Sun - September 5, 2010

Apple and the iPod Touch

So now that the fuss has died down a bit, let's talk about Apple.

I'll be buying a new iPod Touch to replace my Palm TX, long since discontinued and mostly abandoned by Palm. I'm not fond of smartphones. I think the cell phone carriers overcharge for the data plans. I don't like that you can't turn off the "phone" part. In my area and at least for a hundred miles in any direction, cell phone coverage is "lousy" to "occasionally good." Not great, but good, barely over acceptable..

In short, I think there is a market for the PDA niche, and Apple is the only major manufacturer providing a product.

I want something I can take notes with at meetings.

I want voice recordings.

I want video recordings.

And of course I want a calendar, address book, and tasks.

I want something that links to my Macintosh computers, cloud or no.

Right now the iOS does not support a calendar with integrated tasks (bad Apple! Bad!). The address book is very limited with almost no search outside the name, nickname, and company name. The address book doesn't show a contact's family/associates or the maiden name. Those are flaws, no doubt about it.

The camera is not equal to the iPhone camera and certainly can't match the features of a high end digital camera.

But for the money, it's a great piece of work.

And here is the thing.

No other company offers anything remotely close.

No it doesn't have everything I want. Engineering is a matter of tradeoffs after all.

I would love to see something with those liquid lens camera chips. but they haven't hit the market yet.

I would love to see an integrated projector, but those are still in the early stages too.

I would love to have one of those chips that scanned for common pollutants and chemicals, those haven't hit the market yet either.

What Apple does have is a product that is shipping.

Anything else at this point would have added to the size, weight, and most importantly the price,

While we're at it, I want the camera to scan in infrared. I want to scan for changing barometric pressure and humidity. I'd even like something that scanned for magnetic fields.

As it is, I have to settle for things like augmented reality, FaceTime, and top notch dictation software. These things are available now.

I'm willing to take the tradeoffs that Apple made. I know that it's going to get better and better. Maybe in a couple of years, the competition will offer something else. Then I'll look again.

The cell carriers don't like something that doesn't use their networks, that's why they've discouraged other smartphone manufacturers from developing something like the iPod Touch. And while no one is talking about it much, an iPod Touch may be Apple's attempt to do an end run around the carriers.

Do you know what's keeping me from ordering one right now?

I haven't seen a case that I like.

Posted Sun - September 5, 2010 at 01:45 PM  

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Mon - July 19, 2010

Female teens are WAY smarter than Congress and financial regulators

I loved this article because it illustrates freedom of choice so well. Emphasis added.

At first, Chief Executive Officer Dan Porter and his enforcement officer and community manager, Joseph Alminawi, took the Chris Dodd approach to regulation. They made lots and lots of rules, and then tried to enforce them.

The two created a list of banned words such as “rape.” Players commenced saying “grape” for rape. After “grape” was banned players wrote “r4pe” and so on, until the list of banned words reached an unenforceable 9,000.

In addition, the OMGPOP discovered that publicly scapegoating wrongdoers had a counterproductive effect. Once other rogues heard of a vigilante, they didn’t want to shun him. They wanted to join him -- even create a tough new gang to hijack the sweet culture of OMGPOP.


So Porter and Alminawi took a different tack. They involved players in the game, in management, even. Premium members, who have spent sufficient hours on the site, get to test new games, for example.

And, like the New York Stock Exchange before the Securities and Exchange Commission, they tried to get players to police one another. Banning still happened. But management worked anonymously and played on the deep human desire not to be excluded from a desirable tribe.

One other thing.

It worked. Without pages and pages of rules and false promises of absolute safety and absolute security. With people taking responsibility for themselves and their choices.

Amazing isn't it?

Posted Mon - July 19, 2010 at 12:01 PM  

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Mon - June 7, 2010

"Too big to fail" means the government is screwing you over

I've been researching a new theory. I haven't proven it yet, but I'm willing to accept it as a working rule.

You know that monopolies are dependent on government force.

Well, as nearly as I can tell, "too big to fail" only happens when the government tried to control the free market and limit individual choice. Maybe I should have said "tried and failed to control the free market," but I can't find an example of government successfully controlling the free market for more than a very short time.

Although there are plenty of examples of government control driving prices up and availability of products and services down.

So here's the theory. "Too big to fail" perfectly illustrates crony capitalism or mercantilism, Politicos and bureaucrats tried to hand a "competitive" advantage to a selected company, and when that inevitably failed, those same government idiots blamed the very free market that they tried to subvert.

Please, prove me wrong.

Posted Mon - June 7, 2010 at 01:25 PM  

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Mon - May 24, 2010

Health care and the War on Drugs

These are the flip sides of the same thing.

Plummeting Marijuana Prices Create A Panic In California.

Texas doctors opting out of Medicare at alarming rate.

The only reason why marijuana was so highly profitable is because it was illegal. Increase the supply and it becomes dirt cheap and much safer.

But if doctors can't hope to collect because of government regulation, of course they'll find other ways to pay the bills.

Watch what happens when the "health care" plan of the Imperious Leader unravels before it begins.

Posted Mon - May 24, 2010 at 12:03 PM  

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Mon - May 17, 2010

When the game is rigged in your favor, why not cash in?

By now I'm sure you've heard about the $75 million liability cap on offshore oil spills.

Steven Horwitz sums it up nicely in his entry Oil Spills, Incentives, and the Economic Way of Thinking.

If this all sounds familiar, it's because it looks like it works much like bank deposit insurance does. Each bank pays premiums to the FDIC which in turn caps the liability banks face to their depositors if they should fail. There's a nice long literature on the incentive effects of deposit insurance and the "heads I win, tails I don't lose" nature of the deal. (I wish I had the equivalent kind of blackjack insurance when I was in Vegas last month!) It would seem reasonable, without having looked at the empirical data, that this Fund would have similar effects. And it would also be interesting to explore the history of the Fund and to see whether the arguments for creating it have as flimsy a basis as did the creation of deposit insurance.

If we're really interested in preventing oil spills and bank failures, punishing to the fullest those who screw up would seem to be a very effective way of doing so. Why doing so isn't in play in both cases might have something to do with the political pull of large banks and oil companies. Crony capitalism/corporatism strikes again.

Remember, the $75 million is in addition to the clean up costs.

Still, if the government is going to shield you from the consequences of your own actions, why should the taxpayers be surprised if companies and people take advantage?

Especially when the government agencies don't follow their own rules and give an award for your failure.

One lesson Obama should learn is that to really screw things up, you need government.

Posted Mon - May 17, 2010 at 12:20 PM  

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Mon - April 26, 2010

China's not ready

I spend a time looking at indirect effects and news stories outside the mainstream. It's how I try to keep tabs on what's happening in Iran.

And then there's China.

There are some amazing things happening in China, but it's not following the roadmap that the think tanks and foreign policy experts think that it should. Here's one of the better articles that looks below the surface.

But the analysts and the conventional wisdom they peddle are wrong. China’s economic model, which allowed the Chinese to take maximum advantage of boom times, is particularly ill suited to current global conditions. About 38 percent of the country’s economy is attributable to exports—some say the figure is higher—but global demand at this moment is slumping. (Last March, the normally optimistic World Bank said the global economy would contract in 2009 for the first time since World War II and that global trade would decline the most it had in eighty years.) Globalization, which looked like an inevitable trend in early 2008, is now obviously going into reverse as economies are delinking from each other. So China is now held hostage to events far beyond the country’s borders.

As we saw in the Great Depression, the exporting countries had the hardest time adjusting to deteriorating economic conditions. That is proving to be the case now as well. China’s exports fell 16.0 percent last year, and forecasts show a weak export sector for at least the remainder of this year. As a result of declining exports and other factors, Beijing presided over the world’s fastest slowing economy. China’s economy, in fact, grew by about 15 percent in 2007, but fell to negative growth at the end of 2008.

Let's not forget the internal pressures. The Chinese people are demanding things that the Chinese government can't control.

The internet is freedom's last best hope. And where porn goes, business follows. The more that happens outside official channels, the better the Chinese economy will be.

Our American Imperious Leader should take note. He won't, but he should.

Posted Mon - April 26, 2010 at 12:44 PM  

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Mon - April 12, 2010

Something to keep in mind about the Apple-Adobe tiff

After Steve Jobs took over and he was charting out a new course with OS X, Apple reached out many times to Abode to introduce a native version of their suite for the new OS. Adobe never committed – standing by its prediction that OS X would never gain momentum or share and it would ride the Windows ascendancy. Adobe thought that it had the dominant hand and displayed its arrogance in public.
Sorry Adobe, you screwed yourself

There's more.

Way to go, Adobe! Here's a software development company whose "talent acquisition system" software, apparently, doesn't even work on standards-based browsers.

Further, a developer at Adobe—a company which was started by ex-Apple employees and became a big company through, initially, selling Mac-only software—is urging Apple employees to apply for jobs through a system that doesn't support Macs.
— The Devil's Kitchen, Adobe is hiring (Mac users need not apply)

No, I am not saying that Apple is perfect and can do no wrong. I'm pointing out that it is a PR battle, and Apple's "closed standards" don't quite mean what you've been told.

Oh, by the way. There isn't a single handheld out there right now that actually runs Flash.

Learn to read between the lines.

Posted Mon - April 12, 2010 at 01:07 PM  

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Fri - April 2, 2010

Kid gets the wonder

He’s 13 years old and he has created and is selling an iPad app in the same store where companies like EA, Google, and even Apple itself distribute iPad apps. His app is ready to go on the first day the product is available. Not a fake app. Not a junior app. A real honest-to-god iPad app. Imagine a 13-year-old in 1978 who could produce and sell his own Atari 2600 cartridges.

Somehow I don’t think young Mr. Kaplan sees the iPad as hurting his sense of wonder or entrepreneurism.
John Gruber, Daring Fireball: The Kids Are All Right

A followup to yesterday's post.

Apple Inc. isn't selling the sizzle, they're offering an easier creative path. They know that the more people who make quality applications, the more iPads Apple will sell. It's an natural step. First they sold music because they wanted to sell iPods. Then they sold apps because they wanted to sell iPhones. And now, watch what happens.

I wish young Mr. Kaplan the best in the world, and you'd better believe I'll be checking out iChalkboard as soon as I get my iPad up and running.

Posted Fri - April 2, 2010 at 01:46 PM  

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Thu - April 1, 2010


I've been holding off writing or linking to articles about Apple's iPad.

Let me say this upfront, recently I did a design job at cost with free labor for a non-profit (something I probably won't repeat too often), one of their "angels" is giving me an iPad. So yes, I am waiting. It may not make it to my part of the desert by the 3rd, but it should make it sometime next week.

Apple has been a game changer since it bought NEXT and Steve Jobs agreed to advise the Board of Directors.

Remember the floppy? Neither does anyone else.

Do you like your USB connectors? Do you remember what came before?

Do you remember when you could have your computer in any color you wanted as long as it was beige?

Even back when it was Apple Computer and the only product was the Apple ][ and a floppy drive, Apple has always been about the computer as an appliance. You plugged it in, and it just worked. No, it's not original with Apple, and it certainly didn't apply to every product. But that is where Apple has had it's biggest successes..

I confess, I like sticking to things that work. I was still using AppleWorks for formatting and the occasional spreadsheet. Heck, I'm using iBlog to write this post and the version I have goes back to 2005. I was using 10.4 of OS X up until a couple of weeks ago, even though I've had the upgrade DVD for almost a year. The next upgrade means that MaKai will no longer be my main Mac, but that will wait some. I needed 10.5.8 to link to a iPad.

And while I was at it, I loaded iWork '09.

Bloody blue blazes, Pages is the page layout program that I would have killed for in college. I am probably one of the last American generation that typed it's term papers. Yes, typed. On a Sears electric typewriter in my case, I wasn't completely in the dark. I knew my way around an IBM Selectric too, those type balls were cool. I've barely had a chance to look at Numbers and Keynote, but they look just as impressive.

Then a few days ago, Apple put up the iPad demonstration videos.

And I am out of exclamations that aren't pornographic. I believe the word is geekasm, only for maybe the first time, it's not about the technology. I know technology, but at heart I'm the guy who likes taking the pieces apart and putting them back together. I am a designer geek, an art geek, and only a tech geek by necessity.

Look, iTunes was impressive. But it didn't do all that much that it's competitors at the time didn't do. I'm talking about the OS 9 version of iTunes. And even though iTunes got incredibly customer centered, it didn't convince me that Apple was on the right track.

You could do creative things on a Macintosh, but you still had to spend time being a geek and doing the occasional tweaks.

Then I saw Garage Band and iMovie and iDVD. No, they weren't anything radically new, but they all worked together and with all the other Macintosh programs. What it meant was that for the first time, a computer out of the box did 70% of the grunt work that I used to do in production and design. Smoothly, easily. It let people concentrate on the ideas behind the stuff, not making sure that it worked on your computer.

You probably don't know this, but there used to be three main video tape formats. Half inch started as consumer grade (VHS). Three-quarter inch was aimed at institutions and rapidly became used in news gathering as well. High end television broadcast used one inch. There were actually more formats than that, but when I got my television production training, that is what we used. You could reuse video tape. Printing film was expensive, editing film was even more so. I worked with Sony and Panasonic video editing suites and the spring loaded wheels controls that could give you frame by frame control for precise editing.

All of the sudden, here was a laptop that could do that, just by turning it on and feeding in the footage. And you could compose and record the music that went along with it.

Apple wasn't aiming at the "industry standards."

Apple was teaching people creativity. Or rather, it was taking the drudge work out of creativity.

Now there are still programs I love. Dramatica Pro does more to teach creative writing than almost every teacher and professor I ever had. Does great for story theory too. It helped me realize that Abby on NCIS is actually modeled on a large friendly dog. No, I am not saying that to be offensive. I think fourfeets are people too, just of another sort. That's just her personality, and it helps that show from being just another police procedural. Dramatica Pro was the very first program I ever saw that was aimed at the creative process rather than the finished product. For a long time, it was my most expensive software purchase. Twice actually, considering I bought the OS 9 version and later the OS X one.

Apple aimed at the process. You don't have to know music theory to use GarageBand, but it helps. Just listening and experimenting with the clips teaches composition and music styles. And if you get too good for GarageBand, Apple will sell you Logic Studio. And so on.

With Apple iWorks, they do the same thing for page layout and presentation. Get it, they are making the routine part of creativity easy. For someone who still relies on the Eyeball Mark I for visual design, it's nearly absolutely perfect.

But you know what's best about the whole thing, at least from my viewpoint?

Apple gave me my living room chair back.

Back when I still read a newspaper, I would lean back in my chair and read it section by section. I'd pay extra special attention to the funnies. When I got a book, there was nothing I liked better than reading it in comfort. Yes, I experimented with ebooks on my Palm, but the screen is not big enough for a speed reader. It was nice in places I couldn't normally take a book, but it wasn't really a book replacement.

I'm going to read most of my news and columns and blogposts in my living room without having to break out my laptop. the iPad will be linked to my legal identity, which right now is only an administrative account on my iMac MaKai. I'll answer most of my email there. And then I will adjourn to the sanctum where I do the esoteric and creative stuff on MaKai. When I replace my Palm with an iPod touch, that will be linked to my NeoWayland account on this computer. But the iPad will be the living room computer. Eventually I expect to control my television and house with it.

Even before it hits the customer hands, the web and the publishing industries are changing. Craig Mod has several good points about Books in the Age of the iPad. I just love his opening. Emphasis in original.

As the publishing industry wobbles and Kindle sales jump, book romanticists cry themselves to sleep. But really, what are we shedding tears over?

We’re losing the throwaway paperback.The airport paperback.The beachside paperback.

We’re losing the dregs of the publishing world: disposable books. The book printed without consideration of form or sustainability or longevity. The book produced to be consumed once and then tossed. The book you bin when you’re moving and you need to clean out the closet.

These are the first books to go. And I say it again, good riddance.

Once we dump this weight we can prune our increasingly obsolete network of distribution. As physicality disappears, so too does the need to fly dead trees around the world.

You already know the potential gains: edgier, riskier books in digital form, born from a lower barrier-to-entry to publish. New modes of storytelling. Less environmental impact. A rise in importance of editors. And, yes — paradoxically — a marked increase in the quality of things that do get printed.

Now I am a bibliophile of the first order. I'd sleep on a pile of books if it were comfortable. I'd have sex while buried in them if only to feel the ideas stimulate my brain while a willing lady and I stimulated each other's bodies. I drool over first editions. I talk to books when they get me thinking. But most books aren't worth the paper they're printed on.

Craig Mod has a point. Several of them. And if publishers and writers pay attention, physical books can become the pieces of fine craftsmanship that they SHOULD BE.

This Gizmodo article explains how the web is changing.

It's interesting, to say the least, that a device promising to be the best browsing experience--cue Scott Forestall crazy eyes-- is in fact reshaping the internet. You could argue it's for the better, moving sites away from proprietary formats and heavy, resource-sucking designs to more open standards, and more efficient layouts that are easier to use ( as many have , convincingly). And it's not like Apple hasn't been remaking the web already--they've been hugely involved in web standards with their work on the WebKit rendering engine, which powers Safari, Chrome, and most every decent mobile browser around. In fact, you could argue, vis-a-vis WebKit Apple's essentially defined the standards for mobile browsing.

There's not much of a choice for site designers to follow this, either. As John Gruber points out , if you care about people on iPhone OS devices--to be clear, that includes the iPad--being able to use your site, you're going to redesign it, and "if you don't think people using iPhone OS devices are an important segment of your intended audience, you're probably wrong."

The reason the iPad could have a more pronounced effect on the internet than the iPhone actually really is simply because it's bigger. The challenge of best displaying your content on the iPhone wasn't simply making sure you had a Flash-less site--it was fitting it all into a 3.5-inch screen, reducing it to the utter essentials to fit the way people use their phones, a task that might've gone beyond a mobile-optimized site in many cases. With the iPad, two of the biggest restrictions--the tighter screen, those smaller windows of time--aren't there, so content producers very well might not need an app to fit their content onto the iPad. In other words, they really can just build a site instead of an app, which is why the iPad might have a more profound effect on the internet than the iPhone.

The world is changing. Apple has created a worldwide paradigm shift before selling a single iPad.

I know of no other company that has done that.

And it happened without a law passed in Congress. It happened without a Presidential proclamation. It happened without legal threats to unauthorized users.

It happened without coercion.

It happened because individuals wanted something.

Free to choose.

That's the free market in action.

One more link & quote. One of my favorite famous people, Stephen Fry (Gordon Gordon LIVES!), did a great write-up in Time. Emphasis in original.

I suggest there's a bit more to it than that; surely Apple stands at the intersection of liberal arts, technology and commerce? "Sure, what we do has to make commercial sense," Jobs concedes, "but it's never the starting point. We start with the product and the user experience. You seen an iBook yet?" His pleasure in showing me the Winnie the Pooh iBook bundled with every iPad is unaffected and engaging. He demonstrates how the case can be used as a lectern and as a stand. "I think the experience of using an iPad is going to be profound for many people," he says. "I really do. Genuinely profound." That rings a bell. "I've heard it said that this is the device for you," I reply. "The one that will change everything." "When people see how immersive the experience is," Jobs says, "how directly you engage with it ... the only word is magical."

Okay, you got me. The cayenne color is my addition.

Based on a Scientific American article, Cult of Mac speculates on what Apple might be working on next.

I've spent six hours over four days writing this piece. It still doesn't say everything I want. But I don't have an iPad yet. My biggest thrill is not that Apple has done it again. I know that the door is just opening. In five years, the first iPads will be considered quaint antiques. There will be many products that do more and do it better. That's okay, I don't care if Apple "wins," although I think they will. The competition to make things better so people have a choice tomorrow, that's the exciting bit.

And it's the one thing that will never come from government.

Gotta love that free market.

Posted Thu - April 1, 2010 at 12:24 PM  

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Mon - March 22, 2010

Welcome to the Government Store, Citizen! Sign your freedom over now to open your account.

Okay, they passed the health care bill.

Your taxes will go up.

Your premiums will go up.

Your coverage will be rationed.

The insurance companies and "Big Pharma" just became neutered lapdogs bound to the will of the United States government.

Did you expect anything else?

Yes, states are preparing lawsuits to fight this monstrosity.

But you should know by now that the Man on a White Horse™ isn't going to save you.

You're going to have to save yourself.

KYFHO now and forever.

What happens if you don't?

Extend the trends.

The IRS is in charge of making sure you have health care.

Expect "lifestyle" audits.

You won't be able to choose your own doctor.

You won't be able to see a doctor when you need it.

You may not be able to find a doctor.

And if you make too much noise, you will be medicated for the common good.

You won't be able to choose your food.

If your activities are too dangerous, you will have to give them up.

Oh, and you do plan on voting the right way, don't you Citizen? If not, the merciful state might have to "adjust" your attitude.

Posted Mon - March 22, 2010 at 12:08 PM  

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Tue - March 9, 2010

Turning the economy around

One of my favorite libertybrit blogs The Devil's Kitchen linked to a Hillsdale College Imprimis article Rolling Back Government. In the article, Maurice McTigue discusses how New Zealand turned their economy around in 1984.

You should read the whole thing.

You REALLY should read the whole thing.

But try this bit on for size. Emphasis added.

When a reform government was elected in 1984, it identified three problems: too much spending, too much taxing and too much government. The question was how to cut spending and taxes and diminish government’s role in the economy. Well, the first thing you have to do in this situation is to figure out what you’re getting for dollars spent. Towards this end, we implemented a new policy whereby money wouldn’t simply be allocated to government agencies; instead, there would be a purchase contract with the senior executives of those agencies that clearly delineated what was expected in return for the money. Those who headed up government agencies were now chosen on the basis of a worldwide search and received term contracts—five years with a possible extension of another three years. The only ground for their removal was non-performance, so a newly-elected government couldn’t simply throw them out as had happened with civil servants under the old system. And of course, with those kinds of incentives, agency heads—like CEOs in the private sector—made certain that the next tier of people had very clear objectives that they were expected to achieve as well.

The first purchase that we made from every agency was policy advice. That policy advice was meant to produce a vigorous debate between the government and the agency heads about how to achieve goals like reducing hunger and homelessness. This didn’t mean, by the way, how government could feed or house more people—that’s not important. What’s important is the extent to which hunger and homelessness are actually reduced. In other words, we made it clear that what’s important is not how many people are on welfare, but how many people get off welfare and into independent living.

As we started to work through this process, we also asked some fundamental questions of the agencies. The first question was, “What are you doing?” The second question was, “What should you be doing?” Based on the answers, we then said, “Eliminate what you shouldn’t be doing”—that is, if you are doing something that clearly is not a responsibility of the government, stop doing it. Then we asked the final question: “Who should be paying—the taxpayer, the user, the consumer, or the industry?” We asked this because, in many instances, the taxpayers were subsidizing things that did not benefit them. And if you take the cost of services away from actual consumers and users, you promote overuse and devalue whatever it is that you’re doing.

Good stuff. Great stuff. And no, I didn't read it before posting my questions yesterday.

Although it certainly looks like I did.

Posted Tue - March 9, 2010 at 12:59 PM  

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Mon - February 8, 2010

So who do you believe?

You don't have to look any farther than the headline to realize that someone is playing with the numbers.

U.S. jobless rate hits 5-month low but payrolls fall

Wait for the "revised" numbers.

Posted Mon - February 8, 2010 at 12:53 PM  

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The bills are coming due.

A report from the Congressional Budget Office shows that for the first time in 25 years, Social Security is taking in less in taxes than it is spending on benefits.

Instead of helping to finance the rest of the government, as it has done for decades, our nation's biggest social program needs help from the Treasury to keep benefit checks from bouncing -- in other words, a taxpayer bailout.

This is one of those shady fiscal maneuvers that the politicos never mention when they say things like "a balanced budget in 2000."

Social Security could have been "saved" years ago if the money had been invested instead of put in the general fund of the Treasury. It wouldn't have taken much thought, just an even split between various bonds and the top seven of the Dow Jones 40.

Instead, the money went to cover current operating costs.

If a company had done that with it's pension fund, it would have been illegal and the company officers would have been arrested and tried.

Shouldn't we do that for Congress and every living President?

Posted at 12:50 PM  

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Mon - February 1, 2010

Amazon blinks

Of course, I can't cover the iPad without mentioning the Amazon-Macmillion dustup.

Now I'll admit my bias upfront. Amazon has been messing with the publishers, especially the small niche publishers, for years. But at the same time, Amazon is a godsend to someone like me in a rural area without a decent bookstore.

Still, it's been fun to watch.

Charles Stross has one of the better writeups.

From the point of view of the public, to whom they sell, Amazon is a bookstore.

From the point of view of the publishers, from whom they buy, Amazon is a wholesaler.

From the point of view of Jeff Bezos' bank account, Amazon is the entire supply chain and should take that share of the cake that formerly went to both wholesalers and booksellers. They do this by buying wholesale and selling retail, taking up to a 70% discount from the publishers and selling for whatever they can get. Their stalking horse for this is the Kindle publishing platform; they're trying to in-source the publisher by asserting contractual terms that mean the publisher isn't merely selling them books wholesale, but is sublicencing the works to be republished via the Kindle publishing platform. Publishers sublicensing rights is SOP in the industry, but not normally handled this way -- and it allows Amazon to grab another chunk of the supply chain if they get away with it, turning the traditional publishers into vestigial editing/marketing appendages.

The agency model Apple proposed -- and that publishers like Macmillan enthusiastically endorse -- collapses the supply chain in a different direction, so it looks like: author -> publisher -> fixed-price distributor -> reader. In this model Amazon is shoved back into the box labelled 'fixed-price distributor' and get to take the retail cut only. Meanwhile: fewer supply chain links mean lower overheads and, ultimately, cheaper books without cutting into the authors or publishers profits.

Go, read, it makes sense.

And of course we know what happened next.

It wouldn't have happened if Apple didn't offer an alternative. Gotta love that competition thing.

Posted Mon - February 1, 2010 at 02:50 PM  

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Thinking about the iPad

iPad thoughts from here and there.

Frasier Speirs - Future Shock
Secretly, I suspect, we technologists quite liked the idea that Normals would be dependent on us for our technological shamanism. Those incantations that only we can perform to heal their computers, those oracular proclamations that we make over the future and the blessings we bestow on purchasing choices.


The tech industry will be in paroxysms of future shock for some time to come. Many will cling to their January-26th notions of what it takes to get "real work" done; cling to the idea that the computer-based part of it is the "real work".

It's not. The Real Work is not formatting the margins, installing the printer driver, uploading the document, finishing the PowerPoint slides, running the software update or reinstalling the OS.

The Real Work is teaching the child, healing the patient, selling the house, logging the road defects, fixing the car at the roadside, capturing the table's order, designing the house and organising the party.

