceral hatred of Bush the younger, to watch yet another transfer of power in the mightiest nation on earth take place so calmly brought me nearly to tears yet again.

44 individuals leading our nation. That is 44 opportunities over the past 230+ years for new ideas to be implemented. 44 new ways to govern. 44 futures which, at the time, were yet to be crafted.

In 2001, no one knew what Bush would bring nor what he would face. He came into office, the beneficiary of the first budget surplus in decades and inheriting a decade of virtual peace in the world. But dark clouds had been gathering for some time. the dot-com bubble burst just before Bush took his oath, then, a short 8 months later, 9/11 happened. And here we are, after 8 years of Bush, having weathered a future that we could not anticipate.

Now we bring in a new leader and a new set of ideas and ideals. What will the next four years bring? What changes will be offered for us to believe in? Will we, as America, remain the shining city upon the hill, a model for freedom-seeking peoples the world over?

I truly hope so. I pray that the ideas Obama brings us will strengthen our nation while preserving its foundations. If my prayers are answered, he will have my full devotion and support.

You gotta know when to walk away

My senior "capstone" class in college, to earn my biology degree, was Ecology. While not formally so, I considered the final paper that I wrote in that class to be my senior thesis, as I leveraged the scientific and research knowledge that I had honed over the previous four years.

The paper, which explored the validity of anthropogenic global warming theory, received an A-minus, which made me quite proud, as I had put countless hours into it. My father, now retired from the coal industry, shared it with one of his colleagues, who agreed that it was well-written, though lacking in one key area: the epilogue.

I had chosen to include a final commentary on the topic to make my views on the state of global warming science known, because it did concern me deeply, as a budding scientist (I have since moved on to other, better suited endeavors). But this epilogue was, quite truly, the one weak area of my paper, and I regret having included it. It morphed my thesis from something to be considered with seriousness to something less credible, as it added subjectivity to a data-driven work.

So it was, today, with the benediction delivered at the inauguration of America's 44th President, Barack Obama. The reverend Joseph Lowery, a civil rights leader and wholly appropriate choice for delivering the final prayer, was on target and moving, and his prayer would have been spot on were it not for that final thought.

"Lord, in the memory of all the saints who from their labors rest, and in the joy of a new beginning, we ask you to help us work for that day when black will not be asked to get in back, when brown can stick around ... when yellow will be mellow ... when the red man can get ahead, man; and when white will embrace what is right. That all those who do justice and love mercy say Amen."

I'm sure he was trying genuinely to inject his own commentary on the state of race relations in our country, and perhaps provide a final verbal nail in the coffin of the whole sordid subject, but this is not the way to do it.

I wasn't aware that blacks were still asked to "get in back." That Native Americans were still being held back, systematically. That Asians were angry. That I, a white man, haven't yet embraced what is right.

With this cutesy, superfluous epilogue of his own, Reverend Lowery managed to inject the thing that was rightly absent from today's ceremonies and hopefully stamped out by the election of the first black president.

Fear mongers, all

"America must not ignore the threat gathering against us. Facing clear evidence of peril, we cannot wait for the final proof, the smoking gun that could come in the form of a mushroom cloud." -- President George W. Bush

"We start 2009 in the midst of a crisis unlike any we have seen in our lifetime, a crisis that has only deepened over the last few weeks...If nothing is done, this recession could linger for years. The unemployment rate could reach double digits. Our economy could fall $1 trillion short of its full capacity...In short, a bad situation could become dramatically worse." -- President-Elect Barack Obama

What is the difference between those two quotes?

The first quote came from Bush as he was rallying public support for an invasion of Iraq. The only thing standing between the boots of the U.S. Marines and Iraqi sand was a tad of hesitation from some lawmakers and some citizenry.

The second quote still lingers in today's newsprint, fresh from Obama's lips one short week ago. Obama was visiting on the public the idea that only a massive spending effort by the government could lift the mighty American economy out of the current mess.

"Only government can provide the short-term boost necessary...Only government can break the cycle that is crippling our economy" stated Obama.

The only thing that stands between an additional $800 billion in federal and taxpayer debt is public indigestion over the $1+ trillion that has already been committed.

Bush and his war. Obama and his spending bill.

The difference between the two quotes, and the only difference, is the subject matter, war and the economy. It is the similarity that is troublesome, and revealing.

What is the only thing that will overpower the logical mind? What is the only thing that can mute the reasoned argument? What is the one thing that can sway public opinion so reliably? What is the one thing that can convince an otherwise skeptical people to agree to something that they know they should reject?

Fear.

Bush knows this. So does Obama. Every politician knows this, and it is oft-used to gain favor for their policies and plans.

Do you wish America would have had the courage to put fear on hold long enough to consider the arguments against going to war in Iraq? How about another $800 billion in government spending and trillion-dollar deficits for the coming 3-5 years? Do you have the courage to temper the fearsome rhetoric with thoughtful analysis?

We will see. The war is already history, and hindsight is 20/20. The economy is now, but hindsight can be a valuable teacher.

My heart bleeds...