Andy Ihnatko - Hands-on with the Apple iPad - it does make sense
It’s the Morning After. I’ve had a good night’s sleep, finally, and have also had the chance to wash the stink of a full day’s worth of coverage off of my battered body as well as the glitter and stardust that Apple sprinkles over the folks who attend its product announcements.

I’ve also been able to read some of the Internet’s first impressions of the iPad.

Let me address one thing straight away: anyone who declares the iPad a “fail” because the browser lacks support of Flash needs to elaborate their position beyond one word of a single syllable. Frankly, I think some people elevate flash-based Web content to the level of a fetish. Which isn’t far off the mark, given the kind of content that its fans stream from various video sites.

It’s true that there’s a lot of Flash content out there. But Flash – see Adobe's reaction to the lack of Flash support on iPad here – is in no way part of the true language of the Internet. It’s Scottish-accented English. Sometimes it makes the language more colorful and entertaining, and sometimes it just renders it into unintelligible mush.

Lifehacker - The Problem with the Apple iPad
So why is it a problem if the iPad is better than its competition, or, more importantly, fills a niche that hasn't been addressed well enough to this point? Yesterday Gizmodo rounded up 8 things that suck about the iPad, focusing primarily on hardware issues like its lack of camera, an ugly bezel, and lack of even a single USB port (sans adapters); we could likewise complain about how the iPad's graphical design seems like a complete afterthought. But much more important, at least from the perspective of a blog that's pretty serious about the free use and control of computers:

The iPad, much like the iPhone, is completely locked down. The user has no control over what she installs on the hardware, short of accepting exactly what Apple has approved for it. From past experience, we know what happens when a completely legitimate application—from a huge company that's actually partnered with Apple—doesn't gel with Apple's business plan. They reject it, and you can't use it. And what recourse does the power user have?

Jailbreaking! And certainly the iPad will see plenty of hacking, but only because Apple requires you to hack the device if you actually want control over it yourself. Apple's gotten into the habit of acting like you're renting hardware. They've become the all-powerful, over-restrictive, ambivalent IT person in the sky, restricting what users can and can't install on their hardware.

stevenf - I need to talk to you about computers
When the iPhone came out, I was immediately in love, but frustrated by the lack of an SDK. When an SDK came out, I was overjoyed, but frustrated by Apple’s process. As some high-profile problems began to pile up, I infamously railed against the whole idea right here on this very blog. I announced I was beginning a boycott of iPhone-based devices until changes were made, and I certainly, certainly was not going to buy any future iPhone-based products. I switched to various other devices that were a bit more friendly to Old Worlders.

It lasted all of a month.

For as frustrated as I was with the restrictions, those exact same restrictions made the New World device a high-performance, high-reliability, absolute workhorse of a machine that got out of my way and just let me get things accomplished.

Nothing is simply black or white.

Jim Stogdill - The iPad is the iPrius: Your Computer Consumerized
It's been a long time since most of us have used our computers to do anything approaching "computing," but the iPad explicitly leaves the baggage behind, leaps the conceptual gulf, and becomes something else entirely. Something consumery, media'ish, and not in the least bit intimidating.

The automobile went through a similar evolution. From eminently hackable to hood essentially sealed shut. When the automobile was new, you HAD to be a mechanic to own one. Later, being a mechanic gave you the option of tinkering and adapting it to your specific interests. In fact, that's how most people up until about 1985 learned to be mechanics. The big changes came with the catalytic converter and electronic ignition (and warranty language to match). Now the automobile has reached the point in its development where you don't even have to know whether it has a motor or an engine to use it, but to tinker at all requires highly specialized skills.

So, in some ways this evolution of the computer to the iPrius seems completely natural. I don't care all that much if the iPad is hermetically sealed, but I wonder uncomfortably if in a few years the MacBook and the PC will be too. Or, more likely, we'll just wake up one day to a world without MacBooks or PC's. As we continue our shift en mass to the mobile device ecosystem and the laptop as we know it goes the way of the desktop, banished to special purpose niches.

I just want to add one thing. If my grandmother were still alive, I'd say wait a few months and get an iPad instead of a computer.

Posted at 02:40 PM  

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Wed - January 27, 2010

Apple's iPad

Well, I had a mad on and a bunch of topics to write about. And then Apple had to change the game again.

Today Apple introduced the iPad.

Yes, I'm a Macintosh user. This blog is composed on a G4 iMac named MaKai.

Yes, I'm an Apple fan. For good reasons I'd say.

Let's get down to business. The iPad is a reader that kicks Kindle's posterior. It makes the Nook look primitive. I don't expect that will stay that way, I think both will improve, fast. That's what makes competition work. Meanwhile Apple will make the iPad better yet. Lower prices, better product, and the consumers win.

Unless you are doing mostly typing, the iPad leaves every netbook I have seen in the dust.

Apple's iBook store looks terrific. If the iTunes Store and the Apps Store are any indication, it will be pumping electrons for a very very long time.

That's just the beginning.

Keynote presentations from a tablet? It's going to make PowerPoint look weak. How about wireless Keynote presentations?

Collaborative software doesn't exist for the iPad yet, but when it does, meetings and jobs will have a whole new meaning. Telecommuting will become simple and practical. You may never meet most of your "coworkers."

Every home automation geek will have a triple orgasm. Imagine something in your hand that can control and talk with your appliances.

This thing will not only do cookbooks, it will show video demonstrating the techniques.

This will replace the doctor's clipboard in diagnostic medicine. With Bluetooth and WiFi, practically any medical monitor from EKG to heartbeat could be displayed, complete with scrollable history automatically highlighting any trouble spots.

Speaking of diagnostics, how about an app that talks to your car's chips and contains your owner's manual and diagramming blueprints? Your iPad could show you exactly what the bad part is and how to replace it. Maybe it could even order for you at the local auto parts store.

And if that could be done to cars, there's no reason it couldn't be done on any industrial process. Virtual reality and remote manipulation is about to take a huge step forward.

Now, again, this isn't because Apple has invented anything. But what they have done is refine the user experience and made powerful developer tools available. Home, professional, and industrial electronics will be designed to link with the iPad and it's competitors.

Yeah, it's an ebook reader today. Yes, it's a netbook replacement today. Yes, it's a way to centralize controls and widgets today And yes, it does movies and music today.

But Apple isn't content with that. Remember that Apple has been providing content tools for years. Macintosh computers sold today not only let you play and organize music, they let you compose music out the box. You can clean up your photos, make slide shows, create movies, and write books. All of this exists digitally, none of it exists physically unless you want it to.

Imagine what is about to happen to publishing.

Remember when Amazon decided that they didn't want to play nice with small publishers? Guess what happens next.

Imagine what happens when the iPad starts to work with existing Macintosh computers. Media editing is about to take some intriguing directions. That touch screen will amplify creativity.

It's not that Apple did anything incredibly original here. They just put it together in a package that works. I can't wait to see what's next. It took Microsoft till Windows 3.1 before they started giving the classic Macintosh OS a run for it's money. I've yet to see a smartphone do a better job overall than the iPhone. It's all about the integration and the user experience. The computer as an appliance.

Look out world, here it comes.

Posted Wed - January 27, 2010 at 04:00 PM  

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NASA doesn't know the meaning of the word "privatize"

Someone is changing definitions again.

This is mercantilism again.

Talk to me when NASA doesn't decide the missions, provide the launch facilities, and pay the bills.

Government funded space programs are inherently flawed.

Otherwise we'd have asteroid mining and cities on Mars by now. It's been two generations since Americans put men on the Moon. I told you a year ago.

Government has a long history of promising the Moon and delivering failure.

We can't afford to let government choose for us.

I say we take it back. Not the old Americans can trump anything dream, but the older one. The one that invokes Lady Liberty and her sister Lady Freedom.

We can make things better tomorrow. But not if we limit ourselves today.

Raise your eyes above your feet.

Raise your eyes above the horizon.

Raise your eyes to the STARS.

That's where we need to be.

Don't let everyone in space be a government contractor. That won't get us far enough. Congress already thinks they can control us here. The White House thinks that only NASA should dominate space.

HT Gizmodo.

Posted at 03:15 PM  

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Mon - January 4, 2010

Why shouldn't people choose?

I agree with this one. Let people make their own choices.

So how would one, as e.g. a proponent of public health care, prove the market is a bad idea? The obvious solution would be to let both systems co-exist, i.e. live side by side, and then let people see for themselves that the market simply doesn’t work. This is why I don’t understand advocates of health care “reform”: they demand “universal”health care while claiming it is not restrictive or expensive (some claim it is even “cheaper”) but refuse to show anyone this is the case and they will not allow any alternative solutions. If government provision is truly a better system, then wouldn’t we all be better off to stop our ideological fighting and settle the matter?

Good stuff. Read the whole thing.

Posted Mon - January 4, 2010 at 01:29 PM  

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Thu - November 26, 2009

This explains a lot

At Coyote Blog I ran across this chart from The Enterprise Blog.

Even assuming that government should be directing private enterprise and the free market, this is a bit like having an entire coaching staff that has never actually seen a football game, much less played it.

It's all theory to them. No wonder the Imperious Leader is messing things up. Look at the previous low mark, the Kennedy Administration. Historically it's been called the most academic and the most liberal ever, but it still has three times the previous private sector experience as Obama.

I don't have anything else to add right now.

Posted Thu - November 26, 2009 at 09:52 AM  

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Mon - November 23, 2009

It takes GOVERNMENT to really screw things up

I know that blaming Big Business for taking advantage of the taxpayer is all the rage right now.

But you should look at this. Emphasis added.

Investment funds are buying billions of dollars’ worth of home loans, discounted from the loans’ original value. Then, in what might seem an act of charity, the funds are helping homeowners by reducing the size of the loans.

But as part of these deals, the mortgages are being refinanced through lenders that work with government agencies like the Federal Housing Administration. This enables the funds to pocket sizable profits by reselling new, government-insured loans to other federal agencies, which then bundle the mortgages into securities for sale to investors.

While homeowners save money, the arrangement shifts nearly all the risk for the loans to the federal government — and, ultimately, taxpayers — at a time when Americans are falling behind on their mortgage payments in record numbers.

It took an act of Congress to set it up. It took two Presidents to sign it into law. And it's taking several government agencies.

Wall Street profits guaranteed by the taxpayer, sanctioned by the government.

Remember THAT when the administration goes off on the greed of Wall Street. Big business is screwing you, but so is big government. And it could not have happened without both conspiring against you.

Posted Mon - November 23, 2009 at 01:16 PM  

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Wed - November 4, 2009

The future gets greener for Al Gore

Lookee here. Al Gore stands to make a fortune on global warming. All thanks to government contracts. Which means the coercive power of government wedded to corporate interests all funded by taxpayers.

The man proves himself a parasite on the public dime. It's corporatism and mercantilism and a few other isms all rolled together.

Seems like it was only yesterday that some people were saying that you couldn't trust what Cheney said about Iraq because of his former connections to Haliburton.

I'm not saying if that was right or wrong.

But I do find it amazing that Gore escapes most of his criticism.

Posted Wed - November 4, 2009 at 12:20 PM  

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Congress tries to write off the free market

Neil King tells us what happened when politicos and bureaucrats started interfering with General Motors.

Probably no company has been more on the receiving end of congressional attention than GM, whose widely scattered factories, suppliers and dealership network put it in touch with nearly every U.S. congressional district. After committing $58 billion to keep the company afloat, the federal government took a 60% stake in the auto maker when the slimmed-down GM emerged from bankruptcy.

In May, even before the government's ownership became official, lawmakers erupted when GM disclosed it planned to produce a new subcompact car at its factories in China. Under congressional pressure, GM dropped those plans and promised instead to retool an existing U.S. facility in Michigan, Wisconsin or Tennessee for the new model.

Lawmakers from those states demanded and received high-level meetings in Washington to quiz GM on the criteria for site selection and to tout their states. GM in the end picked a site in Michigan.

That same month, GM dealer Pete Lopez in Spencer, W.Va., received notice that GM was giving him just over a year to shut down his Chevy, Pontiac and Buick dealership, which he'd acquired two years earlier. GM's move to shutter more than 1,300 dealerships -- about one-quarter of its network -- was central to its restructuring because it cleared out underperforming showrooms and brought the network more in line with its shrunken sales.

With an assist from his mayor, Mr. Lopez took his complaint straight to one of his state's senators, Jay Rockefeller, the Democratic chairman of the powerful Commerce Committee.

Sen. Rockefeller sent a letter to GM headquarters on Mr. Lopez's behalf, according to a staff aide. He arranged for Mr. Lopez to come testify before a Senate panel in early June, alongside GM Chief Executive Frederick "Fritz" Henderson. The senator introduced the two men, giving Mr. Lopez a chance to make a personal pitch.

It's not about saving the companies. It's not "too big to fail." It's about control. It's about mercantilism.

Laugh if you want, but look at what's happening. The companies that are politically connected get the goodies. The politicians get to call the shots.

And everyone blames the free market when consumers don't do as they're told.

"What's good for General Bullmoose is good for the U.S.A!"

And don't you DARE forget it.

Posted at 12:12 PM  

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Mon - November 2, 2009

Ideally Windows without the adware

If Microsoft keeps doing this, people might learn to love Windows.

PC's without the adware. Amazing thought.

Apple did it years ago.

Posted Mon - November 2, 2009 at 12:36 PM  

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Tue - October 20, 2009

More Apple than an orchard

By now, you've probably heard about Apple's record setting earnings this last quarter. And if you haven't, you should have.

Two years ago, I told you that Apple worked their magic by delivering computers that just worked. They sell the experience. Especially the iPhone. It's the computer as an appliance that Steve Jobs has been pushing since at least the days of the original Macintosh development team. Although the original father of the Macintosh project, Jef Raskin, should get some kudos there too.

Well, I saw a couple of interesting posts today.

Here's a bit from Steven Frank.

It’s not just that the iPhone has fancy woo-woo transitions and purty graphics; it runs all the way down the software stack. For example, when I tap on something, I don’t have to hover for five seconds wondering “now did it get that tap, or do I have to do it again?” This is something other platforms are still struggling with. When we say you have a bad experience, this is the sort of thing we mean. It has little to do with features, and everything to do with core functionality.

And for Mac users, that great experience goes double. I add an event on the iPhone, it gets MobileMe’d and it’s on all my desktops without some disastrous intermediate desktop syncing software. Same with contacts, bookmarks. I don’t have to think twice about it. I remote control my iTunes library from anywhere in the house from my iPhone. I can even pick which speakers the music comes out of thanks to Airport Express.

Worryingly, iPhone competitors have less reason than ever to provide a stellar experience for Mac desktop users, as the iPhone has that angle sewn up. I expect future non-Apple smartphones to scale back Mac desktop support even further than they already do, as it will cost them a fortune to provide an experience that’s even half as good as the iPhone provides with the iTunes/MobileMe ecosystem.

Short term, I think he's right. It's going to be very hard to match the integrated experience that Apple delivers out of the box.

Long term, I think he's wrong. Apple has been pushing for open standards. As other computers and other smartphones become the appliances they should be, proprietary data formats will disappear. Every company will have to offer a competing experience to sell anything at all.

My favorite line comes from Jamie Zawinski in his post Dear Palm, it's just not working out. Emphasis in original.

So why would I get an iPhone? Because it's an appliance that just fucking works.

Be sure and check out the rest of his entry and the comments there.

Apple Inc.'s "secret" is that user experience and the integration that backs it up. That's all.

Posted Tue - October 20, 2009 at 02:49 PM  

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Fri - October 16, 2009

What's really employee choice? did a short piece on John Mackay and the Whole Foods health plan.

After watching that, I wonder why do the protesters assume that the Whole Food employees don't know what's best for themselves and their families?

HT to

Posted Fri - October 16, 2009 at 12:09 PM  

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Mon - October 12, 2009

Forget the Peace Prize, here's the Nobel you SHOULD notice

Unlike the Peace Prize, the other prizes require measurable results.

Part of me just can't help wonder at the juxtaposition. One winner of this year's Nobel Prize for Economics has some fascinating ideas.

Elinor Ostrom's work culminated in Governing the Commons: The Evolution of Institutions for Collective Action which uses case studies to argue that around the world private associations have often, but not always, managed to avoid the tragedy of the commons and develop efficient uses of resources.  (Ostrom summarizes some of her findings from this research here).  Using game theory she provided theoretical underpinnings for these findings and using experimental methods she put these theories to the test in the lab.

That is incredibly important.

Unlike government solutions that promise total solutions but seldom deliver, solutions based in private associations often (but not always) work.

I'd say this is amazingly ironic considering that this year's Peace Prize winner wants to do away with the free market and voluntary associations.

Posted Mon - October 12, 2009 at 01:30 PM  

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Market forces undermine pot cartels

I'm surprised this article made CBS.

Almost all of the marijuana consumed in the multibillion-dollar U.S. market once came from Mexico or Colombia. Now as much as half is produced domestically, often by small-scale operators who painstakingly tend greenhouses and indoor gardens to produce the more potent, and expensive, product that consumers now demand, according to authorities and marijuana dealers on both sides of the border.

The shifting economics of the marijuana trade have broad implications for Mexico's war against the drug cartels, suggesting that market forces, as much as law enforcement, can extract a heavy price from criminal organizations that have used the spectacular profits generated by pot sales to fuel the violence and corruption that plague the Mexican state.

They tiptoe right up to the edge, but they do not make the last step.

If market forces can disrupt illegal trafficking in one drug, those same market forces can disrupt all illegal trafficking.

Have you priced a bottle of aspirin lately?

The entire reason why illegal drugs are so profitable is because they are illegal. The same exact thing happened during Prohibition. And just like Prohibition, the underground black market made organized crime incredibly profitable. If the drugs are legal, then the price drops way way down.

If the drugs are legal, then quality becomes a major selling point. That means that the doses are standardized and the drugs aren't "cut" with other substances. Brand names become important.

If the drugs are legal, then they are generating tax revenue instead of costing millions with armed SWAT teams.

We know that Prohibition failed. This article points out that cheap legal marijuana drives out the illegal stuff. Without the high prices and within the law, there's no need for armed violence.

So why do we try any other way?

Posted at 01:07 PM  

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Mon - October 5, 2009

John Mackey speaks out again

There's a great interview with John Mackey of Whole Foods online at the Wall Street Journal.

The Whole Foods health-care story has been largely ignored by proponents of a government-run system. But it could be a template for those in Washington who want to drive down costs and insure the uninsured.

Mr. Mackey says that combining "our high deductible plan (patients pay for the first $2,500 of medical expenses) with personal wellness accounts or health savings accounts works extremely well for us." He estimates the plan's premiums plus other costs at $2,100 per employee, and about $7,000 for a family. This is about half what other companies typically pay. "And," he is quick to add, "we do cover pre-existing conditions after one year of service."

Whole Foods also puts several hundred dollars into a health savings account for each worker.This money can be used to cover routine medical expenses, like drug purchases or antismoking programs. If that money is not used in a year, the workers can save the money to pay for expenses in later years.

This type of plan does not excite proponents of a single-payer system, who think that individuals can't make wise health-care choices, and that this type of system is "antiwellness" because it discourages spending on preventive care.

Let people decide for themselves. That's what freedom is about, isn't it?

The irony is that except for this one issue, Whole Foods is pretty close to the ideal "progressive" company.

But then the Federal government's goal isn't your health and well being. The goal is control over your life.

Posted Mon - October 5, 2009 at 01:46 PM  

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Everything the government has done has been EXACTLY wrong

Vin Suprynowicz uses a Murray Rothbard classic to show how Obama economics fail. How does he know? Because it's happened before.

When economies get into trouble, Mr. Rothbard points out, businessmen are "misled by bank credit inflation to invest too much in higher-order capital goods" such as houses and cars. The "boom," then, "is actually a period of wasteful misinvestment. ... Errors are made due to bank credit's tampering with the free market." This is followed by a recovery period that sees a "rapid liquidation of the wasteful investments," and, typically, a deflationary credit contraction, which helps restore confidence in the remaining sound banks.

"In short, and this is a highly important point to grasp, the depression is the recovery process. ... The depression, then, far from being an evil scourge, is the necessary and beneficial return of the economy to normal after the distortions by the boom. The boom, then requires a bust. ...

"If government wishes to see a depression ended as quickly as possible, and the economy returned to normal prosperity," professor Rothbard explains, "the first and clearest injunction is: don't interfere with the market's adjustment process," which will include bankruptcies of unsound enterprises, credit contraction and falling wages and prices.

This is the course the government took during the 1920-21 recession, which was over so quickly that the history books barely remember it. (Except in the farm segment of the economy, where the government made the mistake of interfering to try to hold crop prices at artificially inflated World War I levels -- a mistake that has now been ongoing for 90 years.)

But let us say, for the sake of argument, that government wanted to hamper the normal process of economic adjustment, which helps make recessions brief and relatively painless.

If anyone in Washington were to be so wacky as to seek to extend the pain of a recession, what course would they follow? On Page 26 of "America's Great Depression," Rothbard presents that very catalog of idiocy.

It's worth your time to read the whole thing. Especially since it looks like Rothbard predicted every economic move Obama is making right now.

We know how to fix it. But that wouldn't give government more power and you less liberty.

Posted at 01:40 PM  

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How it SHOULD work

Forbes takes a hard look at The Banker Who Said No.

Andy Beal, a 56-year-old, poker-playing college dropout, is a one-man toxic-asset eater--without a shred of government assistance. Beal plays his cards patiently. For three long years, from 2004 to 2007, he virtually stopped making or buying loans. While the credit markets were roaring and lenders were raking in billions, Beal shrank his bank's assets because he thought the loans were going to blow up. He cut his staff in half and killed time playing backgammon or racing cars. He took long lunches with friends, carping to them about "stupid loans." His odd behavior puzzled regulators, credit agencies and even his own board. They wondered why he was seemingly shutting the bank down, resisting the huge profits the nation's big banks were making. One director asked him: "Are we a dinosaur?"

Now, while many of those banks struggle to dig out from under a mountain of bad debt, Beal is acquiring assets. He is buying bonds backed by commercial planes, IOUs to power plants in the South, a mortgage on an office building in Ohio, debt backed by a Houston refinery and home loans from Alaska to Florida. In the last 15 months Beal has put $5 billion to work, tripling Beal Bank's assets to $7 billion, while such banks as Citigroup ( C - news - people ) and Morgan Stanley ( MS - news - people ) shrink and gobble up billions in taxpayer bailouts.

That, ladies and gentlemen, is exactly how a free market recovers. And without government intervention propping up prices and supporting failed companies, that is how it would work.

This is vitally important.

Everything that the Federal government has done since the Bush bailout has been exactly wrong. And we'll deal with that in the next entry.

Posted at 01:30 PM  

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Apple and closed systems

There's been grumbling about Apple's "closed" architecture.

What short memories people have.

Before Steve Jobs went knocking on the record label's doors, no one had profitably sold music online. That was why Jobs was able to make the deal he did. The record companies were already tanking and didn't think that online music would amount to much.

The iTunes Music Store changed all that. Apple isn't in the business of selling music, Apple is in the business of selling iPods and iPhones. A wide variety of reasonably priced music helps do just that. Likewise, Apple is not in the business of selling iPhone Apps, Apple is in the business of selling iPhones and iPod Touches.

What made Apple's approach different was the integration. It's something that has been the hallmark of Apple at it's best since the Apple ][. It's the computer as an appliance, something that the user doesn't have to worry about. It's no secret that iTunes is at the heart of that integration. And the iTunes Music Store birthed the iPhone App Store.

No, I don't approve of all the decisions that Apple has made regarding which apps are available and which are not. But for the most part, the rules work to keep the iPhone (and iPod Touch) as an appliance. It's that integration that has made the iPod and later the iPhone such a success.

That's why I am disappointed with Palm.

Here's what you won't see Palm mentioning anywhere.

You see, Palm doesn't need the iTunes app to sync the Pre. They don't need to draw Apple's ire, or play yo-yo with their customers over this important capability. They can sync the Pre to a customer's iTunes music library with a public, open, and documented approach that has been used by third-party developers and device makers for years. This capability was created by none other than Apple itself.

With the Palm Pre's "cloud" approach, there is no way to synchronize address and calendar information from a Macintosh to a Pre without a third party solution. Unfortunately, given the history, this isn't surprising. Palm's last version of a Palm Desktop for Macintosh was a tweaked version of Claris Organizer, which Palm had bought in 1998. Palm did tweak the program to make it work with OS X, but made no further updates. Palm also stopped providing conduit software, Apple provided a bare-bones one. Mark/Space provided a better solution. And you don't even want to know what I think about cloud-computing.

But I will tell you, this stunt of Palm to go through iTunes to sync music and pictures, well, it makes Palm look like a parasite company. Apple doesn't seal off the files, it just doesn't want anyone else messing with the system integration. If Apple were to open that up, they'd be just another computer company instead of one of the best respected names in consumer electronics.

Apple, Inc. is known more for design and integration than anything else. That's the selling point.

Palm seems hellbent on turning it's brand into an also-ran. I know the company is struggling right now, but it should show some class. The Pre is a good product, it doesn't need to piggy-back on Apple's success.

Posted at 07:19 AM  

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Sun - October 4, 2009

It wasn't a failure of the free markets

Once again, you couldn't have sub-prime mortgages or any of the other financial shenanigans without an active alliance between certain companies and various governments.

Those companies were granted either special privileges or protections that just weren't available to other companies. That in turn is backed up by governments threatening force.

Corporate socialism. Mercantilism. It doesn't matter what you call it, it's still joining corporations and governments so that BOTH can get around the rules.

That is what failed.

And more of that is what the politicos want to inflict on the rest of us. For our own good, of course.

Posted Sun - October 4, 2009 at 01:34 PM  

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Sun - September 20, 2009

Coyote Blog answers Ezra Klein

There's an outstanding article at Coyote Blog.

Let’s take a different example, because medicine is so screwed up by government intervention that it can be confusing.  Let’s imagine ourselves in the computer market in 1974.  The market is dominated by IBM mainframes, and innovation at the time was considered to be the penetration of mini computers (not to be confused with PCs, these were really just smaller mainframes) by DEC and HP.

Let’s say that for some reason the US government decides it is fed up with the IBM “monopoly” and the high cost of mainframe computing and it wants to take over.  It feels like there is a lot of waste in mainframes as some people are using them for frivolous reasons while other companies who really need them can’t afford them.  They might have created review boards to make sure that they thought each dollar spent on computing hardware and software was “worth it.”

So, how much spending is needed to maintain innovation?  We know in hindsight that the PC revolution is looming in the next few years.  And in that context, Klein’s question is absurd.  The answer is that spending per se, and even profits, in the mainframe computing market were irrelevant to the coming series of innovations.    The necessary preconditions were that entrepreneurs saw that new technology provided potential new value to consumers, and were allowed the freedom to launch these new products in hopes that the value these new products provided would be sufficiently high that consumers would pay enough for them to return their cost of manufacture and development and return them a profit.  Some succeeded, and some failed, but entrepreneurs were allowed to try, despite most “experts” predicting the PC was a silly toy.

Note that computer innovators were not required to trundle into some government computing board to justify the PC and its price, to justify how much, as Klein would say, needed to be spent on PC’s.   If in fact they were forced to do so, if Jobs and Wozniak had to fly to Washington to justify the Apple I to the Computing Spending Decisions Board, they would have almost certainly been shot down.  Or told they could sell it but only for $200 and not their initial price of $2000.  We would have never had a PC revolution in a government single payer computing world, no matter how much, as Klein asks, was “spent” by the government.   It is possible that the government might eventually have greenlighted a PC (years later) just as the increasingly bureaucratic IBM did, but can you imagine how frail the PC revolution would would be if only IBM had ever sold PCs, without the slew of competitors that emerged, and if every innovation had to pass the scrutiny of a government review board before it could be launched?   Only a tiny percentage of PC innovation and of what we think of as a PC today, mostly in the basic architecture, ever came from IBM.

The piece is worth your time. And while you're reading, you might look at Yesterday and today from the Pagan Vigil archives.

Posted Sun - September 20, 2009 at 01:51 PM  

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Free market does it better than Medicare

Via Roughly Drafted, Prince McLean tells us about a New York Times article.

A lady found that a $300 iPhone and $150 software allowed her to speak just like a $9000 computer did, only the iPhone was handy and could do more out of the box.

Medicare would reimburse her for the computer (which had the "general computing tools" disabled), but would not reimburse her for the iPhone.

Both McLean and Ashlee Vance, the author of the NYT article, miss the point.

The story isn't that Medicare would pay for one and not the other, or that Obama's planned reforms would "fix" the problem (this time around).

No, the real story is that private companies would produce something at a twentieth the price and a tenth the size that would do everything the "approved" computer would do and more besides.

That's private companies doing the job without government funding, approval, direction, or much of anything from our wannabe overlords.

And next year, it's going to do more.

Posted at 01:40 PM  

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Wed - September 9, 2009

The Inferior Golden Rule

I'm sure you've heard of the Golden Rule, also called the Ethics of Reciprocity.

My favorite version comes as part of a set of three rules. Taken together, these rules are a pretty good guideline for healthy human behavior.

Do unto others as you would have them do unto you.

Do for yourself at least as much as you do for others.

Don't do for others what they can do for themselves.

These aren't original with me, I ran across the set in a motivational publication during my Corporate Clone days. And I find them a pretty good description of libertarian ideas (although not the best I've seen). Yes, other people are important. But YOU are important too. And you do no favors for another if you do what they can do for themselves. I call it charity and compassion with an attitude.

But there is another Golden Rule, one that is usually trotted out as an example of the failure of selfish free markets. Say it with me, you know what it is.

He who has the Gold makes the Rules.

Starting today, I'm going to call that the Inferior Golden Rule. It also doesn't have anything to do with the free market. Let me remind folks about what the free market is really about.

The free market is based solely on the voluntary and mutual exchange of goods and services. In a real free market, it doesn't matter who has the gold because they want to exchange it for something else. Your economic power is not how much of something you may have, but the flow of exchange.

The Inferior Golden Rule is at best a perversion and at worst enslavement. The Inferior Golden Rule can't work without coercion and the threat of force.

That puts a whole new spin on the government plans to "reform" health care, doesn't it?

And yes, I said "plans."

Because that's the "other" thing they aren't telling you. The Republican alternatives also mean that the government calls the shots and makes the rules.

The politicos are telling you that you HAVE to choose EITHER one or the other. I'm telling you that's a false choice because it costs your freedom.

But hey folks, I'm not the one who's holding a gun to your head.

Posted Wed - September 9, 2009 at 05:18 PM  

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Mon - August 24, 2009

Another reason not to trust your health to the FedGovs

Sometimes this stuff writes itself.

1,200 veterans wrongly told they got fatal disease

How can I tell people that universal government health care is a Really Bad Idea™ if the Federal government keeps proving my point before I have time to make it?

Posted Mon - August 24, 2009 at 11:11 AM  

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Tue - August 18, 2009

Losing the business

One thing about your own webspace, when you want to show how a company screwed up, you can.

I have to set the stage a bit.

I live in one of the most geographically isolated spots in the continental United States. So I probably do about two thirds of my non-food shopping online. I stick with the companies that have what I want and who are reliable. Apple, for example, can get me almost anything they sell in 24-72 hours if I order on Monday, Tuesday, or Wednesday. Thursday and Friday takes a little longer, and the weekend just gets bumped to Monday. I know Amazon (rightfully) takes it's lumps over the way it treats small publishers, but I can usually get anything they sell in five business days. CDW, my other major computer supplier, can get me stuff in three to four business days. Even McFeelys, a tool company I discovered a while back, can get me most things in about five business days.

Eight days is usually the maximum, unless a company specifically tells me differently when I do the order.

There's scrambled genes in my makeup. Parts of me don't quite fit. My hands are small for a man, for example, and my legs are out of proportion to my torso. This isn't a biggie usually, but it means that certain cuts of trousers work and look better than others. That's probably one reason why I prefer no pants, truth be told.

Except for socks and trousers, I can go off the rack. Buying clothing online is always risky because you don't know how well it fits until it's there, or how well made it is.

So, I tend to go with companies that I have had good luck with before.

J.C. Penny was one such company.

This time around, I found the brand and style of pants I've had before and I put five pair in my shopping cart. It wasn't until I tried to check-out that it told me they were no longer available. But it showed the EXACT trousers as "related products." So I am already frustrated because of that.

I ordered on the 7th. According to the, the order shipped on the 10th.

Yesterday, there were no trousers. So I checked the site again. This time there was a FedEx link. The FedEx link said the order shipped on the 17th, yesterday, and should arrive on the 20th.

Somebody is lying to me, and I don't think it is FedEx.

If they had told me there was going to be a delay, I would have grumbled a bit but been patient.

Today I am going to call and yell.

And I guess I will have to find somewhere else to by my work pants twice a year.

Posted Tue - August 18, 2009 at 08:40 AM  

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Mon - August 17, 2009

It started with Nixon, not Obama

I was reading the excellent Too Big to Fail Must Die in City Journal and I learned something new.

Fifty years of policy died in 1984. That May, the nation’s eighth-largest commercial bank, Chicago’s Continental Illinois, found itself in deep trouble. Like any enterprising company in a capitalist society, it had exercised its right to establish a competitive edge and pursue greater profits—with a corresponding risk of failure, which had now struck. Continental’s biggest error was how it paid for its investments. All banks use depositors’ money and other sources of funding to make loans and other investments. But beyond using funds from FDIC-insured small depositors and other stable, long-term lenders (such as bondholders), Continental relied more than most banks on short-term, uninsured lenders from around the globe, particularly large depositors. Global corporations and other investors often park their money overnight or for a few weeks at a time in bank accounts that offer slightly higher rates because, once they’ve exceeded the FDIC limits, they carry risk. For a lender who doesn’t mind that risk, these short-term, uninsured accounts are attractive, since he can pull his money at any time if he needs cash, finds a better rate elsewhere, or perceives a new danger. For the borrower, like Continental, however, that ease of withdrawal made the funding source perilous. A sudden panic could leave the accounts depleted and the bank without money just when it needed it most.

Looks like it was the Reagan administration that fell for the line first. But not everyone in the administration agreed. Emphasis added.

The break from normal practice divided the administration. Treasury Secretary Donald Regan found the intervention outrageous: “We believe it is bad public policy, would be seen to be unfair . . . and represents an unauthorized and unlegislated expansion of federal guarantees in contravention of executive branch policy,” he wrote to his colleagues. But the White House, by offering its quiet support to the Fed and the FDIC, plainly agreed with their compelling argument that the alternative was to risk a systemic crisis in the financial industry.

Federal Reserve chairman Paul Volcker told Congress that the decision to protect uninsured lenders of a private institution from the consequences of a freely assumed risk wasn’t meant to set a precedent. But the federal comptroller of the currency, which regulates banks, made clear that a shift in policy had taken place, telling Congress that none of the nation’s top 11 banks would be allowed to fail. Small banks were apoplectic. Jokes flourished about investors’ not wanting to put money into the nation’s 12th-largest bank. “How often and to what extent can the government, and in turn the taxpayers, prop up any institutions that are neither the nation’s best or brightest?” wondered the Independent Bankers Association of America.

Good question. So I did some checking. Continental Illinois National Bank wasn't the first. It wasn't even New York City.

It was Penn Central Railroad in 1970 with President Richard Nixon.

Nicole Gelinas was right about one thing though. It was a Republican White House that decided some companies are too big a risk.

Here's what you should remember from the City Journal article.

Gradually, lenders to big banks understood that their money was no longer at risk. And the banks realized that the bigger and more complicated they got, the safer they would be from market discipline—and so they became.

That is what our entire financial system has become based on. As long as we allow lenders and bankers to act without consequences, failures will happen more and more. The stakes will become higher and higher.

We can't afford it.

Not because of the sheer size of the sums involved.

But because we've shifted risk and higher costs to the taxpayer.

And there is no more money to use.

Posted Mon - August 17, 2009 at 01:33 PM  

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Wed - August 12, 2009

Health care mess

Well, there is no getting around it. Let's talk about this mess that the government is making of health care.

Let's forget which industry groups are supporting "reform" in exchange for favors.

Let's forget that continued government "intervention" keeps pushing prices higher and higher.

Let's forget that our politicos have told the population that they can get something for nothing.

Roughly speaking, most medical care falls under four categories.

Let's call the first category WANT. These are the things that modern medicine makes possible, but aren't necessary. Non-reconstructive plastic surgery. Cosmetic surgery. Lasik surgery. Birth control pills. Viagra. Tooth whitening.

Let's call the second category NEED. This helps people deal with the daily falls and encounters of everyday life. Flu shots. Setting broken bones. Removing tonsils or an appendix. Treating gashes or burns.

We can call the third category EMERGENCY. This is medical treatment to treat a life threatening condition that the patient can recover from. Treating heart attacks. Treating massive injury.

Our fourth category can be called PERMANENT. Anyone with a permanent condition will never get "heal", but the care prolongs their life. This includes treating diabetes, treating Alzheimer's, nursing homes

Obviously people will disagree with me over the categories and what each includes.

But that is only part of the point I want to make,

Universal health care HAS to cover each of these categories. Suddenly cancer gets the same priority as a yeast infection. At least to the patient, THEY don't have to pay for it.

I shouldn't have to pay for your tummy tuck with my taxes, and you shouldn't have to pay for where I sat in the cactus.

Here's the second point.

Different people will need different levels of each category.

My stepfather needs round the clock care, but he doesn't need to be put on an artificial kidney machine.

Here's the third point.

Without individual people choosing where to spend their money, there is no competition to drive prices down and availability up. At that point, the only way to contain costs is to ration who gets what.

Here's the fourth point.

Each category needs a different type of funding. Standard insurance already covers NEED and EMERGENCY pretty well. WANT and PERMANENT would just drive up insurance costs without delivering benefits to most people. A Health Savings Account could work for PERMANENT.

Here's the fifth point.

IT'S NOT ABOUT HEALTHCARE! It never was. It's about controlling your life. That's why there are things like mandating parental training and phasing out private insurance.

It's why you aren't allowed to choose once the plan kicks in.

That's why your medical care can be rationed if you engage in risky behavior.

That's why certain groups with political pull get favorable treatment.

Get the picture?

To save you, they will control you.

They will make you less than human.

Do you trust the politicos now?

Posted Wed - August 12, 2009 at 07:21 AM  

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Mon - August 10, 2009

Don't listen to the distraction, watch what's he's doing

The Grand and Glorious Imperious Leader has been saying that the economy is turning around, largely on the strength of a stock bounce and a slowing in the growth of the unemployment rate.

But somehow he forgets to mention that weren't for the increase of government (and taxpayer funded) jobs, the unemployment rate would be much, much higher. That trend has been there for a decade, but with now with other sectors losing employees, it really shows.

Think about that for just a bit.

The stock market is even worse.

According to official government statistics, the current recession began in December of 2007. Two months earlier, in October of that year, the Dow Jones Industrial Average and S&P 500 both hit all-time record highs. Exactly what foresight did this run-up provide? Obviously markets were completely blind-sided by the biggest recession since the Great Depression. In fact, the main reason why the markets sold off so violently in 2008, after the severity of the recession became impossible to ignore, was that it had so completely misread the economy in the preceding years.

Furthermore, throughout most of 2008, even as the economy was contracting, academic economists and stock market strategists were still confident that a recession would be avoided. If they could not even forecast a recession that had already started, how can they possibly predict when it will end? In contrast, on a Fox News appearance on December 31, 2007, I endured the gibes of optimistic co-panelists when I clearly proclaimed that a recession was underway.

Rising U.S. stock prices – particularly following a 50% decline – mean nothing regarding the health of the U.S. economy or the prospects for a recovery. In fact, relative to the meteoric rise of foreign stock markets over the past six months, U.S. stocks are standing still. If anything, it is the strength in overseas markets that is dragging U.S. stocks along for the ride.

Don't pay attention to government claims, especially with this President.

More than fifty banks have gone under since the beginning of the year.

The dollar is sinking fast. We may see hyperinflation starting next year sometime. You will see prices rise dramatically, especially for food.

We've added more than 161 billion dollars to the national debt in July alone.

And our Imperious Leader claims that the solution to all our ills is more government involvement with less dissent.

Posted Mon - August 10, 2009 at 12:04 PM  

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Mon - August 3, 2009

Universal insurance is the wrong idea

Let's talk about the one part of medical reform that Congress doesn't want to think about.

The costs.

As long as government guarantees payment at a given price, there is never going to be meaningful reform.

As long as government treats medical insurance as one-size-fits-all, health care will always be rationed.

If people can choose their own computers, they are perfectly capable of deciding what care if any they need. All without the government holding a gun to their head.

Yes, there should be catastrophic health care insurance, AS LONG AS GOVERNMENT IS NOT INVOLVED.

Otherwise, let people pay for the services they choose.

Because doctors won't listen to patients as long as government foots the bill.

So why is the President and the Congressional Democrats pushing universal health care?

It's not because they care about your welfare.

It's because they want to control you.

Remember the Second Golden Rule. "He who pays the bills makes the rules."

Better yet, remember this.

"In every generation there are those who want to rule well - but they mean to rule. They promise to be good masters - but they mean to be masters."
— Daniel Webster

Let the free market rule, government interference keeps making it worse.

Posted Mon - August 3, 2009 at 02:10 PM  

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Mon - July 27, 2009

Carbon dioxide and sunlight make fuel

Ah, this is one of those free market stories I absolutely love passing along.

Start-up Joule Biotechnologies is sort of a mashup of the fuels, solar, and biotechnology industries.

The Cambridge, Mass.-based company on Monday is disclosing its technology and business plans for making ethanol and other liquid fuels from genetically manipulated microorganisms that have been fed only sunlight and carbon dioxide.

In a break with biofuels companies, Joule says its HelioCulture system works without a biomass feedstock, such as algae or others plants. Instead, the company's engineered organisms grow through photosynthesis in a brackish water solution and directly excrete fuel or commercial chemicals.

Just so we're clear, this will do absolutely nothing to reduce carbon emissions. But considering that there is absolutely no evidence that human activity is causing global warming, that is okay. (And I still say that if you think humans put too much carbon in the atmosphere, PLANT MORE TREES!)

What it could do is make ethanol incredibly cheap and be able to produce it anywhere the sun shines.

Please notice I said "could," not will.

The savings on distribution costs alone would be enormous. Ethanol doesn't travel well in pipelines. But if you could decentralize production into a mass of mini-plants instead of one huge refinery, that problem is solved.

I'm also curious about secondary applications, maybe combined with those petroleum eating bacteria from a few years back. Could this technology be extended to "harvest" materials from old electronics and other discarded waste? BAM! Cheapo recycling, which would deal with the landfill problem.

Watch this one, it's exciting.

Posted Mon - July 27, 2009 at 12:29 PM  

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Wed - July 22, 2009

It takes forty-two thousand a year to keep him alive - OOPS! Make that seventy-five thousand. Updated.

I admit I am biased on healthcare.

My stepfather is institutionalized. I won't go into his symptoms, but he is bedridden, on a feeding tube, and mentally incapable of carrying on a conversation about half the time. He seems happy and doesn't have pain. He smiles when he sees people.

His condition is progressive. There is no way he will recover. He will never be any better. He could die tomorrow or he could hang on for thirty more years.

But he is my stepdad. I can't "pull the plug" on him. Nor would I ask that anyone else do it for me.

Through careful juggling of his retirement, Medicare, and a few other things, his care is paid for without Mom losing the house or any of her assets. I've lost track of how many government agencies are involved.

The direct costs to keep him alive run about thirty-five hundred a month. I want you to think about that for a moment. That's $3500 doing nothing but keeping him alive with no hope of recovery. Without all that careful juggling and various circumstances, we could not afford to keep him alive.

See, that is part of the problem, our health care is not set up to deal with long term conditions. We expect people to get better.

Each of the government agencies involved has a different review period. One is 15 days, some are 30, a couple are 45, and most are 90. A question raised by any agency can trigger inquires by any or all of the others, resetting the clock. I estimate that filing paperwork and keeping all the agencies satisfied probably consumes another two hundred monthly in time, effort and materials. That's another $2400 a year.

I absolutely hate that my stepfather's life depends on balancing one government agency against two or three others at any given time.

As a libertarian, believe me, I know it moves beyond irony.

The thing is, a big part of why medical services are so expensive is because there is no REAL free market for medical care in the United States. More than half of all medical care goes through things like Medicare, the VA, and more government agencies than I can name. Most of which have serious problems with fraud and waste, all on the public dollar. Of what's left, it's all highly regulated.

Under the new Democrat medical plan, some existing insurance would still be allowed, but some would be phased out right away. The rest would be phased out as the patient's needs changed (see the infamous page 16 of the bill).

If our existing medical care is flawed, it's because our government made it that way.

They can't be allowed to "fix it" ANY MORE. The politicos are only interested in their own power.

Update: It's actually more than $3500 per month. The $3500 is what the family contributes each month, mainly by signing over his retirement and social security. There is a little more that Mom pays as a monthly bill.

In my defense, I goofed because it's not my checkbook. I was going by memory.

However, if you count the 'total costs," it actually costs about $6300 per month.

"Ah," I can hear you saying. "That means that Federal government pays to keep your father alive. It couldn't be done without them."

That's sort of like the neighbor drive your car insurance up by wrecking your car, and then demanding that you thank him because he's the only salesman allowed to sell you a policy.

Posted Wed - July 22, 2009 at 08:41 AM  

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Mon - June 29, 2009


Emphasis added.

Now comes the CBO with yet more news of the sort that neither Capitol Hill nor the White House is likely to welcome: its freshly released report on the federal government's long-term financial situation. To put it bluntly, the fiscal policy of the United States is unsustainable. Debt is growing faster than gross domestic product. Under the CBO's most realistic scenario, the publicly held debt of the U.S. government will reach 82 percent of GDP by 2019 -- roughly double what it was in 2008. By 2026, spiraling interest payments would push the debt above its all-time peak (set just after World War II) of 113 percent of GDP. It would reach 200 percent of GDP in 2038.

This huge mass of debt, which would stifle economic growth and reduce the American standard of living, can be avoided only through spending cuts, tax increases or some combination of the two. And the longer government waits to get its financial house in order, the more it will cost to do so, the CBO says.
The Debt Tsuami,

Good work if you can pull it off. Spend more money than can possibly be paid off. Hand out expensive goodies to almost every group in sight. Then blame everyone else when the economy collapses.

And demand more in taxes to put things right.

Don't fall for it.

Posted Mon - June 29, 2009 at 12:58 PM  

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Mon - June 15, 2009

Fudging the numbers

This is an older one, but I bet most of you didn't see it.

Accountants, Washington Helping Banks Fluff Profits.

For all of Obama's pledges of transparency, he certainly doesn't want you to have good information.

Oh, and you aren't supposed to protest too loudly either.

Just remember that the only thing that keeps politicos honest is the one thing that they desperately fear.

An angry, informed, and determined citizenry. Not voters, but citizens.

You see, voters work within the system. Citizens have been known to take freedom matters into their own hands, no matter what the law says.

Posted Mon - June 15, 2009 at 12:01 PM  

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Mon - June 1, 2009

The vanishing cash flow

It's getting tougher to make a profit. Emphasis in original.

…taxes extracted 74.2% of any added (marginal) corporate earnings, leaving only scraps for stockholder.

Companies that lost money, on the other hand, were often bailed out and/or nationalized.

A funny thing happens when government targets the "richest." The money disappears.

Maryland couldn't balance its budget last year, so the state tried to close the shortfall by fleecing the wealthy. Politicians in Annapolis created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25%. And because cities such as Baltimore and Bethesda also impose income taxes, the state-local tax rate can go as high as 9.45%. Governor Martin O'Malley, a dedicated class warrior, declared that these richest 0.3% of filers were "willing and able to pay their fair share." The Baltimore Sun predicted the rich would "grin and bear it."

One year later, nobody's grinning. One-third of the millionaires have disappeared from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April. This year there were 2,000, which the state comptroller's office concedes is a "substantial decline." On those missing returns, the government collects 6.25% of nothing. Instead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last year -- even at higher rates.

Despite the best efforts of the FedGovs to prop up the economy and to keep people in housing they can't afford, delinquencies and foreclosures are up. Way, way up. Ordinarily, this would cause house prices to fall. Under the circumstances, it's going to cause the dollar to crash.

Money wants to flow free.

I told you before, the question isn't if government can fix it, but what the costs will be.

Government action most directly influences marginal behavior. It's an economic truth. Lower the cost of flood insurance by government decree and more people build in a flood plain. Tell banks that they don't have to cover bad subprime loans and of course there will be more loans. Pay unwed mothers and a majority will stay unwed.

It's these marginal behaviors that can lead to cascade reactions because it's at the margins.

If the income tax rate jumps three percent between 50 grand a year and 51 grand per year, that whole zone between 50 grand and 52 grand becomes a "no man's land" that everyone avoids because it costs less. People will resist moving above 50 grand until they can keep more of their money. That means that there is less movement up the income scale, and when income does change (if it changes), it's going to spike over the gray area.

Watch those marginal behaviors.

I asked the obvious question before. Do you think the behavior that led to this mess will change now that the FedGovs are officially "in charge?"

But when politics trump the free market, people don't take responsibility and the taxpayers are left holding the bill.

Nothing has changed since I told you this:

Every single social service "provided" by a government agency inevitably costs more than a private sector version. It will be looked upon as a right, not a cost. It will change marginal behavior for the worse. And it will discourage alternatives from developing.

The fact is that we could have handled the collapse without spending oodles of cash stolen from ourselves. It would have been rough, yes, but it would have been a burp. Bush opened the door and Obama took out the wall and most of the neighborhood on the other side.


About the only good thing that is coming out of this is the collapse of the central state, and I don't think most people would choose that.

Posted Mon - June 1, 2009 at 12:37 PM  

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Mon - May 25, 2009

The dollars dry up

It's all about consequences and the rule of law. Emphasis added.

All contracts are important in some way, but credit contracts are particularly important to a functioning capitalist system. That’s why Article V of the U.S. Constitution prohibits states from interfering with the obligation to pay debts. And Article 1, Section 8 reinforces this point by delegating to the federal government the sole authority to enact “uniform laws on the subject of bankruptcies.”

Under these long standing bankruptcy laws - enacted and enforced by the federal government under the Constitution - a secured creditor is entitled to first priority under the “absolute priority rule.” Other nonsecured creditors have “junior” priority. The purpose of this rule should seem clear. When you offer credit to some one or some thing, and do so on the condition that it is secured by an asset, you should be first in line to collect before those providing credit without such security. Unfortunately President Obama’s actions throughout the Chrysler bankruptcy have trampled over these well worn bankruptcy laws, contract rights, and even the rule of law.

One of Chrysler’s secured creditors was the State of Indiana, or more particularly, pension funds administered by the state. But now that Chrysler has filed for bankruptcy, Indiana and other secured creditors are being forced to the back of the line so that unions can proceed to the front. For every dollar of secured creditors’ claims, they’re receiving only 30 cents. Compare that the the United Auto Workers union, an unsecured junior creditor, who will get 50 cents on the dollar.

Why? It’s not because any contract, agreement or bankruptcy law calls for it, but because the federal government decided it was politically convenient. Of course, we’ve become far too familiar with the government robbing Peter to pay Paul, but in this instance the government is violating the rule of law to do it. The arbitrary whims of Obama’s administration threaten the very foundation of capitalism.

Henceforth lenders will hesitate to provide credit, and eager entrepreneurs and businessmen will struggle to find it, because any credit can now apparently be confiscated by government greed regardless of the law or the existence of a binding contract. Simply put, the price of borrowing will now go up because lenders must account for a new risk - government intervention.

Remember that according to the Grand and Glorious Imperious Leader Obama, we're out of money.

What do you think will happen in a few months when the bills come due?

Posted Mon - May 25, 2009 at 02:04 PM  

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Brit Banks Tell Obama No Thanks

I know Obama didn't expect this.

The question isn't why the British banks are putting up a fuss.

The question is why the American banks aren't.

Posted at 01:55 PM  

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Tue - May 19, 2009

AZ Attorney General sues to keep Tucson Citizen print edition

One of those moments when I wish I didn't have to admit that I am living in Arizona.

Federal judge to rule Tuesday on Citizen's print edition

If it were my paper, I think I would tell the judge that either the state pays my expenses to run the paper or I will walk away completely.

Amazing how the Newspaper Preservation Act is being used to violate property rights, isn't it? That always seems to happen when someone or something is exempted from the law.

Posted Tue - May 19, 2009 at 06:57 AM  

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Mon - May 18, 2009

Why taxing mainly the rich is a losing game

Here's the problem for states that want to pry more money out of the wallets of rich people. It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states.
— Arthur Laffer and Stephen Moore, Soak the Rich, Lose the Rich

The rest of the piece is pretty good too.

The laws "against the rich" seldom affect the rich. That's because the wealthy can hire expert advice or influence legislation to exempt their wealth. Without fail, laws "against the rich" hit those people trying to become rich.

Posted Mon - May 18, 2009 at 12:44 PM  

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Sat - May 16, 2009

Killing the golden age of Hollywood

Here's another article that is certainly worth thinking about.