"Do you know what this is? Its the world's smallest violin playing just for [you]." --Mr. Pink, Resevoir Dogs

In case you missed it, over the weekend, five Somali pirates drowned after their boat capsized as they were taking off with their loot. It took two months for the ransom to be paid on the hijacked vessel Sirius Star, an oil supertanker coming from Saudi Arabia.

According to the story, "Abukar Haji, uncle of one of the dead pirates, blamed the naval surveillance for the accident that killed his pirate nephew Saturday." Also, in the local pirate port, where the local economy is apparently booming from the influx of stolen wealth, the lost pirates were mourned. "'Here in Haradhere the news is grim.'"

Well, excuse me if I'm not all broken up about this. As the familiar parental caution goes, "If you play with fire, you're going to get burned."

Now, truth be told, as a compassionate human being, I cannot help but feel saddened at the loss of any human life. The way I see it, each individual has the potential to be something positive to this world. In one way or another, each is a blank slate on which some productive history can be written. So when human life is lost, so is that potential.

But I feel no remorse that tragic ends came to criminals. Some, such as the pirate's uncle, would argue that his nephew had no choice. After all, Piracy seems to be the best way of making money in the broken Somali economy these days. It's no different than me coming to work as a manager each day. Except the inherent risks that I take in my day-to-day work do not include dying. When I signed up for my job, no one told me that I could be targeted by the world's most powerful militaries to account for my daily decisions.

Piracy? That's a different story. They know the life or death risks they take on a daily basis. I assume that's why they carry guns and use terror and fear as tactics in subduing their targets and forcing their demands to be met.

Of course, one could also think of piracy coming from a wrecked nation such as Somalia as a form of grievance-based violence, and therefore acceptable. After all, these people are oppressed and they have no other choice but to resort to violence against the oppressors.

Sorry, I ain't buying it. You play with fire, you'll get burned.

Friday Madness: Part Two

Headline: "Builders seek help to survive"

The original $700 billion that was to go to prop up banks and other choice financial firms was supposed to be the only money needed to head off a major recession. The money was to be used to help these companies to get these "toxic" debts off their books and ease their minds about getting the credit flowing again.

Unfortunately, Congress botched the TARP program up, just as it's botched so many other economic programs up in the past. Hell, the current crisis is rooted in government's economic meddling. If you let the undisciplined 2-year-old in the china cabinet a second time, what do you expect will happen? With nearly zero legislated regulation of the allocated funds, there are many questions about exactly where the billions in taxpayer dollars are going. With nearly zero legislated regulation of how those funds are being spent, banks are hoarding these massive gifts instead of turning the lending spigot back on. As such, the economy is in a freefall.

Apparently, Congress, the Treasury Department and the Federal Reserve also feel they hold the power and wisdom to decide who should fail and who should survive. Bear Stearns? Too big to fail. Fidelity? Let them die. GM and Chrysler? We must save them!!! Wait a second, they're not banks...

But save them they have. Or at least they're on some short-term life support, thanks to that fiscal conservative, George Bush.

Now the precedent has been set. If the American auto industry (whatever that means anymore) is too valuable to fail, then so are so many other industries or sectors. I'll be damned if the porn industry didn't just start lobbying for it's own piece of the pie, to the tune of $5 billion.

Today I read that homebuilders across the country are throwing their weight together to help spur a separate $100 billion package to salvage their own industry.

Specifically, they are asking for tax credits of between $10,000 and $22,000 for home purchases through the end of 2009, and federal help in reducing mortgage rates.

Translation: Take money from you and me to give to other Americans so that they can buy a house. I say bullshit. Enough is enough. The homebuilding industry, just like any other, waxes and wanes. It's waning now. Due to some factors beyond its own control (again, like government rigging of the economy) and some within its own control (overbuilding), many of the building companies may be forced to go out of business. So be it.

I'm not trying to be a hard ass. I just know that in order for you and I to stay free, in order for us to retain our liberty, in order for us to keep the ability to succeed, we must also preserve the ability to fail.

If government keeps stepping in and, essentially, taking control of these industries, government will have all the control. When they do, you won't, and you lose your opportunity.

In order to maintain the health of a free market economy for the long term, the deadwood must be pruned every now and again. The people who do fail won't suffer for long, because opportunity will still be there for them. The opportunity to fail again, and, thus, also the opportunity to learn and succeed.

Friday Madness: Part One

It seems everywhere I look in the paper today, there's an example of how our government is being positioned as our social and economic savior. I'll start with this...

Headline: "Obama urges delaying digital TV switchover"

If you haven't heard, and it's hard to believe anyone hasn't (you just may not care), the analog transmissions that TV stations have been using since the dawn of television are being requisitioned by the government for resale. This means no more rabbit ears or foil-laced contraptions to snatch the signal out of the air.

The vast majority of folks have already long moved past receiving air-based analog signals, favoring, instead, many of the higher bandwidth options available, such as cable or satellite. And digital transmission technologies are being used more and more by content providers.

So for the past 2-3 years, the government has been spreading the word that February 17, 2009 is the date that analog signals get shut down. They've spent millions on notifications alone; commercials on TV, mainly, to alert people that they may lose their signal if they don't purchase a special digital-to-analog converter box that would keep their TV sets from being rendered useless.