Hollywood ain't what it used to be. For the most part — and with known exceptions — the quality and content of today's movies have plummeted when compared to the Golden Age. With the movies' parade of sex and violence, they're an easy target for cultural critics to say capitalism inflicts grave damage on the culture.

Let's take another look. It wasn't the free market, consumerism, or capitalism that killed the movies after World War II. It was antitrust regulation, as enforced by the Federal Trade Commission.

This government intervention in the 1940s radically altered the structure of the film industry for the worse. The direct and immediate result was a decline in acting, scripts, scores, content, and the cultural contribution of films.

I think the article minimizes the impact of television, although it does go a long way towards explaining how television became the "vast wasteland."

Still, there is no question that the Federal government interfered with a free market construct that worked, and movies have been less rich because of it.

Our culture has been less rich because of it.

Remember that when the Fedgovs demand to interfere in any other industry.

Posted Sat - May 16, 2009 at 02:03 PM  

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Zombie Press fed on the public dime

Another example of "special rules for special people."

Washington State Bails Out Media: Newspapers Get Tax Cut

Odd how the politicos don't want the free market and your choices to work, isn't it?

Maybe because elected officials want a favorable press at their beck and call?

Certainly with thinking about.

And certainly another reason why newspapers should fail if they can't compete without public money propping them up.

Posted at 01:56 PM  

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Chrysler and the lemon laws

Ah yes, the another case of "special exceptions."

Chrysler's bankruptcy is throwing a wrench into California's lemon law, which is intended to make it easier for consumers to get refunds for defective vehicles. As the automaker's bankruptcy grinds away, settlement checks from Chrysler to unhappy car buyers are bouncing and complaints are stymied in and out of court.


Since Chrysler filed for Chapter 11 bankruptcy protection April 30, financial claims incurred before the filing can be paid only if approved by the bankruptcy judge. Chrysler has not asked for permission to make payments on lemon law complaints -- and that is causing headaches for some of its customers.

Alex Simanovsky, an Atlanta attorney whose firm handles lemon law cases in California and other states, said he had "a stack of six or seven checks in my drawer right now from Chrysler that have bounced." The amounts range from $2,000 to $3,000 for clients who were accepting cash payments to as much as $40,000 in cases where Chrysler agreed to repurchase the vehicle.

"There has been no determination if these accounts are going to be unfrozen [by the Bankruptcy Court] and the checks will be good," Simanovsky said. "My feeling is they will not be."

I don't think bankruptcy is a reason to ignore the uniform rule of law.

But I suspect Chrysler executives do. And I bet that given the Federal government involvement, they will get away with it.

Boom!! Another "competitive advantage" backed by government force.

Hat tip Brain Terminal.

Posted at 01:37 PM  

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Thu - May 14, 2009

Set top boxes may go smart?

Here's an example of why greed and competition work to give the customer a better product.

But perhaps it’s time to examine the cable industry’s lease model. Is having all of those logo-branded boxes on the balance sheet worth the pittance consumers pay to rent them? Is it worth dooming customers to a clunky experience when a third-party box could do the job better? Heck, gaming consoles, DVD players and other CE devices could simply double as cable set-tops if the cable industry could just finally… let go. All of this was supposed to happen years ago, by the way, with set-tops proliferating at retail. But it never came to pass for a variety of reasons. And now competition is fierce, online video is the boogeyman and gee… wouldn’t it be nice if all those advanced boxes were out there right now?  

Recent signs suggest cable operators are starting to get it. They know they need to change. At the Cable Show, for example, Comcast’s Brian Roberts showed off Starz’s new EBIF application (very similar to Time Warner Cable’s Start Over feature) on the show floor. Other execs trumpeted the potential of EBIF and tru2way to free up previously closed off silos in the cable infrastructure—all in the interest of giving consumers more flexibility (so they don’t “cut the cord” and get all their content from other sources). Many continue to believe that 2009 could be the year when the cable industry finally starts unclenching its hand from the box—albeit very gradually and with an abundance of caution.

Perhaps cable should take a cue from Apple, which is famously restrictive when it comes to its devices and software—especially its mega-successful iPhone. Yet, the App Store has cultivated one of the most open and eclectic software bazaars in history, making it easy to purchase applications that do everything from find nearby restaurants to tune musical instruments to organize expense accounts. Imagine what kind of world such an App Store could create for cable? And Apple has proven that giving third parties the ability to innovate doesn’t mean sacrificing all control over the hardware or software. Furthermore, the iPhone shows what a bit of “letting go” can do for the bottom line of the infrastructure owners: AT&T Wireless was floundering, so it agreed to a raft of unusual concessions to Apple to get exclusivity over the iPhone, including forgoing the AT&T logo on the device and letting Apple dictate all the manufacturing specs and software. AT&T has nothing to do with that wonderful app store either. Has this lack of control put AT&T into a death spiral of despair? Quite the opposite: AT&T is the envy of Verizon, which has been making overtures to Apple lately in an attempt to match its rival’s accommodating stance. What if Apple exclusively built an “iSetTop” for the cable industry under similar restrictions? Would it be the end of the world or a new competitive superweapon?

As long as government stays off the playing field, over time competition means better, cheaper, and faster products.

Hat tip Gizmodo.

Posted Thu - May 14, 2009 at 07:28 AM  

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Mon - May 11, 2009

Free market means voluntary exchange without coercion

One thing that keeps alarming me is people's idea of what the free market is.

It's the way they have been taught. Company bribes government official or makes ""campaign contributions," company gets special consideration and a leg up over the competition.

Or if the company or owners are politically connected, the company gets benefits that aren't available to any other company.

You know, like just happened with Chrysler. Even though Ford managed to resurrect itself without government "help," there is no doubt that Chrysler (and probably GM) will have a competitive advantage sanctioned and protected by the Federal government.

That is NOT the free market. It happened with government intervention. Government officials goosed the laws and regulations to bring about a specific outcome, even though that outcome was economically disastrous.

That, ladies and gentlemen, is mercantilism. Basically it's union between commercial and government interests.

The only thing that history shows is more dangerous is the union between religious and government interests.

When an industry is "in the national interest," that's mercantilism.

When a company is "too big to fail," that is mercantilism.

When something is "vital to the economy," that is mercantilism.

For a company, the advantage of getting the government involved is that all the competition can be pushed aside by force. For the government, it gets to control part of the economy. Well, not really, but it believes that it does.

Mercantilism means that the government does the dirty work, the company gets the profits, and the politicos get the bribes and power. That has been called free market economics, but it really isn't.

When people are disgusted by what passes as free market economics in modern Western society, chances are they've never experienced the free market.

A free market is the voluntary exchange of goods and services without coercion.

That also means without regulation. Can you think of an economic exchange in the last century that happened without government regulation?

That is a pretty important idea. It's toppled governments. Wars have been started over less. Four simple words and it's enough to threaten Presidents and armies and massive international corporations. Very powerful people have spend decades trying to convince you that free markets NEED to be controlled.

Voluntary exchange without coercion.

Why are they afraid?

Because their system of mercantilism can't withstand the competition. It has to be defended from free choice.

YOUR choice.

Otherwise it shatters into a million pieces.

Their power and fortunes depend on you buying into a lie and paying dearly for the privilege. So when the elites tell you it was a failure of the free market, ask if it really was a free market to begin with.

Was it voluntary exchange without coercion? Without regulation? Without "protection?" Did you have alternatives? Could you have walked away and not bought anything today?

The free market means voluntary exchange without coercion.

Posted Mon - May 11, 2009 at 02:07 PM  

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Wed - May 6, 2009

Blatent Apple flavored plug for the free market

A while back, Brad over at put up Another Reason Not to Own an iPhone.

Well, free market guy (and not so closeted Apple fan) that I am, I thought that blaming Apple alone for the problem was a little much.

So I joined the forum so I could make that point. It's been a great talk and my brain has been stretched by participating.

Incidentally, should be one of your daily reads.

Posted Wed - May 6, 2009 at 03:03 PM  

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Mon - April 13, 2009

Beacon Links for 13Apr2009

Captain Capitalism has a great idea for fixing the economy. Like him, I don't think the government would willingly let it happen because it would mean surrendering control. It makes since though, and puts the money thing really in perspective.

But people get tired of waiting for government to fulfill it's promises. That's what happened in on Hawaii Kauai island. Jeffery Tucker sees it as the best example of private roads. I have to wonder if its the face of the future. Be sure to read the comments.

A Wall Street Journal symposium finds that Alan Greenspan's Federal Reserve and low interest rates probably caused the housing bubble, but they all don't say that the bubble led to the bust. I find it fascinating that economists are no longer tip-toing around the idea that maybe the Fed shouldn't "regulate" the currency. H/t

Some U.S. communities are using alternative currencies. I remember reading about the Ithaca hours years ago in the Utne Reader. While I applaud the recognition that cashflow is important, I think this communities fell into the same trap as the FedGovs. What's the value behind their currency?

As part of the automaker bailout, the Federal Government is going to buy 17600 vehicles. There was no bid process, and no sign that the government needs the cars. So you the taxpayer gets to finance it.

In his own inimitable way, Vin Suprynowicz takes on the automaker bailout.

More and more I have to wonder if the Treasury Department is just using a shell game. Banks have been ordered to keep quiet about the "stress test" so as not to affect stock prices. We'd be calling this "insider trading" if it weren't the Federal government doing it. But since information wants to flow freely, the news is coming out and it is not good. More and more banks have almost no cash reserves.

Posted Mon - April 13, 2009 at 01:01 PM  

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Tue - March 31, 2009

It's not just for executives anymore

Congressional mob enforcer Barney Frank has introduced some scary legislation. Emphasis added.

But now, in a little-noticed move, the House Financial Services Committee, led by chairman Barney Frank, has approved a measure that would, in some key ways, go beyond the most draconian features of the original AIG bill. The new legislation, the "Pay for Performance Act of 2009," would impose government controls on the pay of all employees -- not just top executives -- of companies that have received a capital investment from the U.S. government. It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies.

The purpose of the legislation is to "prohibit unreasonable and excessive compensation and compensation not based on performance standards," according to the bill's language. That includes regular pay, bonuses -- everything -- paid to employees of companies in whom the government has a capital stake, including those that have received funds through the Troubled Assets Relief Program, or TARP, as well as Fannie Mae and Freddie Mac.

The measure is not limited just to those firms that received the largest sums of money, or just to the top 25 or 50 executives of those companies. It applies to all employees of all companies involved, for as long as the government is invested. And it would not only apply going forward, but also retroactively to existing contracts and pay arrangements of institutions that have already received funds.

Right now, it only applies to companies that have received government bailouts. Pretty much like I predicted.

Anyone want to give me odds that similar legislation won't soon apply to all employers?

Posted Tue - March 31, 2009 at 03:00 PM  

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Sun - March 22, 2009

Hedge Funds and Mercantilism - Updated

This one misses the point a bit. More on that after the links.

The really telling point is in Part 2, and I quote (adding some emphasis):

"Naked short selling is a name often applied to in an illegal, steroid enhanced perversion of short selling and is the most common mechanism by which stock manipulators generate supply swollen IOUs to sell instead of real shares. Neither you nor I can do this, but until relatively recently a few powerful folks on Wall Street could and actively did engage in naked short selling in order to manipulate the price of a company's stock down, making their regular short positions and put options much more lucrative."

While I will agree that certain hedge funds should top the suspect list on the private side of the equation, this otherwise excellent piece doesn't ask the really important question.

How did those "few powerful folks on Wall Street" get the power to use naked short selling, and why can't anyone else do it?

There was more than one set of rules. There was no uniform rule of law. Someone had paid a pretty penny for the power to control one part of the market.

It's mercantilism. Crony capitalism. Corporate welfare. A perpetual sixty-nine between business and government that screws everyone else.
NeoWayland, Fiscal Porn

There's no doubt in my mind that neither Congress nor the various regulators understood what they were handing to certain individuals.

But the root of the problem is still the absence of the uniform rule of law. Law should apply to everyone or to no one. It's obvious that the only way hedge funds could have taken advantage is if there is more than one set of rules.

And from the looks of it, Congress is not going to repair it. At least as long as elected officials and politicos get their cut.

The fix is in, the deck is stacked against you.

UPDATE - At the request of Judd Bagley who made the videos I linked to, I changed my transcript (see comments). Blame my hearing, not his video. I double checked this morning, and he was right.

Posted Sun - March 22, 2009 at 02:14 PM  

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That's the excuse not the reason

Those companies that are lucky to find strong political patrons will survive, but at dreadful costs. For every dime of debt the companies lose, they might spend five dollars in new costs, favors, or outright bribes.

The corporate executives, the board of directors, even the stockholders will have no voice in how the company is run.

The once mighty Masters of the Universe will be reduced to lapdogs.

Neutered lapdogs. With only two legs. And dyed obnoxious colors.

The companies that get assistance will be subject to the whims of a Congressman, or the bullying of a few technocrats.
NeoWayland, Fiscal Porn

And here's the next step. Emphasis added.

The Obama administration will call for increased oversight of executive pay at all banks, Wall Street firms and possibly other companies as part of a sweeping plan to overhaul financial regulation, government officials said.

The outlines of the plan are expected to be unveiled this week in preparation for President Obama’s first foreign summit meeting in early April.

Officials said the proposal would seek a broad new role for the Federal Reserve to oversee large companies, including major hedge funds, whose problems could pose risks to the entire financial system.

It will propose that many kinds of derivatives and other exotic financial instruments that contributed to the crisis be traded on exchanges or through clearinghouses so they are more transparent and can be more tightly regulated. And to protect consumers, it will call for federal standards for mortgage lenders beyond what the Federal Reserve adopted last year, as well as more aggressive enforcement of the mortgage rules.

Imagine that. The President wants power to regulate executive salaries.

Do you honestly think it will stop there?

After all, this is an administration that wants to control the medical care you get, the car you buy, and your mortgage.

And every thing so far indicates that no one in the government has competence to make these decisions.

It's not about saving you.

It's about controlling you.

Posted at 01:43 PM  

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Fri - March 20, 2009

Five major smartphone platforms compared by Gizmodo

Gizmodo has a decent and fairly accurate piece comparing the five major smartphone platforms .

Worth your time.

This is going to be an explosive field, even in a recession.

Posted Fri - March 20, 2009 at 11:49 AM  

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eHarmony reluctantly complies

I really don't understand the fuss about this one.

eHarmony is a private company. A lawsuit forced them to provide a service that they hadn't provided.

Now unless I have been misinformed all these years, gay means you're not interested in dating straights.

So someone tell me why a separate service is unacceptable?

I guess what really bothers me about this is that it fails the handy-dandy parity test.

What would the reaction be if an exclusively gay dating service was required by court decree to provide a service to straights?

I'm all for equal rights. I am dead set against special rights.

Posted at 11:46 AM  

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If Obama and the Congressional Democrats won't honor existing treaties, why should they honor any existing contracts?

File this one under "they should have known better"

California, an important supplier of fresh fruits, dried fruits and nuts to Mexico, will be hit hard. Table grapes will face a 45% duty at the Mexican border; wine, almonds and juices among other agricultural products will pay 20%. Some 90% of Christmas-tree exports from California and 65% from Oregon go to Mexico. It's doubtful volumes will hold up beneath a 20% tariff.

Alongside Oregon, Washington state will pay dearly to protect the Teamsters. Four out of 10 pears that the U.S. exports go to Mexico and half of those come from Washington. Under the new rules, American pears now face a 20% tariff, as do a host of paper products from the Pacific Northwest and Wisconsin.

Wisconsin's scrap battery industry, which exports $128 million annually to Mexico, won't be as competitive after it pays a 20% tariff. Nor will New York's $24 million annual exports in personal hygiene products or its exports of $250 million in precious-metals jewelry. President Obama's home state of Illinois can't be happy to learn it will lose competitiveness under a 20% tariff on its plastic tableware and kitchenware exports to Mexico ($57 million annually) and on its printed leaflets and brochures ($68.7 million).

North Dakota Senator Byron Dorgan sponsored the amendment that closed the border and his constituents will pay. North Dakota only exports $1 million in oil seeds annually but 80% of that goes to Mexico. They now face a 15% tariff.

Think about all that and read the title of this entry again.

Just how much is on the table with this administration?

Will they honor ANY agreements made before they took office?

Posted at 11:37 AM  

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Mon - March 9, 2009

Your bank account may not be insured

Remember all those promises about the Federal government preserving the value of your home?

That's what made this one so telling.

It turns out right now, the Fedgovs can't even guarantee your bank account. Emphasis added.

The head of the Federal Deposit Insurance Corporation, Sheila Bair, in a letter to bank chief executives dated March 2, defended the FDIC's plan to raise fees on banks and assess an emergency fee to shore up the fund and maintain investor confidence.

Bair acknowledged the new fees, announced Friday, would put additional pressure on banks at time of financial crisis and a deepening recession, but insisted they were critical to keep the insurance fund solvent and protect.

"Without these assessments, the deposit insurance fund could become insolvent this year," Bair wrote.
The FDIC chief said in the letter that the rapidly deteriorating economic conditions raised the prospects of "a large number" of bank failures through 2010.

So let's just make sure I have this straight.

When we don't need the insurance, we have to pay it.

When we do need the insurance, there's no money to back up the promises.

No privately owned insurance company would be allowed to pull this nonsense.

So we have different rules for government entities.

Which is what made the Fannie Mae and Freddie Mac meltdowns possible.

And the solution is more government control?

Posted Mon - March 9, 2009 at 02:07 PM  

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Mon - March 2, 2009

Thank Obama for higher cell phone prices.

Raise the price one place and watch the cost distribute itself.

The Imperious Leader is calling for higher prices for cell phone spectrum license fees.

The really ironic thing is that with all the cheap cell phones, more of the poor rely on cell phones than traditional land lines.

Which means that this is effectively a tax that will hit the poor hardest.

Change you can believe in.

Posted Mon - March 2, 2009 at 02:35 PM  

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Why the Amazon Kindle needs competition

We can't afford to have Amazon be the "only game in town." They will milk it for all it's worth.

Kevin couldn't understand why Amazon charged $29.95 for the digital version of Confessions of a Butcher when the paperback cost only $11.95. Amazon tried to gussy up the Kindle edition by offering what looked like a steep 45% discount, but the digital edition still cost $5 more than the print edition. Even the author's wife chimed in to Amazon's discussion forum to pan the discrepancy, adding, "what's really ridiculous is that we sell more ebooks at $20 than we do new paperbacks for $11.95."

Competition keeps prices low and companies honest. Right now Amazon is getting a little "too big for it's britches," especially in it's treatment of small presses. I use Amazon because I am in a rural location, but I don't think they will stay as the best choice. I think someone (and probably a bunch of somebodies) who is hungrier will figure out how to beat Amazon at it's own game.

That's why the free market works.

Posted at 02:30 PM  

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Another reason government bailouts will prolong the collapse

Thoughts on venture capitalism from the Wall Street Journal, emphasis added.

Venture capitalists certainly agree that innovators and start-up companies, not bailed-out GMs or Chryslers, will create the new jobs. They rightly brag that almost 20% of U.S. gross domestic product is generated by companies built by venture capital, such as Intel, Apple and Google. Still, they almost universally panned the notion of taxpayer support. Their real-time rejection is an excellent example of how social media -- here, the venture community dissecting a proposal online -- can now quickly take down bad ideas.

"The top venture firms don't want, don't need and are never going to take government money. The same is true of the top entrepreneurs," Fred Wilson of New York's Union Square Ventures wrote on his blog. "The worst firms, on the other hand, will gladly accept government money," which would go to investors who can't raise funds privately and to entrepreneurs whose ideas shouldn't be funded. "It's a problem of adverse selection."

Venture firms have had a hard time profitably investing $30 billion each year for the past several years. Even in the paralyzed markets of the last quarter of 2008, more than $5 billion was invested in more than 800 deals. Returns, however, have been low. Some areas, such as clean tech, look especially troubled now that oil no longer costs $145 a barrel. Another $20 billion would be impossible to digest efficiently. Instead of subsidizing the biggest venture firms, Geoff Entress of Rolling Bay Ventures in Seattle posted that tax breaks are needed for seed-stage angel investors, who "are quickly becoming an endangered species."

The idea of direct government funding is also anathema because it would undermine market discipline. Pension funds, endowments and other institutional investors keep a close eye on how their invested money is doing. Venture firms can raise new funds only if their previous performance was good.

Several venture capitalists pointed out the irony that government-funded venture capital could mean trading a credit bubble for another technology bubble. Artificially inflating the venture coffers through a government fund could risk repeating the debacle of 1999-2000, when too much money chased too few good ideas, resulting in the sharp deflation of the Internet bubble. Taxpayer funds would reduce hard-won investment discipline as cheap money backed riskier, less-promising ventures. Valuations assigned to companies would artificially rise, poorly selected start-ups would fail, and taxpayers would be on the hook.

So here's the question that no one is asking Washington. If the spending is really about recovery, then why isn't anyone talking to the people who really know money?

Posted at 02:23 PM  

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Mon - February 23, 2009

"The Crisis of Credit Visualized"

One of the better explanations so far. I do have two issues with it. First it completely overlooks the government role in the game. And second, the turning point happened earlier when mortgages were bundled with other mortgages and not with another investment.

Still, it's a great piece.

Posted Mon - February 23, 2009 at 01:38 PM  

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Money down the drain

Two pieces have an interesting juxtaposition.

The first is from Cato @ Liberty, The U.S. Didn't cause the World Recession. Emphasis in original.

Unlike the U.S., real GDP began falling in the second quarter of 2008 in Germany, France, Italy, Japan, Singapore and Hong Kong.  By no coincidence, that was when the price of oil rose as high as $145 a barrel.  Soaring oil prices raise the cost of production and distribution for many industries, and reduce real household incomes and therefore consumption.   Nine of the ten postwar U.S. recessions were preceded by a major spike in the price of oil.

The second is more telling, but the source may not be reliable. Here's a snippet from The Looming Collapse of European Banking.

The original February 11 story was a shocker. The author claims to have seen a secret European Commission report. The report estimates that losses (write-downs) by European banks will be in the range of $25 trillion.

If true, then to save the banking system, European governments will have to find an extra $25 trillion, fast. There is only one source of such funding: the central banks, mainly the European Central Bank (ECB).

For comparison's sake, consider the $700 billion banking bailout in the United States last fall. Of this, only about half has been spent. That was sufficient bailing wire and chewing gum to keep the American banking system going. More will be needed, but so far, this has sufficed. The Federal Reserve did a lot of asset swaps in 2008 – Treasury debt for toxic assets – and pumped in an extra trillion dollars or so. But the system has held.

Adding these together – the increase in the monetary base and $350 billion in bailout money – the total is around $1.5 trillion. Then think "$25 trillion." This is a sobering thought for some, and a reason to get unsober, fast, for others. (NeoWayland adds: The $1.5 trillion is definitely low-ball, my own estimates place it closer to around $2.7 trillion)

The European Central Bank will have to serve as the lender of last resort. There are over a dozen national EC governments. How will they coordinate their respective bailouts? Think of a dozen Barney Franks and a dozen Nancy Pelosis. Think of a dozen Henry Paulsons. Think of a dozen Gordon Browns. Terrifying, isn't it?

Meanwhile, no one is talking about Russia. And they should be.

Posted at 01:21 PM  

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Sat - February 21, 2009

The free market always wins in the end

Gary North of the Mises Institute tells it like it is.

Here is their intellectual problem: they do not believe in the free market. They cannot conceive of a social institution based on voluntarism that can break the backs of government planners and central bankers. They will believe anything but this. They think of themselves as defenders of the free market, but they do not grasp the power of the free market to enforce consumers' decisions.

The conspiracy of well-placed insiders is now tottering. The whole structure of the national American political system has rested on the solvency of the largest American banks. These banks have all been called into question. They are now gutted.

The thought that commercial-bank insiders actively demolished trillions of dollars of their own equity as part of a conspiratorial plan is so imbecilic, so outrageous, so ludicrous that I am convinced that these conspiracy worshippers have lost whatever remained of their minds. They have been gutted intellectually, just as the banks have been gutted financially.

Some of them probably think that Communists still run Russia. Ex-Communists do: bureaucrats, mobsters, and KGB agents. But Communism is dead. How do I know? Look at a map of Russia. Look for the old names: Stalingrad and Leningrad. Gone. Maps tell a great deal about a civilization. Russian maps tell us that Communism is dead.

The American conspirators have lost the one thing that they thought they had: control over the nation and the nation's finances by means of the fractional-reserve banking system. That system is coming unglued, just as Ludwig von Mises said it would, just as Murray Rothbard said it would, and just as those other Austrian economists who understand the enormous weakness of the fractional-reserve system said it would.

I've nothing to add.

Posted Sat - February 21, 2009 at 02:02 PM  

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Warner Bros. sues the Wyrd Sisters

This morning I was looking for lyrics for Everything And More, a song from the Wyrd Sisters Sin & Other Salvations.

While I was at their site, I ran across this page.

It's one of the worst examples of mercantilism I think I have ever seen.

Here's what you can do to help. Buy their CDs.

These ladies are very talented performers.

Here are a few of my favorite songs and the albums that they are from.

Witness To It All from Sin & Other Salvations.

3000 Million from Inside the Dreaming.

Dance, Little Brother from Inside the Dreaming.

This Ain't Living from Raw Voice.

I Guess It's Alright from Raw Voice.

High Horses from Wholly.

I'm telling you that these songs will get inside your head and get you singing. Give them a try, and let talent and the free market shine.

Posted at 07:21 AM  

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Thu - February 19, 2009

"I will say this very bluntly: We were told to take it. Not asked, told."

Hmmm. This one is intriguing.

But Davis was critical of the U.S. Treasury's Troubled Asset Relief Program introduced last fall, saying that while the program was well intended, it has turned out to be "lousy."

Created to encourage lending to small businesses and consumers, TARP started by shoveling tens of billions of dollars at the country's biggest banks but soon was expanded to include banks of all sizes. Minneapolis-based U.S. Bancorp got $6.6 billion.

"I will say this very bluntly: We were told to take it. Not asked, told. 'You will take it,' " Davis said. "It doesn't matter if you were there on the first night and you were told to sign on the dotted line before you walked out of the office, or whether in the days that followed, you were told to take it."

But by Tuesday afternoon, a U.S. Bancorp spokesman said Davis had misspoke, and meant that because the largest banks in the country took TARP money, U.S. Bancorp and others were forced to do so as well, for competitive reasons.

So we have differing stories here. But there have been persistent rumors that the FedGovs didn't the give the banks a choice to sign.

I think I find it even more significant that the current official reason U.S. Bancorp took the money was for competitive reasons.

Either way it actually went down, it certainly appears that the Federal government set out to destroy the free market, doesn't it?

Posted Thu - February 19, 2009 at 12:15 PM  

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Tue - February 17, 2009

It's your money. Do you really trust the government?

Here's one of the better solutions I've seen so far. That's why it will never be impliemented.

Hat tip disinter.

Posted Tue - February 17, 2009 at 01:35 PM  

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Sun - February 15, 2009

"ZERO balance across her accounts…"

I didn't know that this was legal, but it doesn't surprise me. Emphasis added.

Unfortunately, a different friend that has been in the mortgage business for 15-years is going through some hard times re-inventing herself. She is doing well in this terrible market but as with so many, got a bit over-levered during the bubble years and is now spreading it thin trying to keep all of the monthly payments going out. Some months when it is thin, she will chose to skip a payment on a specific card or two to pay other things…but she is paying nevertheless.

Yesterday morning she logged into her Wells Fargo checking and savings accounts to pay bills online and there was a ZERO balance across her accounts. However, her debt was paid down considerably. Immediately she called Wells and they informed her that because she was over 30-days late paying her Wells credit that they drained the accounts in order to pay down the bills.

This is also the second time somebody I know personally has had this happen with Wells – the first had their accounts drained of about $5k to bring current a HELOC payment. Leaving people with zero money and no credit is a drastic measure. Stories like this will get around quickly – it will not be too long before you hear about practices like this on 60-Minutes (I happen to know someone there!)

Yes, the money was owed and she was getting calls from Wells collectors but I still have to question the way this was done. This ensures she defaults on everyone else this month and in the future must keep all money out of banks from which she has credit.

Good advice. Keep your savings and checking in one bank and your credit cards somewhere else.

I got this link from Wendy McElroy's site, and Brad there adds that you should be alert because your two banks may merge someday.

Personally I don't believe in credit cards, I find a debit card works fairly well for my day to day stuff and I pay cash or cashiers check for the big stuff, but that's me.

I avoid the online scams because I have only one email that I use to deal with my bank and monthly bills. That way, if bank information comes back to any email except the one I use for banking, it goes straight in the trash. One time or occasional purchases have a separate email designated just for that purpose. Regular suppliers each have their own email. If I get an email addressed to one of the regular supplier addys and it's not from the regular supplier, I know who sold it and that company ceases to be a regular supplier.

Unfortunately scams and shoddy business practices are an unavoidable side effect of commerce and your best defense is to watch your money carefully.

Whatever you do, don't believe government when the politicos tell you that they can protect you and make sure you get what's coming to you.

Posted Sun - February 15, 2009 at 01:45 PM  

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Tue - February 10, 2009

Out of their depth

I am a free market guy. I believe that choice and competition delivers better products over time.

Take Walmart.

Assuming that they haven't been playing footsie with the local authorities, Walmart can ignite the free market.

See, the local store employees have very little control over what a Walmart carries. Walmart gets the low price by purchasing in great quantities and centralizing their inventory management. The average Walmart may have several items in a given category, but all are low end and there isn't a lot of choice.

What you are trading for is the low price, and nobody can beat Walmart on that day after day.

When my local Walmart closed and the company opened a Super Walmart, the picture changed in ways I didn't expect. The product range increased but the product depth decreased. Instead of having more wiper blades in the automotive section, there are fewer blades but you can now get paper shop towells on a roll and other products that the old Walmart didn't carry.

Instead of five choices that will work, I now have one or two. And not always that.

On the other hand, my local True Value is doing great guns. Walmart was just the incentive they needed to shed all the non-hardware items. They went with better quality tools, focused on customer service, and they have expanded four times since Walmart came to town.

So guess where I go when I need to scratch the tool itch?

Or let me give you a more recent example.

I decided to get a whiteboard. It needed to be between 26 and 40 inches wide, magnetic. and decently made. Now Walmart had magnetic whiteboards, but they were all two feet or less wide. They had a 36 inch wide whiteboard, but it wasn't magnetic, didn't have a lip for the dry erase markers, and the wooden frame was coming off in the store.

So I ordered one online. No, I'm not thrilled about the shipping costs, but that was the tradeoff I made to get what I needed.

There are no other office supply stores within a hundred miles. I probably do ninety percent of my shopping for office supplies online just because I don't like what Walmart carries. Sure it would probably work sort of if they had it. But mostly they don't.

Everyone thinks that the only way to compete with Walmart is on price. Not so. Quality and service goes a long way.

What good does it do me for Walmart to sell stuff that I don't want?

Walmart targets wide but doesn't have the inventory depth to keep me as more than a cursory customer.

Posted Tue - February 10, 2009 at 02:29 PM  

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In defense of the borg fruit - Updated

The Company Formerly Known as Apple Computer takes a lot of flack for it's practices and operations.

Most of it is undeserved.

Apple is the company that invented the personal computer.

While there were small scale computers available before the Apple I and Apple ][, they were specialist machines. Most of them were aimed either at the upscale hobbyist or the laboratory.

The Apple ][ changed that.

Apple is the company that made the graphic user interface practical and cheap.

Remember that before the Lisa and before the Macintosh, the only people using anything except text on their state-of-the-art computers were research centers and think tanks like Xerox's PARC or a few visionaries here and there.

The very first web browser ran on the NeXTSTEP. NeXTSTEP was made by Next Computer, a company founded by Steve Jobs and eventually bought by Apple.

USB was another good idea put out to pasture before Apple introduced the iMac and made the USB port the only way to attach peripherals. Overnight USB products became red hot sellers. Today USB 2.0 is the de facto interface standard.

Before the iTunes Music Store, no one made a profit selling music digitally. From the very first, Jobs told the music companies that they needed to offer high quality downloads without copy protection at a minimum price. Ironically, the record companies signed deals with Apple's competition to do exactly that after Apple made them money. Although bound at first by the agreements that Apple made, today DRM-free music is available for a slight fee almost anywhere.

Before the iPhone, the cell phone carriers specified to the hardware manufacturers what features could be used in what areas, often limiting the user interface. The iPhone changed that, and it's no accident that most of the popular smart phone improvements happened after Apple's iPhone.

Now, admittedly, I am a huge Apple fan. I think that they do what they do mostly right.

You'd be hard pressed to find a company that has done more to revolutionize computers and home electronics again and again.

But most of what they get criticized for are the deals Apple cut to get the products shipping. DRM is a great example. Apple was ready to do DRM-less music from the moment they introduced iTunes, but the record companies insisted.

You many not like Apple products, but you can't deny that competition with Apple makes other companies better.

Or out of business.

Either way the customer wins.

UPDATE - fixed, changed "DRM music" to "DRM-less music"

Posted at 07:59 AM  

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Mon - January 26, 2009

Will the bailout give traction? Or just grease the skids when we fall down?

Bruce Bartlett at Forbes asks the really important question: Does Stimulus Stimulate?

I think the critics of an activist fiscal policy are forgetting the essential role of monetary policy as it relates to fiscal policy. As Keynes was very clear about, the whole point of fiscal stimulus is to mobilize monetary policy and inject liquidity into the economy. This is necessary when nominal interest rates get very low, as they are now, because Fed policy becomes impotent. Keynes called this a liquidity trap, and I think there is strong evidence that we are in one right now.

The problem is that fiscal stimulus needs to be injected right now to counter the liquidity trap. If that were the case, I think we might well get a very high multiplier effect this year. But if much of the stimulus doesn't come online until next year, when we are likely to be past the worst of the slowdown, then crowding out will greatly diminish the effectiveness of the stimulus, just as the critics argue. According to the Congressional Budget Office, only a fraction of proposed infrastructure spending can be spent before October of next year; the bulk would come long after.

Thus the argument really boils down to a question of timing. In the short run, the case for stimulus is overwhelming. But in the longer run, we can't enrich ourselves by borrowing and printing money. That just causes inflation.

I don't agree that we can spend our way out of the mess. But I do think spending later rather than now will make things much worse.

Oh, and the article gives a pretty good overview of American economic policy and effects in the 20th Century. Worth your time.

Posted Mon - January 26, 2009 at 01:33 PM  

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Marijuana and the California economy

What's a major industry in a state with too many taxes and too much spending?

You know and I know. It's just finally getting play in the major media.

I wonder how much longer the FedGovs can allow this to go on.

Perhaps no one knows that better than Ukiah Morrison, a Mendocino pot grower. In most places, he would be considered an outlaw, but not in this neck of the woods.

“This is as natural as growing corn to me,” he said. “This is the lifeblood of the county. And it has been for more than 30 years.”

Morrison walks a fine line. He grows as much marijuana as he can without triggering a legal crackdown. He can do that because authorities here are overwhelmed by the sheer number of growers. They’re also hampered by conflicting state, federal and county laws governing marijuana.

Marijuana is the major cash crop here. A county-commissioned study reports pot accounts for up to two-thirds of the local economy.

“I don’t think there’s anything more important in this economy. To take this out would be a major blow,” said Morrison.

Though reliable numbers are hard to come by, marijuana growers in Mendocino County generate an estimated $1 billion a year. That makes the area home to a sizable chunk of a national market for marijuana believed to be in the tens of billions of dollars.

Hat tip To the People.

Update - Minor spelling error in the title, sorry about that.

Posted at 01:22 PM  

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Sun - January 25, 2009

Government is making it much, much worse

I'm a bit rushed today, but I do have a couple of links I want to throw out there.

Peter Schiff is one of those people you should be watching closely. He's not always right, but his track record is impressive. In this CNN/Money piece, he has some interesting things to say. Emphasis added.

While Schiff's mood has gotten a boost from his newfound fame and enhanced status, his outlook for the U.S. economy has only grown grimmer while watching the federal government throw unprecedented amounts of capital into circulation to prop up banks and car companies. A response, he likes to point out, that he also predicted. "I'm as negative as I've ever been," he says, "because everything the government is doing now is going to make the situation much, much worse. They're trying to reflate this bubble. All along I knew that what would potentially be fatal wasn't the recession itself but the government's response. But what they've already done exceeds even my worst-case imagination."

If that sounds familiar, it should.

Hat tip to

Posted Sun - January 25, 2009 at 02:53 PM  

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Sat - January 17, 2009

Are pensions next?

Jon Entine has a piece at ReasonOnline looking at the looming pension collapse.

Sound like the great mortgage-fueled financial crisis of 2008? Sure. But it also describes a calamity likely to hit as soon as 2009. State, local, and private pension plans covering millions of government employees and union workers with “defined benefit” accounts are teetering on the brink of implosion, victims of both a sinking stock market and investment strategies influenced by political considerations.

From January to October 2008, defined benefit funds—those promising a predetermined amount of retirement money to the payee—averaged losses of 26 percent, according to Northern Trust Investment Risk and Analytical Services, making it the worst year on record for corporate and public pension funds. The largest public pension fund in the United States, the California Public Employees Retirement Security System (CalPERS), lost a staggering 20 percent of its value in just three months last year. In May 2008, Vallejo, California, became the largest city in the state ever to file for Chapter 9 bankruptcy, thanks largely to unmanageable pension obligations. The situation in San Diego looks worryingly similar. And corporations with defined benefit plans are seeking relief in Washington as part of a bailout season that shows no sign of slowing down.

If the stock market remains in a funk for even a few more months, corporations that oversee union pension funds and state and municipal leaders responsible for public retirement pools may be faced with difficult choices. First on the docket might be postponing cost-of-living increases and reducing health care coverage for retirees. Over the longer term, benefits for new employees will have to be shaved and everyone is likely to see an increase in personal payroll contributions. Corporations will have to resort to more cost cutting and layoffs of their own just to guarantee the solvency of their pension funds. And things could go from bad to terrible if the managers of those funds do not quickly revise their investment practices.

I could see bailing out the pension funds before I can see bailing out the banks.

I still wouldn't agree to it, but it makes more sense then the Mafia-inspired FedGov takeover of banks and insurance companies.

Posted Sat - January 17, 2009 at 01:13 PM  

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Thu - January 15, 2009

Pre-paring for Palm's last gasp - Will the company survive?

Good morning ladies and gentlemen. Let's see how much of this I can get through.

Of course, one really big free market story this last week was the introduction of the Palm Pre.

I use a Palm TX myself, and I have used Palms for years. I've also drooled over the iPhone.

First, I am excited to see Palm finally deliver something, anything that might sell. Palm has been trying for years, and their last savior product flopped. I'm very surprised that they lasted this long.

But the Palm Pre is not the iPhone killer. Nor should it try to be. Remember what I said about competition? It's me so I get the technopagan green.

The free market makes it possible. Unburdened by regulation and unshielded by special exemptions, companies HAVE to develop ways to make it better, cheaper, faster, or more desirable than the competition can. If a company can't deliver something unique to the buyer for the price, the company goes under because the buyer goes somewhere else.

While the Pre is an exciting product, it's also flawed. It has less memory than the iPhone and the memory is not expandable. Palm says that's because OS X is too fat to run on phones. I do see the lack of expandable memory as a major flaw, just as it is on the iPhone.

Here's Gizmodo comparing the Pre and the iPhone and the G1 Android.

Here's a PCWorld article that expresses reservations.

And here's a piece that examines reaction to the Pre and iPhone compared with what each delivers.

All in all, I think the Pre is a potent product that could really add to customer choice. Because that is what I am really interested in. I want better products, and we weren't getting them when the American cellphone carriers were calling the shots on the feature lists.

None the less, I think the Pre is fatally flawed and I won't be getting one unless something changes. It has to do with that "cloud" thing they tout so much.

I don't want my calendars and contacts to live somewhere I don't control on my own computer.

Now I personally don't care if someone knows I have a doctor's appointment, but I would rather be a little discreet with my rituals. And when it comes to my relationships, well, I am not dating exclusively but it works better if one lady doesn't know exactly what I do and how long it takes with the others.

When it comes to my contacts, it doesn't matter to me if you know who my sex toy supplier is, or where I buy my groceries, but some of my professional and networking contacts have personal information attached to their records. It works great to remind me before I talk to them or write them. If I have to "purge" that information so I can put it on the cloud, what's the point?

Also, there are some of my contacts who would rather people not know that they are friends with a (pick one) naked Pagan libertarian troublemaker.

With the "cloud," you do not know who has access to your data, or even if it's going to be there tomorrow. AOL just dropped their file sharing. Yahoo is undergoing a major seismic shift. LiveJournal just fired a whole bunch of their staff.

The iPhone, for all it's flaws, offers an alternative.

Yes I can see how the cloud can be massively useful. I just don't see it as secure.

Posted Thu - January 15, 2009 at 05:15 AM  

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Sun - January 11, 2009

"I write the songs that make the whole world sing…"

So Guitar Hero doesn't really teach you about instruments.

Disney rides to the rescue.

And didn't you hear?

Apple's latest version of Garageband uses Sting and Norah Jones to teach you to play guitar and piano.

I love the free market.

Posted Sun - January 11, 2009 at 03:23 PM  

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You have to sacrifice for the greater good, says Obama

Guess what?

The Imperious Leader wants you to sacrifice. And then sacrifice some more.

Guess who is not sacrificing.

The Federal Government.

Gee, I wonder why?

Posted at 03:12 PM  

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Tue - January 6, 2009

Government goes after big screen television

There are days I feel like a song.

I was an environmentalist when environmentalist wasn't cool.

Loses something in the translation, doesn't it?

But I do want to know whose bright idea was it that government could regulate the amount of electricity appliances use?

Now California is going after televisions.

Of course the blame is on the state's strained power grid.

Which was caused by subsidized water and power.

And was made worse by state regulation.

So the answer to a government screwup is… more government?

Until the revolt, anyway.

Californians unite, take back your television.

Posted Tue - January 6, 2009 at 03:29 PM  

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Mon - January 5, 2009

In line for that bailout cash

I haven't reported on the accountants or the travel agents.

But there are five states in line.

And now the steel industry.

According to BailoutSleuth, there are now 282 banks, thrifts, and lenders participating in the bailout.

Where does it end?

John Stossel says it won't end with Obama. Emphasis added.

So they will "transform our economy." Obama's nearly trillion-dollar plan will not merely repair bridges, fill potholes and fix up schools; it will also impose a utopian vision based on the belief that an economy is a thing to be planned from above. But this is an arrogant conceit. No one can possibly know enough to redesign something as complex as "an economy," which really is people engaging in exchanges to achieve their goals. Planning it means planning them.

Obama and Emanuel want us to believe that their blueprint for reform will bring recovery from the recession. Yet we have recovered from past recessions without undertaking a radical social and economic transformation.

In fact, reform would impede recovery.

This is not the first time a President chose reform over recovery. Franklin Roosevelt did it with his New Deal, and the result was long years of depression and deprivation. Roosevelt's priorities were criticized not just by opponents of big government but by none other than John Maynard Keynes, the British economist whose theories rationalized big government. Before FDR had been in office a year, Keynes wrote him an open letter, which was printed in The New York Times:

"You are engaged on a double task, Recovery and Reform; -- recovery from the slump and the passage of those business and social reforms which are long overdue. For the first, speed and quick results are essential. The second may be urgent, too; but haste will be injurious. "¦ (E)ven wise and necessary Reform may, in some respects, impede and complicate Recovery. For it will upset the confidence of the business world and weaken their existing motives to action. "¦ Now I am not clear, looking back over the last nine months, that the order of urgency between measures of Recovery and measures of Reform has been duly observed, or that the latter has not sometimes been mistaken for the former."

Note Keynes's concern. Government interventions, such as the cartelizing of industry through the National Recovery Administration, "will upset the confidence of the business world and weaken their existing motives to action." In other words, investors will not take the risks necessary for recovery if their profits and freedom are subject to unpredictable government action. Economic historian Roberts Higgs calls this phenomenon "regime uncertainty."

It's too late to fix it. Grab some popcorn and watch, it's going to be a sharc gib.

That's big crash spelled backwards. Afterwards the politicos and technocrats will be whimpering as the rest of us pick up the pieces.

The economy is not something that is controlled from the top down by Washington. They just haven't learned that yet.

It will be the most expensive lesson in history.

Posted Mon - January 5, 2009 at 02:28 PM  

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Wed - December 31, 2008

Free markets vs. Capitalism and Mercantilism

I'm seeing more and more articles that I would file under Free Market. And it's dawning on me that this political struggle and this financial crisis is defined by who's going to control the economy.

Free market advocates like me will tell you that the solution is less law and less regulation and a very restrained government.

Everyone will tell you that government should be more involved, either by direct control or by "encouraging" the right companies at the right time.

But the facts don't support either of those cases.

Detroiters continue to embarrass themselves by placing the auto industry collapse into an us-versus-them framework. In the midst of all the whining and begging for a bailout, the South has been declared the new enemy, along with the foreign-car manufacturers who are producing cars — in Southern plants — that consumers want to buy. The army of politicians and opinion columnists in Michigan who lay the groundwork for resuscitating this fading industry don't bother to acknowledge that it is in the best interests of any public company to maximize quality for its customers and efficiency of production and profits for its shareholders.

Instead, Toyota and Honda are pegged as evil because they are thriving. They are especially evil for building plants that aren't located near Detroit. However, it is important to remember that foreign auto manufacturers are able to build plants where they want to build them, according to what fits best into their strategic plans and potential for profit. The US automakers have UAW officials making those decisions for them for the sole purpose of enriching the union's overpaid officers and dues-paying members.

Moreover, the whole South is considered evil for luring foreign plants into the region. Sure, the massive subsidies granted to foreign automakers to lure them to the South are the quintessence of corporate welfare. But no country, no state, no region, is immune to such politics. Michigan does the same to lure high-tech companies to the state, and most recently, it offered huge incentives to Volkswagen to build a new plant in the state. The game is played the same everywhere.

Here's the real telling paragraph. Emphasis added.

The free-market method would be to allow for a business environment that would be ideal for businesses to thrive (no taxes or stifling regulations); thereby encouraging companies to relocate to low-cost states on a mutually cooperative basis. This would engender competition among states that would drive down all costs everywhere. But that would mean that the people in power — the politicians and government planners — would become less influential and less wealthy; it is for that reason the free market has not prevailed.

I can't stress that enough. Not only is government using this to take YOUR freedom away, but even when things "work" the way that government types say it should, it results in you paying higher prices.

That's BEFORE they pick your pocket to pay for a "bailout."

Posted Wed - December 31, 2008 at 02:23 PM  

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"The Man Who Said No to Walmart"

Here's an article about a company making the right choice.

Oh, and facing Walmart down in the process.

Talk about coming to the table with different agendas. Wier was in Bentonville to pull his mowers from Wal-Mart's stores. The vice president was offering a greater temptation: Let's join hands and go head-to-head against the home-improvement superstores.

Which is when Wier said no.

"As I look at the three years Snapper has been with you," he told the vice president, "every year the price has come down. Every year the content of the product has gone up. We're at a position where, first, it's still priced where it doesn't meet the needs of your clientele. For Wal-Mart, it's still too high-priced. I think you'd agree with that.

"Now, at the price I'm selling to you today, I'm not making any money on it. And if we do what you want next year, I'll lose money. I could do that and not go out of business. But we have this independent-dealer channel. And 80% of our business is over here with them. And I can't put them at a competitive disadvantage. If I do that, I lose everything. So this just isn't a compatible fit."

The Wal-Mart vice president responded with strategy and argument. Snapper is the sort of high-quality nameplate, like Levi Strauss, that Wal-Mart hopes can ultimately make it more Target-like. He suggested that Snapper find a lower-cost contract manufacturer. He suggested producing a separate, lesser-quality line with the Snapper nameplate just for Wal-Mart. Just like Levi did.

"My response was, we would take a look at that," says Wier. "The reason I gave that response was, it was a legitimate question. In my own mind, I knew where I'd go with that"--no thanks--"but at that kind of meeting you at least have to be willing to say, I'll investigate." And that was it. "The tone at the end was, We're not going forward as a supplier."

No lightning bolt struck. Except that Snapper instantly gave up almost 20% of its business. "But when we told the dealers that they would no longer find Snapper in Wal-Mart, they were very pleased with that decision. And I think we got most of that business back by winning the hearts of the dealers."

Worth your time.

Pay attention to the bit about the office furniture, that's pretty telling too.

Posted at 02:11 PM  

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Excuse to meddle

Look for a many more articles like this one.

Opinions like that keep the politicos and bureaucrats meddling.

Yes, the companies were money grubbing greed heads.

But Congress changed the laws to make it possible.

It's a classic example of how the best intentions can destroy.

And if you believe a certain segment of the blogosphere that is inspired by Rush Limbaugh, the meltdown was deliberately triggered by Democrat leaders in an "October surprise" to distract attention from the success in Iraq. I wouldn't go that far, but there is no doubt that Congress is weaseling out of their responsibility.

It's an old pattern repeated again and again. I've said it before.

Congress created more problems.

And now, the only method that anyone is talking about to solve the new problems is more regulation and more governmental control.


This should be a familiar pattern by now. Congress takes on a "moral" or "ethical" problem. The new laws and regulations have devastating effects and end up promoting the very type of behavior that Congress tried to stop.

Prohibition. The War On Drugs. The Anti-Trust Act. The Environmental Protection Act. The various Federal gun control laws. The income tax.

Always it makes the problem worse. Always the only "practical" solution is more control.

We need to stop them before they legislate again.

Otherwise this will be a Greater Depession.

Posted at 02:05 PM  

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Tue - December 30, 2008

Bye bye VHS

Speaking of free markets...

VHS just officially became a memory.

Better stuff is available, and the free market does it's stuff.

Posted Tue - December 30, 2008 at 01:56 PM  

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Is this the next big thing?

I'm passing through on my way to bend young minds.

But I did want to pout out this Reason Hit & Run bit on D.I.Y. Dollars.

For some strange reason (*cough* bailout *cough*), similar topics have been making the rounds of my liberty lists.

Posted at 01:51 PM  

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Sun - December 28, 2008

Proven right again

I was looking for backup material for the Peter Schiff entry and I ran across this quote of mine.

What do you think will be the effect on investment firms when they realize the FedGovs will underwrite all their risk?

The entry was posted on August 13, 2007.

Of course, I wasn't the only one saying it at the time. I wasn't even the first. Some folks were making noise back in the late 1970s.

Still, it's nice to see that I had it right before the bottom fell out.

I'm right about how to fix it too, but it's too soon to prove that.

Posted Sun - December 28, 2008 at 03:30 PM  

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"...they promise happy, pain-free solutions."

This is an amazing Peter Schiff article, and you really should read the whole thing. But here is the bit that jumped out at me. Emphasis added.

It would be irresponsible in the extreme for an individual to forestall a personal recession by taking out newer, bigger loans when the old loans can't be repaid. However, this is precisely what we are planning on a national level.

I believe these ideas hold sway largely because they promise happy, pain-free solutions. They are the economic equivalent of miracle weight-loss programs that require no dieting or exercise. The theories permit economists to claim mystic wisdom, governments to pretend that they have the power to dispel hardship with the whir of a printing press, and voters to believe that they can have recovery without sacrifice.

As a follower of the Austrian School of economics I believe that market forces apply equally to people and nations. The problems we face collectively are no different from those we face individually. Belt tightening is required by all, including government.

Governments cannot create but merely redirect. When the government spends, the money has to come from somewhere. If the government doesn't have a surplus, then it must come from taxes. If taxes don't go up, then it must come from increased borrowing. If lenders won't lend, then it must come from the printing press, which is where all these bailouts are headed. But each additional dollar printed diminishes the value those already in circulation. Something cannot be effortlessly created from nothing.

Similarly, any jobs or other economic activity created by public-sector expansion merely comes at the expense of jobs lost in the private sector. And if the government chooses to save inefficient jobs in select private industries, more efficient jobs will be lost in others. As more factors of production come under government control, the more inefficient our entire economy becomes. Inefficiency lowers productivity, stifles competitiveness and lowers living standards.

Yep. Here's what I said in an earlier entry .

Nothing is ever "too big to fail." Government can't create money, it can only divert it. Without consequences, there's no cost to marginal behaviors.

And still earlier.

Government money comes from the private sector. Spending one dollar of public money means taxing the private sector more than a dollar, because there is the cost of collecting the tax, administrating the tax, paying the government workers, distributing the tax, and monitoring the money. Government money is a hidden cost.

If the government makes loans available at a reduced rate, the cost of the reduced rate, the risks and all the associated government spending is distributed throughout the economy.

Since the consequences of the "free money" are hidden, of course there is a rising demand. And the demand is much higher than anyone planned for. Which in turn raises the costs and the risks.

In failure analysis, this is called building a cascade. When the system fails, the stress will cause the massive collapse instead of just a few points.

It's going to collapse. The only questions left are when and how bad.

Posted at 03:24 PM  

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Sat - December 27, 2008

Mmm Mmm Good!

Score one for principles. Via the Outright Libertarian's Blog comes this link .