Congress also allocated $1.34 billion to reimburse the cost of the converter (which runs about $80 each) so that folks wouldn't have to pay out of pocket.

Now the part that gets me is that Obama is maintaining that too many folks who rely on analog TV won't be ready. I'm sorry, but this is not new information. In 2-3 years, there is little doubt that the majority of folks who need to know already do. I'm not sure what people expect the government to do to ensure that there is 100% awareness, short of sending folks door-to-door.

Further, there is an apparent shortage of the converters, and the $1.34 billion has already been spent in rebates. I imagine that there is no real shortage; it's likely that many people (geeks like me) who don't really need a converter bought one or more anyway, just to tinker with a free toy.

The other part that gets me in this story is that "Obama officials are concerned also that the government is not doing enough to help Americans -- particularly those in rural, poor or minority communities -- prepare for the transition."

Of course government isn't doing enough...it never is. Government should be all things to all people, right?

Music Recommendation: Muse

Every once in a while I will stumble upon a band that renews my love for music of all different flavors. Many years ago I went through a huge Moby phase, which led me to explore the world of techno and electronica. Then it was Franz Ferdinand (until I determined they really aren't that special, save for a few songs). Breaking Benjamin popped up on my radar about the same time that Metallica released their new album. Both exposed me to new and creative approaches to metal that really kept me listening, over and over. Most recently, Kelly and I got tickets to a Smashing Pumpkins date in Raleigh so I was forced to catch up on their latest album, Zeitgeist, where Billy Corgan proved, once again, that he knows his shtuff and can take on new sounds and still sound great.

Tonight, I sit here listening to a British band called Muse. I tend to trail fashions and trends far behind the curve (think Jamz shirts in elementary school, spiked hair in high school, both on the way out before I started doing it), so many readers may have already heard of them, and may be fans.

If you don't know who they are, I highly recommend checking them out. I first heard them while playing Guitar Hero: Legends of Rock, where their track "Knights of Cydonia" shows up in the later levels. It took me a while, but I finally dug into some of their stuff today. I was just looking for that familiar song and perhaps a couple more, if a few turned out to be worth the 99-cent download on Rhapsody. I ended up buying 2 of their albums, Black Holes and Revelations and Absolution. I have yet to hear a bad song.

The music is so diverse that I can't see myself getting bored very soon. I imagine I'll be playing "Take a Bow" and "Starlight" many times over, until my officemates get sick of the muffled din of my headphones. It's quite rare to find a band where the songwriting and style are fresh and new with each track, and album to album. The creativity of this band just oozes out with each new melody.

Depending on which song you're listening to, you will be able to taste flavors of some of the greats of the past, like Queen and U2. Muse's adventures in sound experiment with traditional guitar, then throw in some horns for a sense of nostalgia touching on what you might hear if you turned to the Spanish station on the radio. Some songs, like "Take a Bow," are entirely electronic and remind me of Moby when he's good. The mixing matches sounds and rhythms perfectly, as Trent Reznor has mastered in Nine Inch Nails. The vocals resonate like Bono or what you'd hear on Cold Play.

So many images are brought to mind with each song, both from the socially-aware songwriting, and the fact that the legendary sounds of so many of these classic bands are brought together and wrapped nicely with a unique bow.

Check them out...I don't think you'll be disappointed.

Green = Less War?

I'm sure a work friend of mine, who supported Obama and his current push for funding alternative energy development, would reply "Exactly" if he were to read this, but the beauty of certain alternative energy success is beginning to don on me.

The personal revelation came to me as I was reading from two sources, both of which highlight that most, if not all wars, are fought over natural resources and sources of energy. In Rise to Globalism: American Foreign Policy since 1938, historian Stephen Ambrose includes the need for sources of energy as major motivations for Japan's strategy for its own imperial ambitions in the time leading up to the Second World War. In his January 2009 newsletter, market timer Thomas Gleason reiterates his view that the current Iraq war was launched mainly to free up more oil for America's energy needs.

I am personally convinced that there was ample justification for invading Iraq and taking Saddam out of power (though the timing could have been better) on the grounds of violating every single one of the U.N. Security Council resolutions and Iraq's saber-rattling about its nuclear and chemical capabilities. BUT, it also seems to me to be more than coincidental that we and the United Nations have still not intervened, militarily, to stop the slaughter that has been persisting for years in Rwanda. Could it be that Rwanda has nothing to offer in terms of oil, or gold, or (fill in your preference)?

The wealth of a nation is defined by, and constrained by, its available resources, human and natural. Wars sparked by nations gaming to gain such wealth through conquest are as old as history.

So it occurred to me that developing a truly renewable and ubiquitous source of energy, such as sunlight, or wind, that each nation can own for themselves, would not only decrease one country's dependence on another for energy, but also could lead to a diminished need for war.

Perhaps that outlook is too rosy. After all, there are other reasons for war, and there are other resources to contend for (food, e.g.). But if there is a chance for a more peaceful world in renewable energy, I'm all for it (so long as the research and development necessary to get us there is undertaken in a way that is economically responsible).