The ad, created by the staff of The Advocate for Campbell but part of a larger campaign crafted by Omnicom Group's BBDO, New York, was challenged by the conservative media watchdog group American Family Association, and the resulting online to-and-fro gained considerable traction over the weekend.

On its website, the AFA has urged consumers to e-mail Campbell and demand they stop "pushing the gay agenda" and then call the Swanson division directly to ask that it "remain neutral in the culture war."

Campbell made no apologies for the series of ads, which it said is its first in any LGBT publication, and instead took a decisive stance on the criticism. "Our position on this is pretty straightforward," said company rep Anthony Sanzio. "Inclusion and diversity play an important role in our business, and that fact is reflected in our marketing plan. For more than a century, people from all walks for life have enjoyed Campbell's products, and we will continue to try to communicate in ways that are meaningful and relevant to them."

He added: "Our plans for the Swanson brand include additional placements in The Advocate."

Of course, the American Family Association can protest anyone for any reason.


(and this is the bit that those so-called free speech advocates forget)

Just because there is a protest doesn't mean that the company can't tell the protesters to stick it in their ear.

It works both ways.

Ain't liberty grand?

Posted Sat - December 27, 2008 at 01:47 PM  

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Wed - December 24, 2008

And for the next bailout trick...

Ethanol is already the most heavily subsidized fuel on the planet. The last round of laws designed to help ethanol production screwed up food production all over the world. And here. And let's not forget here.

It seems that ethanol costs more to produce than gasoline. delivers less power, and doesn't pollute any less. If you factor in production, it may actually pollute more.

But ladies and gentlemen, that doesn't matter. Under the standards introduced under the Bushleague Administration, it only matters if the industry is "too big to fail."

So the ethanol lobby wants a bailout.

The commodity bust has clobbered corn ethanol, whose energy inefficiencies require high oil prices to be competitive. The price of ethanol at the pump has fallen nearly in half in recent months to $1.60 from $2.90 per gallon due to lower commodity prices, and that lower price now barely covers production costs even after accounting for federal subsidies. Three major producers are in or near bankruptcy, including giant VeraSun Energy.

So here they go again back to the taxpayer for help. The Renewable Fuels Association, the industry lobby, is seeking $1 billion in short-term credit from the government to help plants stay in business and up to $50 billion in loan guarantees to finance expansion. The lobby would also like Congress to ease the 10% limit on how much ethanol can be added to gasoline for conventional cars and trucks -- never mind the potential damage to engines from such an unproven mix.

Of course, the ethanol industry wouldn't even exist without the more than $25 billion in taxpayer handouts over the past 20 years. Congress only recently passed energy and farm bills that further greased ethanol production with a 51 cent a gallon tax credit, corn subsidies, plus increasingly stringent biofuel mandates. We were told, as usual, that profitability was just around the corner.

Ladies and gentlemen, this proves exactly how insane government has become.

The most heavily subsidized fuel on the planet, derived from the most heavily subsidized crop on the planet, can't profitably compete against low gas prices without continuous government bailouts and laws forcing people to use it.

Doesn't this prove that subsidies are a terrible idea?

Doesn't this prove that bailouts destroy the free market?

Doesn't this prove that the only way to protect individuals is to make government smaller than absolutely necessary??

KYFHO ladies and gentlemen. It may be the only chance of salvation you get.

Posted Wed - December 24, 2008 at 02:34 PM  

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Tax free holiday shopping?

Someone else wants a piece of the bailout.

Facing a disastrous holiday shopping season, the retail industry on Tuesday urged President-elect Barack Obama to incorporate three national tax-free shopping holidays in 2009.

Uh huh. Let's see...Paraphrasing what I've said over several posts:

It comes down to the uniform rule of law. If it's too much to comply with the law, then it's a sign that the law itself is bad and should not apply to anyone.

If taxes are too high at the holidays, then lower all taxes.

Pretty simple really.

Posted at 01:41 PM  

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Tue - December 23, 2008

It's going to cost you, ISP tells RIAA

I loved this one!

According to Scroggin, if RIAA representatives ask the help of his ISP, they had better bring their checkbook--and leave the legal threats at home. (CNET News obtained a copy of the RIAA's new notice to ISPs here). Scroggin said that he receives several notices each month with requests that he remove suspected file sharers from his network. Each time, he gets such a notice from an entertainment company, he sends the same reply.

"I ask for their billing address," Scroggin said. "Usually, I never hear back."

Freedom defended by the free market! Amazing!

Posted Tue - December 23, 2008 at 02:39 PM  

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Money money money, who gets the money?

According to this AP article, some bank execs are taking home bonuses from the bailout.

But don't count on the banks telling you where else the money is going.

It seems the banks are taking a page from the Federal Reserve and the Treasury Department.

No one wants the taxpayers to know.

Wouldn't this all be illegal if the FedGovs weren't involved?

Why isn't it illegal with the FedGovs involved?

Posted at 02:35 PM  

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Still destroying the free market

Let's see, banks, automakers, and now hedge funds.

Uh huh.

Still in line, states, cities, non-profits, commercial real estate developers, and pretty much anyone who thinks they can get a piece of the action.

Well, Bushleague and his administration are certainly destroying free market principles.

When this collapses, there are going to be a lot of people hurt. MANY more than if the market had been allowed to do it's work.

There are going to be some people who will profit.

And some of the rest (like me) will be eating popcorn till it's time to pick up the pieces.

Posted at 02:28 PM  

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Sun - December 21, 2008

FedGovs STILL don't want you to know about the bailout money

Remember Bloomberg News filing FOIA request to find out what the Federal Reserve is doing with the bailout cash? I covered it in FedGovs don't want you to know.

Well, the Treasury Department is pulling the same number on FOX Business Network.

The initial request, filed on November 25, sought actual data on the use of the bailout funds for American International Group and the Bank of New York Mellon, and an additional request, filed on December 1, sought similar data on the bailout funds for Citigroup, Inc. FBN is asking for the Treasury Department to identify, among other issues, the troubled assets purchased, any collateral extended, and any restrictions placed on these financial institutions for their participation in this program.

Kevin Magee, Executive Vice President, FOX News commented, “The Treasury has repeatedly ignored our requests for information on how the government is allocating money to these troubled institutions. In a critical time like this amidst mounting corruptions and an economic crisis, we as a news organization feel it’s more important than ever to hold the government accountable.”

Almost like the FedGovs are hiding something, isn't it?

Of course, it's impossible to say what unless the records are made public.

Posted Sun - December 21, 2008 at 02:29 PM  

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Wed - December 17, 2008

"abandon free market principles to save the free market system"

Stars above and Earth below, Bush didn't really say that, did he?

Oops. Guess he did. Hat tip Tammy Bruce.

I hereby dub thee BUSHLEAGUE. May thou be known forevermore for thy cowardice.

The really sad thing is that I don't think the Imperious Leader feels any differently.

Watch closely folks, the central state is collapsing.

Posted Wed - December 17, 2008 at 03:34 PM  

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psst...wanna hear a secret?

Over at Sunni and the Conspirators, Sunni has linked to an interesting story .

A new report from financial consulting firm Celent argues that there is no credit crisis, and that the publicly available data from the Federal Reserve Bank directly contradicts the doom-and-gloom public statements made by its chairman Ben Bernanke and Treasury Secretary Henry Paulson.

The research follows up on the October report issued by three economists at the Federal Reserve Bank of Minneapolis entitled "Facts and Myths about the Credit Crisis." That report showed that, despite the drumbeat of news about the frozen credit markets, bank lending to businesses, consumers and other banks has actually stayed steady or increased during the past 18 months.

Now I do think we are overextended.

But are the FedGovs manipulating the news for their own secret agenda?

And people wonder why I am paranoid...

Posted at 02:49 PM  

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Tue - December 16, 2008

Crunching YOUR credit lines

Remember when I said the credit card crunch was just around the corner?

Well, via comes this Clark Howard piece.

So what's going on here? JP Morgan Chase, Bank of America and American Express -- the 3 bigs of the credit card business -- account for more than half of all the credit cards out there. Right now, the 3 bigs are getting pinched on their ability to go out and borrow money to lend to you, plus they're terrified about the rising number of defaults.

Basically, that has them looking for any excuse to cut off your line of credit. This can be particularly bad if you're a traveling businessman or woman who needs a credit card to rent hotels or vehicles.

Know this: If you miss a single payment or are late on any card, you may have one or all of your cards shut off or greatly reduced.

He has some good suggestions, but credit is a very fickle beast these days.

You've been warned.

Posted Tue - December 16, 2008 at 01:48 PM  

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Mon - December 15, 2008

"DIY ID Theft Protection"

The Consumerist tells how.

Link provided as a public service.

Posted Mon - December 15, 2008 at 02:03 PM  

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Palm doing a "massive product launch" at CES next month? - Updated

I really hope for Palm's sake, this one is true.

If Palm doesn't pull a major rabbit out of it's hat and fast, I don't see them lasting another six months.

I'm amazed that they made it this long. When the Foleo flopped, I thought they would be out of business by January of 2008.

I use a Palm TX myself. I really want them to suceed.

Update - BusinessWeek has an article on the subject.

Posted at 12:59 PM  

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Sun - December 14, 2008

The Banks are bankrupt

This one isn't really news, but I thought I would pass it along anyway. Emphasis added.

Jim Rogers, one of the world's most prominent international investors, on Thursday called most of the largest U.S. banks "totally bankrupt," and said government efforts to fix the sector are wrongheaded.

Speaking by teleconference at the Reuters Investment Outlook 2009 Summit, the co-founder with George Soros of the Quantum Fund, said the government's $700 billion rescue package for the sector doesn't address how banks manage their balance sheets, and instead rewards weaker lenders with new capital.

Dozens of banks have won infusions from the Troubled Asset Relief Program created in early October, just after the Sept 15 bankruptcy filing by Lehman Brothers Holdings Inc (LEHMQ.PK: Quote, Profile, Research, Stock Buzz). Some of the funds are being used for acquisitions.

Still think the Congress critters are looking out for you?

Posted Sun - December 14, 2008 at 02:36 PM  

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FedGovs don't want you to know

The full scale attack on free markets and liberty continues.

By the way, it's none of your business how the money is spent.

The Federal Reserve refused a request by Bloomberg News to disclose the recipients of more than $2 trillion of emergency loans from U.S. taxpayers and the assets the central bank is accepting as collateral.

Bloomberg filed suit Nov. 7 under the U.S. Freedom of Information Act requesting details about the terms of 11 Fed lending programs, most created during the deepest financial crisis since the Great Depression.

The Fed responded Dec. 8, saying it’s allowed to withhold internal memos as well as information about trade secrets and commercial information. The institution confirmed that a records search found 231 pages of documents pertaining to some of the requests.

“If they told us what they held, we would know the potential losses that the government may take and that’s what they don’t want us to know,” said Carlos Mendez, a senior managing director at New York-based ICP Capital LLC, which oversees $22 billion in assets.

Chris Martenson has some especially choice comments here.

Hat tip Liberty Maven.

Posted at 02:28 PM  

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A twenty-two pound contract?

I honestly can't think of anything to say about this. It's Ford's 2007 contract with the UAW, all 2,215 pages.

So I am just going to post the link and quietly move on.

Posted at 02:24 PM  

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Sat - December 13, 2008

GM ignored the warning signs

The real question is why the FedGovs want to bail GM out after this happened.

The frozen credit markets signaled the end of an era of easy money that delayed GM’s day of reckoning. In a parallel to the housing bubble, GM and its Big Three brethren enjoyed a decade of artificially inflated sales. Finance companies did a booming business in subprime auto loans, a rarity in 2000, which accounted for 18 percent of new-car financing by 2005, according to CNW Market Research in Bandon, Oregon. And the automakers’ own subsidiaries offered low-interest financing that helped move cars off dealers’ lots.

That did nothing to stem GM’s steady loss of market share in the U.S., from 30 percent in 2000 to 22 percent today. It did help keep the industry’s annual U.S. sales at or near record levels, topping 17 million vehicles.

The article is a detailed timeline of how GM crashed.

Look for the credit card company bailout soon.

Posted Sat - December 13, 2008 at 01:21 PM  

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Pulling movie downloads

Here's one I didn't know, but it explains a lot.

... And the culprit here is a system that for decades has pumped billions of dollars into the coffers of Hollywood studios and the television industry. What has happened is Apple and Netflix have crashed into windows. "Release windows" is the term used to describe periods of time a certain type of media is allowed to show a movie. Typically, a feature film is first released in theaters, then on DVD, followed by pay-per-view channels and finally on broadcast TV.

Normally, release windows don't affect retailers or video-rental services after they've begun selling or renting films. Warner Bros. doesn't go into Best Buy and pull DVDs off the shelf when Comcast airs Casablanca. The corner Mom and Pop video store doesn't surrender copies of Gladiator to Universal Studios when the film appears on ABC. But Internet stores are being treated differently. What this means for iTunes and Netflix customers is that movies will pop in and out of the services.

Spokesmen for Netflix and Apple confirmed that they pulled titles due to these licensing requirements.

The big question many Apple and Netflix fans will have is why are Web stores being treated as though they are entertainment companies instead of merchants?

The answer, of course, is because broadcasters say they are.

I think Hollywood doesn't understand where their markets are.

Posted at 01:07 PM  

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Wed - November 26, 2008

Jolting the economy or political power grab?

I'm not sure I agree with Thomas Sowell over the depth of the economic mess, but he has nailed some points.

What we are talking about is a golden political opportunity for politicians to use the current financial crisis to fundamentally change an economy that has been successful for more than two centuries, so that politicians can henceforth micro-manage all sorts of businesses and play Robin Hood, taking from those who are not likely to vote for them and transferring part of their earnings to those who will vote for them.

For that, the politicians need lots of hype, and that is being generously supplied by the media.

Whatever the merits of trying to shore up some financial institutions, in order to prevent a major disruption of the credit flows that keep the whole economy going, what has in fact been done has been to create a huge pot of money-- hundreds of billions of dollars-- that politicians can use to give out goodies hither and yon, to whomever they please for whatever reason they please.

No doubt we could all use a few billion dollars every now and then. But the question of who actually gets it will be strictly in the hands of Barack Obama, Nancy Pelosi and Harry Reid. It is one of the few parts of the legacy of the Bush administration that the Democrats are not likely to criticize.

The question you should ask yourself is if these "bailouts" are solving anything, or are the bailouts making the problem worse.

Posted Wed - November 26, 2008 at 01:50 PM  

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Fri - November 21, 2008

A New New Deal won't work

I agree with most of this article.

Mr. Obama's one deeply false note during the campaign was his harping on "deregulation" as if that were the source of current troubles. His real problem is the crack-up of the world FDR built.

Fannie Mae was a New Deal creation, subsidizing the securitization of mortgage debt. FDR's successors piled on the subsidies for housing debt and incentives directed at low-income borrowers. Kaboom.

Then there's the UAW, born in 1935. For decades the UAW steadily traded away domestic auto market-share to imports and transplants to keep its aging membership toiling away toward their golden pensions and collecting wages and benefits twice those of their competitors. It worked for a while . . .

Mr. Obama must be looking around and beginning to suspect he will be pouring his political capital, along with considerable taxpayer capital, down bottomless holes for the next four years. He won't be building a legacy as the new FDR, but cleaning up after the last one.

Fannie and its twin, Freddie Mac, have already come back for a second helping of taxpayer money as their once-profitable business model devolves into a politically directed subsidy machine for propping up home prices and delaying foreclosures. Their next meltdown, in government hands, is all but written in the cards.

AIG, an otherwise healthy insurance company that went bust betting on housing debt, has already consumed taxpayer loans and capital injections nearly as big as AIG's $200 billion market cap when it was one of the world's most admired firms. AIG still has a valuable insurance business, but ignoramuses in Congress and the press are busy destroying it. The company sells many of its products through busy independent agents. It uses lush "seminars" to encourage them to sit still for pitches about why AIG should still be trusted despite AIG's purgatory in the headlines. But these seminars only produce more outraged grandstanding from the political commentariat.

The politicos are determined to "save" what should fail, and all they can do is make things worse.

Posted Fri - November 21, 2008 at 02:19 PM  

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"Governments can't handle global run on gold coins"

I've only one thing to say about this one.

I don't think the people trust governments to fix the economies.

Posted at 02:13 PM  

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Sun - November 16, 2008

Cash versus value

There's a difference between cash and value.

Cash is a way of keeping track. It's a polite fiction.

Cash has value only because people agree that it does.

Value can and does exist independently of cash.

For example, original animation cells from Disney films used to be sold in Disneyland for just a few dollars. Before long, people said, "Hey, Wait a minute!  These are works of art! They're worth MUCH more than that!"  Now an original early Disney cell is worth at least a couple of thousand, striking scenes from the best loved films can be worth more than ten thousand.

The value changed not because Disney raised their prices or because of an act of Congress, the value changed because people thought it was worth more.

Now value is a pretty relative thing. An animation cell is next to worthless if you are dying of thirst in the desert.

Roughly speaking, your value is the part of the economy that you control.  You don't exchange your labor for groceries, you exchange your labor for cash which you then exchange for groceries. If you sell your car, you don't expect to be paid in shoes.  You expect cash which you can then exchange for shoes and the services of a plumber to get that bathtub fixed with some left over.

It's easy to dilute value. Airlines did it with frequent flier miles.  They used to be worth something. Now they are barely worth the trouble to keep track.

Cash is just the mutually agreed on medium of exchange, value exists despite cashflow.

One group where I am active suggested replacing cash with cell phone minutes. That may be pretty practical, although right now we don't know how many cell phone minutes it takes for a new lawnmower blade.

It the dollar collapsed tomorrow, there's no doubt in my mind that within a week there would be hundreds of alternatives, and within a month there would be five or six really strong replacements with proven track records and national distribution.

The value would not have changed, just the medium of exchange.

That brings us to those interesting slips of paper we pass back and forth.

Paper money is not the problem.

The politicos attempting to set the value of the paper money, that's the problem.

With competition and a free market, the value would set itself. Then it wouldn't matter if
the paper money was drawn against gold, oil, frozen orange juice concentrate, or Star Wars collectable figurines.

Or all of them at once. Or something completely incomprehensible to us now.

The problem isn't with the polite fiction we call money. It's with the politicos and bureaucrats proclaiming that the dollar is worth so much or that the minimum interest rate must be defined by a government agency.

Most of our problems with money losing value are caused by government trying to dictate the value.

If Company Alpha issued oil certificates and Company Baker issued gold certificates and Company Yellow issued uranium certificates AND if all those certificates had to compete in trading exchanges like the stock market or the commodities exchange, the value of the certificates would be mostly self governing. As time passed, that value would be more and more stable.

The certificates are paper.

The paper is money.

But under the situation I've just described, the value is set by the free market based on what the certificates are drawn against, not some government edict.

Paper isn't the problem.

Government is.

Posted Sun - November 16, 2008 at 03:33 PM  

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Satellite radio gets worse

Way back when, I told you that competition was a good thing that led to more and better choices, and usually lower prices.

Well, the Sirius XM merger is proving me right. Emphasis in original.

This week, Sirius XM began consolidating its channels. In reality, this mostly meant jettisoning XM channels wherever there was a tenuous overlap with something Sirius already offered, which is bad news for anyone with a favorite station on XM who woke up Wednesday morning to find it missing. Alex wrote in to tell us that the four Spanish music channels have been condensed to one without regard to genre, and that the uncensored "urban music" station Hot Jamz has been cleaned up, rechristened "The Heat," and now leans toward radio-friendly R&B. The Motley Fool suggests that the new lineup may drive people to downgrade their subscription—it's "an incentive to downgrade to the cheaper plan that costs $6 less a month and lets users cherry-pick 50 stations."

From the sound of things, customers can complain, but it's going to stay that way until another company comes along and shakes things up.

Posted at 03:24 PM  

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Sat - November 15, 2008

The new overwhelming competitive advantage

Via our friends at Sunni and the Conspirators comes this story about the FDIC backing the debt from GE's finance unit.

Ladies and gentlemen, this is the scary sentence. I'm going to make it red.

For GE, up to $139 billion in short- and long-term debt is guaranteed, putting GE on the same footing as competitors who also have federal backing, GE said.

Why is this so frightening? Because it is now an overwhelming competitive advantage to have a company's debt guaranteed by the FedGovs.

Nothing about what consumers can repay.

Nothing about what stockholders want.

Nothing except the dictates of government.

Which is mostly why we are in this mess to begin with.

Posted Sat - November 15, 2008 at 02:14 PM  

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"How an Economy Grows and Why it Doesn't"

Here's one to think about, via Maynard at Tammy Bruce's site. Yes, it's a comic book on economics.

I'm going to quote Maynard. Be sure to read the comments too. Emphasis in original.

A few words of background are in order. Irwin Schiff is a hard-line libertarian and a tax protester. He is currently in jail for refusing to file income taxes. I am not endorsing his actions, and I'm sad to see him get to this point. Do not follow his example.

Schiff's pamphlet is not the final word on economics, and you may take issue with some of his assertions. But reading it will give you a sense of the big picture that most people are lacking. For starters, you'll probably have a clearer understanding of the futility and waste of those government "stimulus" checks.

Irwin Schiff's website, sending us warm greetings and commentary from his prison cell, is at (Please again note that I am not endorsing everything Schiff says, and I'm certainly not endorsing his tax protest.) Not being in a position to profit from them, Schiff has released a number of his copyrighted works, including this one, onto the web in his great giveaway.

Let me add that Irwin Schiff took a dangerous risk that hasn't paid off. Some of his ideas are a little out there. Some make pretty good sense. It's up to you to decide which should grab your attention.

Posted at 02:01 PM  

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Why didn't it work?

I saw this one a couple of weeks ago and I still think it's a great question.

One really has to ask the obvious question: If Obama’s economic policies work so well, why isn’t Detroit a paradise?

In 1950, America produced 51% of the GNP for the entire world. Of that production, roughly 70% took place in the eight states surrounding the Great Lakes: Minnesota, Wisconsin, Illinois, Indiana, Michigan, Ohio, Pennsylvania, and New York. 

The productive capability of this small area of earth staggers the imagination. Virtually everything that rebuilt the industrial bases of Europe and Japan came from those eight states. Cars, planes, electronics, machine tools, consumer goods, generators, concrete - any conceivable item manufactured by industrial humanity poured out this tiny region and enriched the world. The region shone with widespread prosperity. People migrated from the South and West to work in these Herculean engines of industry. 

The wealth, power and economic dominance of the region at the time cannot be overstated. Nothing like it has existed in human history. 

Yet, a mere 30 years later, by 1980, we called that area the “rustbelt” and it became synonymous with joblessness, collapsing cities, high crime, failing schools and general hopelessness. 

What the hell happened?

Go read, think and make up your own mind.

Posted at 01:34 PM  

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How we got there before we got here

I'm taking care of some of my older links. This one on portfolio theory definitely should be remembered. Emphasis added.

Mr. Markowitz doesn't excuse the financial engineers who bundled complex mortgage-based and other securities. They violated the first principle of his portfolio theory. "Diversifying sufficiently among uncorrelated risks can reduce portfolio risk toward zero," he says in an interview. "But financial engineers should know that's not true of a portfolio of correlated risks."

In traditional Markowitz-inspired investing, such as mutual funds and index funds, there is a discipline around variables such as asset classes and models of covariance. In contrast, collateralized mortgage obligations and related securities had no such discipline. These risks sank together. "Selling people what sellers and buyers don't understand," he says with understatement, "is not a good thing."

In a now-famous paper on portfolio selection in the Journal of Finance in 1952, Mr. Markowitz wrote that risks that are not correlated with one another work best, while investments that move together -- owning both Ford and GM -- are riskier. This idea, which seems obvious now, was so novel then that when Milton Friedman reviewed Mr. Markowitz's University of Chicago Ph.D. dissertation, he half-joked it couldn't lead to a degree in economics because the topic was not economics. Mr. Markowitz got the degree and in 1990 shared the Nobel Prize in economics for portfolio theory.

As with all new information tools at our disposal, applying portfolio theory to investing entails its share of trial and error. Mr. Markowitz admits some people might object to asking him how to repair the credit crisis. "You, Harry Markowitz, brought math into the investment process," he imagines some people thinking. "It is fancy math that brought on this crisis. What makes you think now that you can solve it?"

He draws a line between his portfolio theory and its later misapplication. "Not all financial engineering is always bad," he says, "but the layers of financially engineered products of recent years, combined with high levels of leverage, have proved to be too much of a good thing." In contrast, classic investment portfolios such as mutual funds and index funds continue to reduce risk.

It makes sense when you think about it. To minimize risk, you don't want all car companies or all hotel companies. A more primitive version of the same idea is the Dow Jones industrial average, which draws from the best performers of several industries.

Posted at 01:19 PM  

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Tue - November 4, 2008

Economic déjà vu, or why Bush is like Hoover

Hey, I finally have a professional link to send the skeptics! Bold emphasis added.

- Herbert Hoover, elected president in 1928, was a doctrinaire, laissez-faire, look-the-other way Republican who clung to the idea that markets were basically self-correcting. The truth is more illuminating. Far from a free-market idealist, Hoover was an ardent believer in government intervention to support incomes and employment. This is critical to understanding the origins of the Great Depression. Franklin Roosevelt didn't reverse course upon moving into the White House in 1933; he went further down the path that Hoover had blazed over the previous four years. That was the path to disaster.

Hoover, a one-time business whiz and a would-be all-purpose social problem-solver in the Lee Iacocca mold, was a bowling ball looking for pins to scatter. He was a government activist fixated on the idea of running the country as an energetic CEO might run a giant corporation. It was Hoover, not Roosevelt, who initiated the practice of piling up big deficits to support huge public-works projects. After declining or holding steady through most of the 1920s, federal spending soared between 1929 and 1932 -- increasing by more than 50%, the biggest increase in federal spending ever recorded during peacetime.

Public projects undertaken by Hoover included the San Francisco Bay Bridge, the Los Angeles Aqueduct, and Hoover Dam. The Republican president won plaudits from the American Federation of Labor for his industrial policy, which included jawboning business leaders to refrain from cutting wages as the economy fell. Referring to counteracting the business cycle and propping up wages, Hoover said: "No president before has ever believed that there was a government responsibility in such cases . . . we had to pioneer a new field." Though he did not coin the phrase, Hoover championed many of the basic ideas -- such as central planning and control of the economy -- that came to be known as the New Deal.

Go read the other four myths. And watch carefully.

"Nothing up my sleeve..."

Posted Tue - November 4, 2008 at 02:37 PM  

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Technology Disruptions

Cross posted at Pagan Vigil and teknologi.

There's a great piece at Roughly Drafted, I want to keep track of it.

1: Conventional Disruption.

In hindsight, conventional disruptions are always obvious. Examples include the personal computer of the late 70s; the graphical desktop debuted by the original Macintosh; the rise of Windows as a common platform for PC makers; the emergence of the commercial web; and today, the emergence of the smartphone as a new platform of ubiquitous handheld computing.

We take all of these milestones along the road of computing to be inevitable discoveries because once time passes, the past seems like the only way things could have possibly occurred. At the time however, the dominant leaders of the day often failed to recognize the significance of all of these events, and in many cases, so did the mainstream tech media. <snip>

2: Dropped Ball Disruption.

While conventional disruption gets discussed a lot, there’s a second aspect of technology disruption. It comes, not from the emergence of a disruptive new product or concept, but from the Earth shattering destruction of the status quo caused by a face-planting failure of an existing leader, resulting in fertile ground for innovative competitors to rush in, redraw the playing field and rewrite the rules of the game.

This happened to Apple in the mid to late 80s. It handed away its technology lead to Microsoft (quite literally, when CEO John Sculley volunteered a free license to Mac technology to Gates in exchange for two years of exclusivity of Excel on the Macintosh), and then subsequently ignored the high volume consumer and small business markets while suing Microsoft and its other PC competitors for copyright infringement of the Mac’s unique concepts. <snip>

3: Fantasy Disruption.

There’s also a third type of disruption: the highly anticipated disruptor that never materializes. In the early 90s, the Newton PDA and series of Pen Computing initiatives were widely hailed as systems that would rejigger the computing world. The stylus would replace the bulky keyboard and computing would go mobile. Gates issues a series of predictions about how rapidly this would happen, but it never really did. Outside of a few limited applications, the concept of pen computing died completely.

Fascinating implications there and I'm pretty sure he's right on.

Posted at 07:40 AM  

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Wed - October 29, 2008

Not even pretending anymore

Obviously GM and Chrysler have written off the free market.

General Motors and Cerberus Capital Management have asked the U.S. government for roughly $10 billion in an unprecedented rescue package to support a merger between GM and Chrysler, two sources with direct knowledge of the talks said on Monday.

The government funding would include roughly $3 billion in exchange for preferred stock in the merged automaker, according to one of the sources, who was not authorized to discuss the matter publicly.

I wonder if it occurred to anyone in the companies that if the companies couldn't raise the funding, maybe just maybe, the merger shouldn't happen?

Yep, it's the dawn of a new day. No more going to those pesky lenders. No more listening to those bothersome stockholders.

Now the Federal government has become the lender of first resort.

Screw the taxpayer, it's for the good of the country.

Posted Wed - October 29, 2008 at 01:17 PM  

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Tue - October 28, 2008

Auction fails because sellers are waiting for the Federal bailout

Words fail me, so I will just point.

An auction that netted $7.5 million in bids on 56 distressed Utah properties fell through last week after the owners -- three banks and two private lenders -- decided they may get a better deal by holding out for the government's bailout plan.

"There were buyers, but we couldn't sell the homes because free enterprise has gone out of the market," said Eric Nelson, founder of Las Vegas-based Eric Nelson Auctioneering.

Hat tip Coyote Blog.

Posted Tue - October 28, 2008 at 07:15 AM  

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Mon - October 27, 2008

Quick links on my way somewhere vaguely important

Today is another case of too much to do and not enough time.

But there are some quickies I want to hit.

First comes Paulson's Plan, And The Suckers Who Bought It.

Folks, this bailout money isn't about loosening credit for consumers or businesses, but consolidating wealth and power in fewer and fewer banking hands. That's great business for the banking elites, but lousy business for the US taxpayer. And it's all being orchestrated by one of their own, in the shape of Hank Paulson, ably assisted by Neel Kashkari, another ex-Goldman Sachs employee (with, according to the US Treasury, expertise in mergers and acquisitions -- what a surprise), and now responsible for administering the banking handouts.

Still, there's a Presidential election in the offing, and most people's attention is elsewhere; currently, it seems, on the cost of Sarah Palin's wardrobe. Meanwhile, the future earnings of US citizens are being siphoned off into supporting the empire building of the US banking oligarchy.

Accurate as far as it goes.

Then there is America asks for a king.

Joe the Plumber’s exposure of Obama’s “spread the wealth” philosophy exploded like a flash fire, not only because that philosophy is utterly anti-American, but because it is shortsighted, and immoral. It is short-sighted, because in an economy that is a bit battered and fragile, what we need are more businesses, more workers, and more wealth creation in the private sector, not more government programs and more people dependent upon them. It is short-sighted because it is a failed business model. And, as we saw with the collapse of major lending institutions a few weeks ago, a failed business model, made larger (or “spread around,” if you prefer) by government, is not just a failure, but a catastrophic failure. So it was with the irresponsible lending practices foisted on American banks by the government, and so it will be with the irresponsible spending and doomed reliance on government largesse that Obama and the Democrats are peddling as salvation.

And the inevitability of its failure is why Obama’s philosophies are not just foolhardy, but immoral. It is immoral to deceive well-meaning people about what you intend to do with their money. It is immoral to take by force from those who produce, give to others who do not, and call it “charity.” It is staggeringly immoral to create an ever-larger class of dependent, helpless people who will be doomed to starve when the unsustainable system you have created collapses. And most of all, it is profoundly immoral to set yourself up as a secular messiah of sorts, assuring people that you will take care of them, eliminate hardship, heal the planet, and hold enemies at bay by the sheer force of your own hypnotic rhetoric.

Another, The Age of Prosperity Is Over.

Financial panics, if left alone, rarely cause much damage to the real economy, output, employment or production. Asset values fall sharply and wipe out those who borrowed and lent too much, thereby redistributing wealth from the foolish to the prudent. This process is the topic of Nassim Nicholas Taleb's book "Fooled by Randomness."

When markets are free, asset values are supposed to go up and down, and competition opens up opportunities for profits and losses. Profits and stock appreciation are not rights, but rewards for insight mixed with a willingness to take risk. People who buy homes and the banks who give them mortgages are no different, in principle, than investors in the stock market, commodity speculators or shop owners. Good decisions should be rewarded and bad decisions should be punished. The market does just that with its profits and losses.

Meanwhile, the decentralization continues no matter what the FedGovs try to do. Wall Street workers leaving NYC for fresh start.

Corporate headhunters say Wall Street's malaise will lead to a permanent talent loss for New York. It could help small boutique firms become bigger players with employees they would never have been able to lure from the city long-regarded as the world's financial capital.

Watch those "small boutique firms." Chances are they are going to revolutionize the economy.

And finally, there's a great one at Serf City. We, the market.

We, the people, are the market. Not OPEC, the Dow, Goldman Sachs, or much less the Federal Reserve. The market is you and I with our dollars in our hands. It’s third graders spending their allowance on a favorite soda, let alone hassling their parents to purchase the latest X-Box game. Anyone buying anything they need or want is more significant in determining value than any broker on the NYSE trading floor.

There’s no “invisible hand” driving the markets. They’re not an abstract theory. They’re  the real and inevitable confluence of our creating, buying, selling or trading  of goods and/or services within various industries or demographics which we all comprise at different times. It’s difficult for many to comprehend the chaotic nature of economic liberty, ie free markets, creates the most opportunities and abundance from scarcity.

Free markets are infinitely more efficient than controlled economies such as Cuba’s, where rationing is deemed ethical, but it’s results are disastrous. For example,  asthma inhalers . Sure, they’re 5 cents. Because you’re only allowed one per month, which you still need to pay for. If you need more, as most asthmatics do, the only option is buying them on the black market for practically one month’s wage. Or having family send it from abroad.  Just a minor detail Michael Moore failed to mention in Sicko.

That's it for today. I should have more time tomorrow and I want to get in at least one opinion piece this week.

Oops, there's the NeoSignal, gotta go.

Posted Mon - October 27, 2008 at 03:03 PM  

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Sun - October 26, 2008

Obama in 2001 talking about redistributing the wealth

My oh my.

In any other election, this would qualify as a smoking gun. In this one I am not sure.

There's a transcript here at Some emphasis added.

If you look at the victories and failures of the civil rights movement and its litigation strategy in the court. I think where it succeeded was to invest formal rights in previously dispossessed people, so that now I would have the right to vote. I would now be able to sit at the lunch counter and order as long as I could pay for it I’d be o.k. But, the Supreme Court never ventured into the issues of redistribution of wealth, and of more basic issues such as political and economic justice in society. To that extent, as radical as I think people try to characterize the Warren Court, it wasn’t that radical. It didn’t break free from the essential constraints that were placed by the founding fathers in the Constitution, at least as its been interpreted and Warren Court interpreted in the same way, that generally the Constitution is a charter of negative liberties. Says what the states can’t do to you. Says what the Federal government can’t do to you, but doesn’t say what the Federal government or State government must do on your behalf, and that hasn’t shifted...

A reluctant hat tip to Michelle Malkin.

Posted Sun - October 26, 2008 at 09:58 PM  

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From a free market to a command economy

Remember when I said that government influences marginal behaviors?

That's what makes this so worrisome.

The bailout is now the hottest lobbying game in town.

Insurers, automakers and American subsidiaries of foreign banks all want the Treasury Department to cut them a piece of the largest government rescue in U.S. history.

The betting is that many with their hands out will be successful, especially with financial markets in a stomach-churning dive and predictions the economy is about to tumble into a deep recession.

These groups argue that the credit squeeze is so severe and the risks to the economy so dire that their industries need financial support as well.

Got that?

There are entire industries shifting from selling to the customer to lobbying the government.

The next inevitable step will be changing the companies to comply with government "suggestions" and eventually demands.

We already know from Medicare what happens then.

He who pays the bills makes the rules.

Posted at 01:25 PM  

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Sat - October 25, 2008

Listen to Fred Smith, the CEO of FedEx

The Weekend Interview at The Wall Street Journal is with Fred Smith, the CEO of FedEx. The whole thing is worth your time, but I'd like to stress this bit.

Next I ask Mr. Smith about the class warfare theme of the political debate. "The politicians deplore the fact that we have a disparity of income," he says, but "the only way to make a blue-collar person earn more is to invest in capital, training and infrastructure. So the more you tax capital, the more you hurt workers." He estimates that about 70% of the return from FedEx capital expenditures is captured by workers in the form of higher wages as their productivity rises.

He sees a big problem in that so few Americans now pay any income tax. "We're now at a point where a very large part of the population pays no federal income tax at all. When you have a majority of the population that realizes that you can transfer money from the productive to themselves, that's one of the great questions for the future of civilization, as far as I'm concerned."

Go read. FedEx is about as "in the trenches" as you are going to find. When they have high tech and expensive capital expenses, it's because it raises their ability to do the job.

Good stuff.

Posted Sat - October 25, 2008 at 01:16 PM  

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Wed - October 22, 2008

Spiced Apples

And now for something completely different.

You may have heard by now that Apple met their goal of ten million iPhones in 2008. Before the holiday season, which means the numbers are going to go higher. And they are now the number three cell phone provider.

Well, MacDailyNews put together a great list of iPhone naysayers.

The important thing is not the iPhone. The important thing is with the iPhone, the new Google Android spec, and even RIM's new attempt, the market is shifting and becoming more of what the customer demands.

The cell phone carriers are losing their power to dictate (and RESTRICT) features.

Even though I still consider the iPhone a flawed product (I want copy-paste, I want memos, and I WANT IT AVAILABLE IN MY AREA), it drop kicked the whole industry to where it should have been in the first place.

Competition. Got to love it.

It's growing too.

Here's another great example. This upscale hotel has built in remote capabilities for the iPhone and the iPod touch. But the real telling bit was this sentence.

The hotel chose a web app in order to avoid the Apple certification process and to make it available on other hot devices in the near future.

Get that. Not just Apple, but other hot devices too.

The free market brings choice, better products, and cheaper prices.

Posted Wed - October 22, 2008 at 02:53 PM  

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It wasn't a "failure of capitalism"

The free market didn't fail. It was never allowed to work.

Government has been involved in mortgages since the FDR.

Since 1977, government made it possible for people who literally could not afford a mortgage to get one.

Numerous attempts to "reform" the system never made it into law.

And considering some of the other reform attempts over the last thirty years that DID make it into law (IRS, EEOC, EPA, SEC, FBI etc), it's doubtful that reform would have worked anyway.

Government abused the market, raped the economy, and stole your money.

Posted at 01:59 PM  

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Sun - October 19, 2008

Computers made meltdown possible?

I'm not sure I agree with these conclusions, but it's certainly something to think about.

Without the computer revolution, local banks would give loans to local businesses and provide fixed rate mortgages to local homeowners, mortgages that would never be sold or packaged as securitized mortgages. Banks would require documentation that required proof of capacity to repay.

Usury would be outlawed; the financial services sector (FSS) would be less than 1/4 its size today. There would be no credit or debit cards; consumers would have to pay upfront for their purchases. Home owners would have built up equity in their homes and engaged in prudent investment and built up their savings. Their purchasing power would be much greater then than now. With average credit card debt of $12,000 for a family of four, the average family pays over $1000/year in interest on their cards. This means that the average income where famililies of four have any disposable income has risen from perhaps $20,000/year to $40,000/year. This has a massive impact on the consumer society.

Okay, computers probably did make the financial derivatives possible. But I can't help but think that something else (or someone else) might have had something to do with it too (not safe for work).

Posted Sun - October 19, 2008 at 01:34 PM  

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Sat - October 18, 2008

Schwartz tells it like it is

The Wall Street Journal has an amazing interview with Anna Schwartz.

Who's Anna Schwartz? Glad you asked. The interview has a really nice summation.

Most people now living have never seen a credit crunch like the one we are currently enduring. Ms. Schwartz, 92 years old, is one of the exceptions. She's not only old enough to remember the period from 1929 to 1933, she may know more about monetary history and banking than anyone alive. She co-authored, with Milton Friedman, "A Monetary History of the United States" (1963). It's the definitive account of how misguided monetary policy turned the stock-market crash of 1929 into the Great Depression.

But that's not the good bit. This is. Emphasis added.

Rather, "firms that made wrong decisions should fail," she says bluntly. "You shouldn't rescue them. And once that's established as a principle, I think the market recognizes that it makes sense. Everything works much better when wrong decisions are punished and good decisions make you rich." The trouble is, "that's not the way the world has been going in recent years."

Instead, we've been hearing for most of the past year about "systemic risk" -- the notion that allowing one firm to fail will cause a cascade that will take down otherwise healthy companies in its wake.

Ms. Schwartz doesn't buy it. "It's very easy when you're a market participant," she notes with a smile, "to claim that you shouldn't shut down a firm that's in really bad straits because everybody else who has lent to it will be injured. Well, if they lent to a firm that they knew was pretty rocky, that's their responsibility. And if they have to be denied repayment of their loans, well, they wished it on themselves. The [government] doesn't have to save them, just as it didn't save the stockholders and the employees of Bear Stearns. Why should they be worried about the creditors? Creditors are no more worthy of being rescued than ordinary people, who are really innocent of what's been going on."

It takes real guts to let a large, powerful institution go down. But the alternative -- the current credit freeze -- is worse, Ms. Schwartz argues.

Imagine that, an economist with better qualifications than the U.S. Treasury or the S.E.C. saying that companies should take responsibility and government should get out the way.

Why don't we hear more like this? Especially since there is very little that government can do except prolong the recession?

Posted Sat - October 18, 2008 at 02:05 PM  

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Libertarians tell truth about the economy

The Advocates for Self Government is a small "l" libertarian group best known for the World's Smallest Political Quiz. Twist my arm and I might admit I could know how a few hundred copies of that quiz have ended up in library books over the years.

They also publish The Liberator through email, but this time around they have a special online edition that deals with the economic meltdown. You should look at it.

Posted at 01:52 PM  

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Tue - October 14, 2008

Liquid assetts

Sunni and the Conspirators is one of my favorite sites (and not just because Sunni has put up a quote from me from Technopagan Yearnings), I really like the sense of community there, and I am a regular even if I don't always comment.

Well, I can't do this one justice without quoting most of it. It's good, and I will be watching NonEntity closely.

You remember when you would replace all of that great alcohol that you stole from your parents' liquor bottles with water, carefully marking the side of the bottle first, so as to remember how much it took you to get wasted? Well, I don't either because I never could stand alcohol until I turned about 40 or so, and my parents didn't smoke pot, so I had to... well, I'm getting off track here.

The point is, that every time I hear one of those yo-yo brained idiots on the propaganda network babbling about how this or that entity added "liquidity" to this or that economic vacuum cleaning device, all I can think of is the bottle of Vodka which in actuality is about 2 parts Vodka and 98 parts tap water...

That has to be the best explanation I've seen. They can add more liquid but they can't add more value. That's exactly right.

Oh, and I didn't quite quote it all. I wouldn't want to spoil the funny...

Posted Tue - October 14, 2008 at 07:33 AM  

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One percent, the margin, and recovery

There was a great piece in yesterday's Wall Street Journal that's worth your time. Emphasis added.

The Panic of 2008 is a crisis of trust. Investors don't trust the value of bad debts enough to offer market-clearing prices. Banks don't trust one another to stay in business long enough to do business together. And there's definitely no trust that Washington can avoid creating costly new moral hazards as it attempts to bail out the system.

But the most paralyzing loss of trust may be in Wall Street's system itself: How did the smartest people at the best banks running the most sophisticated financial models fail to forecast the collapse of mortgage-related securities? How did this unpredicted collapse devastate the system? And most of all, can we ever again trust the financial models on which value is supposed to be determined?

These questions matter because despite the current crisis, modern finance has delivered enormous benefits, from explaining to investors why they should diversify their investments to the creation of mutual and index funds. Related innovations helped financial institutions speed capital to its best use, fund new businesses and accelerate global prosperity. In other words, financial engineering worked beautifully -- until suddenly it didn't.

So what happened? Financial models take logic and historical data into account, but it's now clear that these elegant models have a serious weakness: They can't cope with illogical and uneconomic factors. Washington's insistence for years on artificial subsidies for mortgages through Freddie Mac, Fannie Mae and other programs led to a loud "Does not compute!" that is still rocking the financial system.

The article makes the point that 99% of the time, the system works. Unfortunately, that 1% failure rate can be catastrophic, especially if the system isn't fault tolerant. What's more, increasing the complexity of the system and removing transparency increases both risk and raises the cost of failure.

The real question is not if government can fix it, but what the costs will be.

Government action most directly influences marginal behavior. It's an economic truth. Lower the cost of flood insurance by government decree and more people build in a flood plain. Tell banks that they don't have to cover bad subprime loans and of course there will be more loans. Pay unwed mothers and a majority will stay unwed.

It's these marginal behaviors that can lead to cascade reactions because it's at the margins.

If the income tax rate jumps three percent between 50 grand a year and 51 grand per year, that whole zone between 50 grand and 52 grand becomes a "no man's land" that everyone avoids because it costs less. People will resist moving above 50 grand until they can keep more of their money. That means that there is less movement up the income scale, and when income does change (if it changes), it's going to spike over the gray area.

Watch those marginal behaviors.

Government also doesn't respond fast to a crisis. Well, not without threatening martial law anyway. Government action in a hurry IS NEVER a good idea.

On the other hand, free market and competition delivers FAST AND IMPROVING products and services almost as quickly as the demand. If someone isn't doing it fast enough or cheap enough or safe enough or sturdy enough, then someone else will.

If you don't want to take my word for it, check your history. Look at the what the American economy was in January of 1930 and January of 1940. Check stock prices. Check unemployment. Check the amount of abandoned property. And remember, government had been "fixing" that for ten years.

Neither government nor the free market can totally protect you from disaster. The free market can do it better, recover from catastrophe faster, and adapt.

The government solution will always threaten force.

Choose for yourself.

Posted at 07:17 AM  

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Mon - October 6, 2008

"Wasn't the bailout supposed to calm the financial markets?"

This time Michelle Malkin is right.

This time.

The only way that government can fix this is by getting out the way.

Anything else will just make it worse.

The history of the Great Depression should tell you that.

The investors and the traders, the REAL money, will stay away until they can profit

Posted Mon - October 6, 2008 at 02:45 PM  

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Sun - September 28, 2008

Myths, Meltdowns, and Misery

I'm sorry, but I really can't talk in depth about the "mortgage crisis" without talking about economics. I'll try not to lecture or go the Econ 101 route.

"They" have lied to you about economics. It's really not all that complex or boring a subject, unless someone is peddling special privileges. If you can keep a household budget, live within your means, and balance your checkbook, you know more about economics than the average Congressman. Politicos bamboozle the public by claiming that myths are true, black is white, up is down, and that it takes experts to understand economic reality.

I'm not an expert. I don't claim to understand all the scamming ins and outs. But I do know something about corporate finance. You and I are going to talk about some of the myths that the government uses against you.

Myth Number One: Government Controls the Economy.
Sounds good, doesn't it? That way if something goes wrong, they can tweak this, pull that, chant over the other thing, and WHAM-BAM we're back on track. But it's not true.

Government controls the money supply. That's it.

Money itself is a fiction, a sort of fiscal shorthand. Even when the money was backed up with something, the whole idea behind money was that we wouldn't have to carry that heavy metal around. We could give someone a piece of paper that guaranteed (theoretically) that a certain amount of SOMETHING was on deposit somewhere. In one of a long series of con games, the FedGovs removed even that backing from currency, so that the money would only be backed up with the "full faith and credit of the United States."

Except now they are undermining that with the latest shell game.

Since the money is no longer backed by gold and silver, the value behind the currency comes from the economy.

Pay attention, this is a really important bit.

The value comes from the products, services, and ideas that people have and share with each other.

The value is in the voluntary exchange. That's it.

No matter what laws Congress makes, no matter what Executive Orders the President signs, no matter what rulings the Supreme Court declares, it boils down to that one simple thing. If someone wants it, it has value.

Congress didn't demand the transistor or integrated circuit. No law created blue jeans. No Federal agency created the four-color printing process. These advances happened despite the government, not because of government. Exactly like most advances.

These are the kind of things that can't be planned. Who knew that polymer wheels for skateboards would launch a multi-billion dollar X-games industry? Before VisiCalc, personal computers were basically toys with almost no application. Why would anyone want an automatic transmission, or an intermittent windshield wiper?

Myth Number Two: Government Knows Best.
Remember, these are the same people who brought you the income tax, Social Security, Medicare, and enough off-the-books accounting tricks to fill yards of shelf space.

Myth Number Three: It's a Failure of the Free Market.
Not to mention that closely related one, the Democrats had Nothing To Do With It.

Mortgages haven't been a free market since Fannie Mae was created. It got worse during the Carter Administration with the Community Reinvestment Act of 1977, and again during the Clinton Administration when the CRA was revised.

The CRA required banks to make loans to people who would not qualify. Some people can't afford houses, that doesn't mean they should take out loans or that banks should grant them.

Myth Number Four: They Are Too Big to Allow To Fail.
Now we get to how government made things worse.

Fannie Mae and Freddie Mac were granted special privileges and powers beyond the law. It's a classic example of how Congress loves to undermine the uniform rule of law. These two "government sponsored enterprises" could NEVER have existed without constant government intervention. The only reason these GSEs got big is because the law was bent.

Myth Number Five: It's Bush's Fault!
The Bush Administration did try to reform the mess several times.

A brief aside here. I think it's unlikely, but this could have started as a political move by Bush to get reform in place. If Congress hadn't acted before, it's a sure bet that without a catastrophic crisis, they wouldn't act now. Bush could have put the "worse case" reform on the table, knowing that Congress would remove some bits just to score points with their constituents. After all, that is what happened with the USAPatriot Act.

There were other calls to reform the mess from before Bush was elected.

These are some of the major myths.

So what should government do?


Absolutely nothing.

Let them fail. That is how the free market works.

The AIG bailout tells us that no matter what the politicos say, there is always "room" for one more bailout if it's got enough political clout.

There are good reasons to suspect that some firms may have manipulated events to profit.

And the Democrats are already goosing numbers to hand out political largesse.

Government can't be trusted to fix this. It can't even be trusted to remove the laws that made the mess possible.

Tell your Congressman and Senators that you don't want a bailout.

Posted Sun - September 28, 2008 at 01:11 PM  

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Tue - September 16, 2008

Watching the dominoes

There's not much new to the financial meltdown that the U.S. is weathering.

Lehman Brothers, AIG, Washinton Mutual, it's all part of the same thing.

Truthfully, any government intervention will make it worse, just as it set up the mess. If firms don't have to face consequences and can hand off risk to the American taxpayer, of course they will.

But helping out some companies while refusing to underwrite the bailout of others just makes things worse. Who determines who gets the money?

Political contributions maybe?

There are a few things that I try to remind people.

When the free market is working without government interference, it's a distributed network instead of a hierarchal network. In a hierarchal network, some connections are more important than others, information is passed to these central nodes and then the central nodes exchange information, which is then passed down from the central nodes to the subsidiaries.

Think of a hierarchal network as a bunch of pyramids linked to each other only at the top of each pyramid. There is no way for a node in pyramid one to talk to a node in pyramid two except by going up through the top node in pyramid one to the top node in pyramid two, and then down the ladder.

Distributed networks don't have central nodes, each node is connected to several others. Picture a three dimensional fishnet and you're pretty close.

Hierarchal networks concentrate resources. Each pyramid is vastly more capable than individual nodes. So from certain viewpoints, a hierarchy is "more efficient."

But a distributed network is more fault tolerant and more adaptable. Huge swaths of the network could disappear and the information could work around the breaks in the chain.

If this sounds familiar, it should. The internet is the best known distributed network today. If Amazon crashes, it's not going to knock out the servers at the New York Times. Facebook disappearing is not going to make Wikipedia vanish.

And what, do you ask, does this have to do with financial meltdown? That's a very good question.

Back in the 1970s, the FedGovs (and to a lesser extent some StateGovs) started changing the rules of the game. The new rules favored building hierarchal networks over distributed networks. That is why so many Wall Street firms could build empires out of debt in the 1980s. That's why small, regional banks were were absorbed into huge corporate monoliths. And yes, that is one reason why the savings and loan industry collapsed.

One set of rules for the Average Joe. And another set of rules for the Masters of the Universe.

Of course, the Masters of the Universe could funnel huge political contributions to protect their turf...

If the whole thing sounds like a gang war, it was. The politicos extorted money to change the rules, and then blamed the companies who played by the new rules when things collapsed.

And if you know your history, you know that the same thing happened several times in the 1920s before the Big One in 1929.

The best thing the Treasury could do would be to stop bailing anyone out and let them fail. Then dismantle the remains of Fannie Mae and Freddie Mac. Then go back to a gold standard on the currency.

The chances are any of those things happening is very very small. The chances of all of them happening is nonexistent.

But I told you that before. The politicos aren't going to give up power, it's up to us to take it away from them and make government smaller than absolutely necessary. It's the only way to protect ourselves.

Keep Your Freakin' Hands Off!

Posted Tue - September 16, 2008 at 01:33 PM  

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Mon - September 15, 2008

Even in a partial free market, the poor don't stay poor

This Wall Street Journal piece is just full of goodness, but I am going to pick two quotes. First, people are better off.

When all sources of income are included -- wages, salaries, realized capital gains, dividends, business income and government benefits -- and taxes paid are deducted, households in the lowest income quintile saw a roughly 25% increase in their living standards from 1983 to 2005. (See chart nearby; the data is from the Congressional Budget Office's "Comprehensive Household Income.") This fact alone refutes the notion that the poor are getting poorer. They are not.

It's one of those things that SHOULD be obvious. After all, think about all the people who have multiple televisions, fashionable clothes, and plenty to eat.

But the next one is what really stands out.

What is also striking about the data is that the poor today are, in general, not the same people who were poor even a few years ago. For example, the new Census data find that only 3% of Americans are "chronically" poor, which the Census Bureau defines as being in poverty for three years or more. Many of the people in the bottom quintile of income earners in any one year are new entrants to the labor force or those who are leaving the labor force. Obviously, there is also a significant core of truly poor people in this group, but that core is drastically less than 100%.

I can't stress that one enough.

The poor don't stay poor.

Given half a chance to better themselves, most people will do exactly that. They'll find ways to improve their lives and the lives of their families.

The poor don't stay poor.

That's the promise that the U.S. offers to it's immigrants. "Come make a better life for yourself." That's the American Spirit in a nutshell. Make your dreams come true.

The poor don't stay poor.

You don't need government intervention to make it work. You just need faith in yourself and hard work. And if it doesn't work out the first time, there's nothing to stop you from trying again until it does.

Find me another nation that makes that promise and welcomes immigration.

It's not the rich that makes us a strong nation. It's the little guy and gal trying to make life better. And succeeding.

Oh, and if you haven't heard of Arthur Laffer, you should have.

Posted Mon - September 15, 2008 at 12:10 PM  

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Sun - September 14, 2008

The FDIC marker

Stars above, I love the internet. Without "The Unofficial Blog" of the UK Libertarian Party, I would have missed this one. Emphasis added. Double emphasis added as well, just to make the point.

Once upon a time, there was indeed a segregated FDIC fund. During the Johnson Administration, someone had the bright idea to put the FDIC into the federal budget as a way to reduce the deficit. This was in the good old days when the FDIC always produced a surplus. Putting the FDIC on budget reduced the deficits being created by spending on the Great Society programs in tandem with the war in Vietnam.

The reality is that there is no FDIC fund. Anything the FDIC lays out to handle a bank failure must be borrowed by the Treasury, which adds to the federal deficit. The total amount of the current outlay is charged against the federal budget even if recoveries are expected in the future, as problem assets are collected by the FDIC. That’s the case whether the FDIC’s nominal balance at the Treasury is positive or negative.

The plain truth is that premiums paid by the banks to the FDIC today are a tax to compensate the government for putting its full faith and credit behind bank deposits. The nominal balance in the FDIC's account at Treasury is irrelevant, except that, over time, we want the banks to pay to the government more than the guarantee of deposits costs the government.

There you go. One of the great "success" stories of the New Deal, and the politicos couldn't leave well enough alone. They had to cover their behinds.

So there is nothing new here, how does this affect you?

Remember, government doesn't create money or value. It can only divert what already exists. The politicos have been playing poker with IOU markers. The "real" money is draining out of the system.

Posted Sun - September 14, 2008 at 01:15 PM  

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Tue - September 9, 2008

Plastic Logic Reader

I never did like all the hype over Amazon's Kindle. I looked at it a few times, but it always seemed too expensive for the few things it did. Of course I had been reading books for years on my Palm.

Well, Gizmodo showed me an alternative.

Here is what the clunky Amazon Kindle should have been since the beginning: a simple, ultra-sleek full-page 8.5-inch by 11-inch electronic book and newspaper reader with a flexible plastic touchscreen, Wi-Fi connectivity, and the ability to read regular Office documents without conversion of any kind. As we said yesterday, Plastic Logic showed it at the Demo Fall 08 conference in San Diego. Seeing it up close and on its side makes me want to have one. Badly.

This is what the free market means. Someone comes up with an idea, someone else comes up with a better one. Just to keep market share, the first someone has to make their product better.

The result? Over time, better quality, cheaper price, and more capability. All without a politico or bureaucrat in sight.

Competition makes it happen.

Posted Tue - September 9, 2008 at 11:56 AM  

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Mon - September 8, 2008

The dominoes begin to fall

Well, the big news is the "seizure" of Fanne Mae and Freddie Mac and the pending bailout of the Big Three automakers.

While some say that Washington is "putting aside free market ideology," remember one thing. The Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation were never about the free market. These "privately owned, government sponsored" entities were about exempting an ever-growing part of the mortgage segment from economic truths.

Of course the automakers want their turn at the public trough. So will the airlines. Then maybe the television networks. Then who knows? Professional sports?

Oops, too late. Thanks to the stadium scams, pro sports already are plugged into public money.

Nothing is ever "too big to fail." Government can't create money, it can only divert it. Without consequences, there's no cost to marginal behaviors.

It's not hard to see where this is going.

Instead of a series of jolts that the economy could withstand, chances are that the Treasury's actions will lead to a cascade reaction that be much bigger and much longer than it otherwise would be.

How can I say this?

Because history tells me so. Government attempts to control the price of gold were a major cause of the market destabilization in the 1920s. Government intervention prolonged a market correction into the Great Depression.

I think this will accelerate the collapse of the central state.

Don't you find it interesting that the candidates of both major parties are calling for more government intervention?

Let me ask another question.

Do you think that the behavior that led to this mess will change now that the FedGovs are officially "in charge?"

I can tell you now, it's going to cost a lot more than 200 billion dollars.

I wonder what the impact on Social Security and Medicare will be, not to mention all those Federally guaranteed pension plans. As the value of the dollar sinks lower and lower, there are going to be a lot of pissed off Baby Boomers who will want bigger payments to compensate.

That's what I mean by cascade reaction.

If you really want to see someone who is steamed by this, check out Fannie Mae: Where is the Anger? by Becky C. at Just A Girl in Short Shorts. Check out the comments too.

I really liked what Russell Roberts had to say over at Cafe Hayek.

One of the most depressing things about the current situation is that people will try and find different ways to "fix" the mortgage market when it was the very attempt to "fix" it that brought us to where we are today. The government should get out of the mortgage market. Let individual institutions arise that intermediate between home owners and sellers. Let those that do it well thrive. Let those that do it badly bear the costs and disappear.

But I have to have the last word.

Government can't make the right choices for a free people

Or maybe it is even simpler than that.

Government is not your friend.

Hang on to your wallets, the government already has control of your checkbooks.

Posted Mon - September 8, 2008 at 01:59 PM  

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Mon - September 1, 2008

"Dude, the RFID thing. I'm sorry, it's just not going to happen."

Mythbusters is one of my favorite TV shows, and the only one that I make time to watch. So I wasn't surprised when someone forwarded me this link.

Keep in mind that the RFID standard is inherently insecure when it comes to personal ID information. It was designed for inventory control, the application to ID documents was an add-on. It didn't help when the FedGovs decided to make RFID a part of RealID and passports. For legal reasons, Adam Savage can't go discuss how secure RFID is, but he does tell what happened when the Mythbusters were gathering information before making an RFID segment.

In the second part of the segment, Savage shows his class AND demonstrates how competition among science shows means everyone is better off with more information through more channels. Sounds like something I might say.

All hail Mr. Wizard.

Posted Mon - September 1, 2008 at 01:11 PM  

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Tue - July 29, 2008

Computer tech takes down San Francisco city government

I'd love to say that this would never happen in the private sector, but I would be lying.

After years of study and hard work, they say, he landed a job building a network that handled San Francisco's payroll documents, law enforcement records and other sensitive information. He spent his nights and weekends building a system that he wanted to protect, not tear down, his defenders say.

All well and good, prosecutors counter. But why won't he simply come clean about everything he has done? What about the menacing encounters with bosses at work?

They conclude that Childs went overboard, turning the city's computer system into his own "private network" after lying about his violent past to get his job. They point to his prison stint for aggravated robbery, another arrest for assault and what police recently found - ammunition in his Pittsburg home that he shouldn't have had.

Everyone who has had contact with Childs, however, agrees on two things: He was a master in his field, and he was entrusted, for good or ill, with near-total control of the city computer network.

Here's a lesson I learned long before companies and governments because so dependent on computers. You never rely on just one person for global access. You get at least two, give them slightly different objectives, and then let them watch each other. Whenever you can, break out physical access from system access so extra parts (like modems or hidden cameras) can't be installed by just one person. And never, ever, ever put payroll, email, operations, and legal research on the same servers.

Hat tip Gizmodo (wrapup).

Posted Tue - July 29, 2008 at 12:25 PM  

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Mon - July 28, 2008

A little perspective please

Don't get me wrong, there are some major economic problems today. Most of them brought on by government action, but don't believe all the press.

Thanks in part to journalism of that caliber, consumers are more apprehensive than they have been in decades. Consumer confidence is at a 16-year low, and more Americans than ever, 84 percent, think the country is headed in the wrong direction. The New York Times devoted one-fourth of Saturday's front page to illustrating ways in which the economy is mired in "A Slowdown With Trouble at Every Turn" - and continued the gloom for a full page inside.

Voices of reason keep trying to point out that conditions are not nearly as bad as they were the last time consumers were this despondent. That was in May 1980, during the final year of the Carter administration, when the "misery index" - the sum of the inflation and unemployment rates - hit an excruciating 21.9. Inflation was then at 14.4 percent; unemployment was 7.5 percent. The numbers today are 5 and 5.5 respectively.

But voters don't want to be told to buck up. When former senator Phil Gramm, an economic adviser to John McCain, said last week that America had "become a nation of whiners" and described the current slowdown as a "mental recession," the backlash was immediate. McCain repudiated Gramm's remarks and quickly issued a statement assuring voters that he "travels the country every day talking to Americans who are hurting, feeling pain at the pump, and worrying about how they'll pay their mortgage."

Well, that's politics. Politicians who want to get elected genuflect to what Bryan Caplan, in "The Myth of the Rational Voter" calls the pessimistic bias: the "tendency to overestimate the severity of economic problems and underestimate the (recent) past, present, and future performance of the economy."

I'm amazed that despite seven years of constant carping against Bush, the economy is in as good shape as it is.

Hat tip Cafe Hayek.

Posted Mon - July 28, 2008 at 01:31 PM  

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Yahoo Music goes bye-bye

This is why consumers don't like DRM music. Or DRM movies. It's not that most customers don't want to pay for their music, it's that they want to keep what they paid for. When you buy a book, you don't depend on Simon & Schuster staying in business so you can read it. You don't depend on AOL-Time Warner existing so you can read last week's People. Once published, the material exists independently of a signal from a computer server tucked away somewhere.

Posted at 01:20 PM  

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Sat - July 26, 2008

Would-be saints unleashing chaos and destruction

I think I first ran across the word "merchantilsim" in The American Zone, the so-so sequel to the excellent The Probability Broach by L. Neil Smith. The Wall Street Journal calls it "crony capitalism." Whatever it's called, a government extends special privileges and protections to a private company. Usually this allows those companies to outperform their competition, but only by distorting market values and shifting costs to the taxpayers. In the case of Fannie Mae and Freddie Mac, it's even worse because two companies are also owned by the Federal government.

One major progressive rallying cry is "good intentions matter," even more than results. That alone justifies most government intervention. While it's usually blamed on the Republicans, the Democrat Party does more than it's fair share. Don't be fooled by the justification. Left to itself, the free market is perfectly capable of finding ways for people to finance purchases. People aren't "entitled" (pun intended) to a house anymore than they are entitled to their own 767 or NFL team. Underwriting purchases when someone can't afford the price is just asking them to default.

Not so long ago, there was Enron, a company that depended on constant Federal intervention in energy markets to maintain a pseudo-profit. When the Bush Administration withdrew that support, the company collapsed. While some have blamed Enron's collapse on laissez-faire economics and the failure of the free market, it's worth pointing out that it was only when Enron had to compete that it's weakness showed. That's the big advantage of competition, companies either get better or they fail.

It doesn't matter if it's huge multinational companies or New York City taxi medallions, merchantilsim undercuts the free market. This means higher prices and less choice. So remember when it's "too big to fail," that really means that the government has warped the market.

It's your money that they are wasting. Don't you think you should demand it back?

Posted Sat - July 26, 2008 at 02:05 PM  

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Tue - July 22, 2008

Taking more than it gives

Someone asked me the other day what the real difference between government and the free market. I gave them my stock answer (it comes up more times than you think). The boldface words are the ones I emphasize

"The free market depends on voluntary mutual exchange without coercion. Government forces."

Now that is good as far as it goes, but there is something else we should consider.

The free market adds value. Government takes it away.

The reasons aren't that hard to understand. The free market means competition because people choose what to buy, or even if to buy. To keep the same customers you had yesterday, your product or service has to have more value now than it did then. Or your competition will get your customers. If something is wrong with what you are selling, you can't afford not to make it better as fast as you can. The feedback for what customers want is immediate and instantly affects your bottom line.

There are no such incentives in government. Even if someone makes the "right" choice for you, it could take months or years before it delivers any benefit to you. And you may not need it then. Since "free" government benefits displace private sector alternatives, people actually have less choice when government acts.

Even if you aren't the one paying the taxes or complying with the regulations, the public sector drain means that there is less in the private sector. Economics is a zero-sum game only when government is involved.

Or in simpler terms:

Government picks your pocket and demands that you thank it for not killing you today.

Posted Tue - July 22, 2008 at 04:40 PM  

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Mon - July 14, 2008

Fannie Mae and Freddy Mac

A Federal bailout of Fannie Mae and Freddy Mac is a Really REALLY Bad Idea™ that keeps getting worse.

It's not the free market. Both firms got goodies and privileges from Congress that aren't available to anyone else.

Both helped devalue the American dollar.

And both are central to the mortgage meltdown. Not to mention many other financial shenanigans over the past few decades.

The Wall Street Journal has a pretty good roundup of articles going back to 2002. It didn't start there of course. It started when Congress granted the charters in the first place.

One of my favorite lawyers, Becky C. at Just a Girl in Short Shorts lets loose with both barrels blazing in The Facist Bailout of Fannie Mae. Warning, her blog may not be safe for work.

The point is, neither could exist without active government intervention to "protect" them from the rules that the politicos inflicted on everyone else. And it was those same exceptions that exploded.

Posted Mon - July 14, 2008 at 03:11 PM  

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Mon - January 21, 2008

No skip video ads

More proof that Micro$oft is indeed customer focused.

But their customers are not their user base.

Microsoft files for no-skip video ad patent. Emphasis added.

Microsoft is attempting to secure a patent for technology that would prevent users from skipping ads in downloaded videos, according to a new filing with the US Patent Office. The technique would insert a digital rights management (DRM) token inside the file that would prevent users from playing the intended video until relevant ads are viewed. It would also allow a content producer to insert ads into a downloaded video at its own discretion.

When it comes to digital rights, Micro$oft sells fear to the content providers. That lets Apple eat their lunch just by focusing on the end user.

Customer choice means the free market always wins.

Posted Mon - January 21, 2008 at 02:21 PM  

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Mon - December 10, 2007

It will be harder to find a mortgage

Robert Murphy nails the subprime mortgage mess. Bold emphasis added.

To understand the downside of the recent proposals, we need to step back and ask ourselves why ARMs and foreclosure clauses exist in the first place. They are obviously advantageous to the lender, so it’s no surprise that banks favor them. But why do the borrowers agree to these terms? Why doesn’t everybody simply take out a conventional fixed rate loan, and moreover one that is unsecured—so that the bank can’t seize one’s house in the event of default? Is every borrower just plain stupid for failing to insist on loans of this nature?

Of course not. The reason borrowers agree to adjustable rates (which have the possibility of skyrocketing) and to pledging their home or other assets as collateral, is that this allows them to receive concessions from the bank—in particular, it allows them to borrow a great deal more money than would otherwise be possible. Very few people would persuade a bank to lend them money to buy a house, if the bank didn’t ultimately have the right to take ownership of the house in the event that the borrower couldn’t make the mortgage payments. Yes, borrowers would prefer that they get a $300,000 mortgage with no strings attached, but lenders wouldn’t be too happy with this arrangement. The beauty of a capitalist system is that property owners must compromise to reach mutually beneficial arrangements, since private transactions are voluntary.

Now after individuals enter into these voluntary arrangements, what happens if the government swoops in and invalidates them? There will be short term winners and losers, naturally. And most Americans have no problem with this, because it seems fair to help struggling homeowners at the expense of Wall Street fat cats.

Yet this conclusion is very superficial. Lenders will learn the lesson that their contracts aren’t safe; contrary to popular belief, the government will not serve to enforce the law. (Or rather, the “law” can change on a dime, depending on the public’s mood.) Lenders won’t simply shrug their shoulders, say “aww shucks,” and continue with business as usual.

Long term, the more government intervenes to shield borrowers from the self-corrections of the free market, the harder it will be to get financing from now on.

Never mind that it was changes in the law that made subprime mortgages possible in the first place. The politicos don't want you to remember that little detail.

"Pay no attention to that man behind the curtain!"

There are rumors that this could get much worse. Herb Greenberg has the details on that. Emphasis in original this time.

Since then, I’ve kept up an active dialog with Mark Hanson, a 20-year veteran of the mortgage industry, who has spent most of his career in the wholesale and correspondent residential arena — primarily on the West Coast. He lives in the Bay Area. So far he has been pretty much on target as the situation has unfolded. I should point out that, based on his knowledge of the industry, he has been short a number of mortgage-related stocks.

His current thoughts, which I urge you to read:

The Government and the market are trying to boil this down to a ’sub-prime’ thing, especially with all constant talk of ‘resets’. But sub-prime loans were only a small piece of the mortgage mess. And sub-prime loans are not the only ones with resets. What we are experiencing should be called ‘The Mortgage Meltdown’ because many different exotic loan types are imploding currently belonging to what lenders considered ‘qualified’ or ‘prime’ borrowers. This will continue to worsen over the next few of years. When ‘prime’ loans begin to explode to a degree large enough to catch national attention, the ratings agencies will jump on board and we will have ‘Round 2. It is not that far away.

Since 2003, when lending first started becoming extremely lax, a small percentage of the loans were true sub-prime fixed or arms. But sub-prime is what is being focused upon to draw attention away from the fact the lenders and Wall Street banks made all loans too easy to attain for everyone. They can explain away the reason sub-prime loans are imploding due to the weakness of the borrower.

How will they explain foreclosures in wealthy cities across the nation involving borrowers with 750 scores when their loan adjusts higher or terms change overnight because they reached their maximum negative potential on a neg-am Pay Option ARM for instance?

Sub-prime aren’t the only kind of loans imploding. Second mortgages, hybrid intermediate-term ARMS, and the soon-to-be infamous Pay Option ARM are also feeling substantial pressure. The latter three loan types mostly were considered ‘prime’ so they are being overlooked, but will haunt the financial markets for years to come. Versions of these loans were made available to sub-prime borrowers of course, but the vast majority were considered ‘prime’ or Alt-A. The caveat is that the differentiation between Prime and ALT-A got smaller and smaller over the years until finally in late 2005/2006 there was virtually no difference in program type or rate.

Go. Read. It's scary stuff, made possible because the lenders got advantages from the government.

Posted Mon - December 10, 2007 at 02:19 PM  

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Micro$oft and security

It's no secret that C-Net has a Micro$oft bias. But even I was surprised to see this one a week ago.

Because of the experience of Mike Nash, a vice president at Microsoft, the company finally instituted calling trees as a way to quickly reach people in an emergency. When the Slammer worm hit in January 2003, Nash had to work feverishly to track down the vice president of SQL Server, Gordon Mangione, eventually locating him at his sister's wedding in Canada. (Slammer used Microsoft's SQL Server database to propagate a denial-of-service attack.) Nash first heard reports of Slammer on the local news radio station at 6 a.m. At first, he thought he was dreaming. But as the report played a second time, he knew it was real and headed into work. "I was the second one there," Nash recalls.

Automated calling trees go back to what, the early 1990s? Even before that, I know companies had emergency phone lists for their executives, particularly in operations. Back in the days before personal computers, IBM prided itself in having an emergency team dispatched and on site within a couple of hours.

Slammer also taught the company that it was not enough to have a patch; the patch had to be easy enough to deploy so that most customers would do so, lessening the chances that outbreaks would propagate so quickly. And it was Blaster that taught the company that it wasn't enough to patch a single flaw; it needed a systematic process for catching whole classes of vulnerabilities, a realization that paved the way for Microsoft's current approach, known as the Security Development Lifecycle, or SDL.

Umm, isn't this basic engineering?

This one was pretty telling though. Emphasis added.

Much of the reason for that traumatic on-the-job training can be traced to Microsoft's decade-long evolution in how it and its employees deal with security. Until 1997, security was seen mainly as a set of features that the company bolted onto its software long after product design and development. The idea of securing code as it was being developed had not been considered.

You can bet that security was important to the customers, most of whom just took Micro$oft's word that things were okay.

Once again, emphasis added.

In building Microsoft's security response apparatus, Microsoft had to look beyond the software industry. "No one had had to figure this out before us," Nash said. One of the companies that Microsoft used as a guide was chemical maker DuPont. While not an exact parallel, Microsoft studied how DuPont reacted to train derailments.

That's not exactly true. Security was a very important consideration in UNIX through the late 1970s and into the early 1980s. Of course, that code was better written than Windows.

All in all, this article was pretty telling. Micro$oft didn't take security seriously until AFTER it began to blow up in their face. In all fairness, the web did complicate things and overturn assumptions. None the less, I have wonder what would have happened with security if Micro$oft had to fight for it's market share.

Posted at 02:00 PM  

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Sun - December 9, 2007

Costs of higher education

Vincent Carroll at the Rocky Mountain News makes a great point.

Why is spending so much on health care considered a national scandal by many commentators but the outsized spending on higher education is not?

Could part of the answer be that the health-care system is studied, analyzed and dissected by a scholarly community that simply isn't willing to apply the same critical perspective toward the institutions that sign its checks?

To the contrary: The self-interested consensus among academics is that this country needs to spend far more on higher education.

When health-care costs rise at double the inflation rate, intellectuals understandably knit their brows. When higher-ed costs outstrip inflation (as they do year after year), the only people who complain tend to be powerless parents and students.

"It takes more resources today to educate a postsecondary student than a generation ago," writes Richard Vedder, a professor of economics at Ohio University and a rare insider who is critical of rising costs. "That is not true for most goods and services . . . . Relative to other sectors of the economy, universities are becoming less efficient, less productive, and, consequently, more costly."

Free market economists know the answer, and so do libertarians. Competition drives quality up and prices down.

Posted Sun - December 9, 2007 at 07:59 PM  

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Government impact on health care

Arnold Kling at TCS Daily provides a common sense analysis of how government can help health care and where government really makes things worse. I don't agree with him entirely, but this bit made the article worth it.

I believe, however, that having the means and the opportunity to make better choices is not sufficient. Consumers also need a motive, which is why I think that our system needs to eliminate the insulation provided by our poorly-designed forms of health insurance. Instead, I would like to see insurance policies with higher co-payments and higher, longer-term deductibles.

I will point out that as government has gotten more involved in health care, the availability of basic services has gone down and the cost of almost everything else has gone up.

Posted at 07:44 PM  

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Wed - December 5, 2007

Yesterday and today

Take a thought journey with me back thirty years.

It's 1977.

Star Wars came out in the summer.

The Apple ][ had just been introduced. Monitor and floppy drives were extra. There was no modem and no mouse, but it was arguably the first "personal computer." Visicalc, the first spreadsheet program that would make the Apple ][ a runaway success, would not be introduced for two more years.

Stereos had three formats, records, reel to reel tapes, and 8-track cartridges. Although stereo cassettes existed, at the consumer level the quality wasn't very good. The Sony Walkman would not come out until 1979.

AT&T had just begun to sell phones instead of renting them. Many customers were still contractually forbidden from connecting anything except a phone to the phone line. While mobile telephones existed, they were heavy and bulky and usually mounted permanently in cars. Commercial cell phone networks were another two years away. The breakup of the the AT&T monopoly would not happen until 1982.

Microwave ovens were expensive with mechanical controls and timers.

Home video recorders were just beginning to come into their own.

Early prototypes of infrared television remote controls were just being designed and built.

The accepted solution to the "education crisis" was to spend more money and get the government more involved.

The accepted solution to the "medical care crisis" was to spend more money and get the government more involved.

The accepted solution to the "narcotics problem" was to spend more money and get the government more involved.

The accepted solution to the "global cooling crisis" was to spend more money and get the government more involved.

The accepted solution to the Social Security "crisis" was to spend more money and get the government more involved.

Today, there have been some changes.

Star Wars spawned five sequels, inspired thirty years of "summer blockbusters," and ignited a firestorm of film technology advances. There are more films produced every year than ever before.

There weren't laptop computers in 1977, but there are now. Today's desktops and laptops have several thousand times the power, speed, and memory of the Apple ][. Today's top of the line desktop machines can outperform the top of the line main frames from 1977 at a fraction of the price. Even the OPC, a computer designed for children in developing nations, blows the door off the Apple ][. Handheld computers have several times the capacity of the Apple ][ and have become so cheap that they are being merged with high end cell phones to make smartphones.

Cassettes replaced 8-tracks as the popular portable music format, and were in turn replaced by CDs, which then were replaced by MP3 and MP4 files. Today's portable music plays longer, is better sounding, and today's music players can hold the equivalent of several hundred CDs, movies, photo albums, address books, calendars and notes.

Cellphones have become so widespread that for many people it's cheaper to have a cell than a traditional landline. Even low end cell phones offer features that were top end in 1977, like voice mail, autodialing, and paging. And at the high end, there are smart phones which incorporate powerful computers.

Microwave ovens have become so cheap and popular that for many homes, they are used more than stoves and convection ovens. Digital timers, temperature probes, and variable cycles make them more capable than ever before.

Thanks to VCRs, the home video market exploded. More entertainment is available to more people than ever before.

Just try finding a TV without a remote control.

Some things haven't changed.

The accepted solution to the "education crisis" is to spend more money and get the government more involved.

The accepted solution to the "medical care crisis" is to spend more money and get the government more involved.

The accepted solution to the "narcotics problem" is to spend more money and get the government more involved.

The accepted solution to the "global warming crisis" is to spend more money and get the government more involved.

The accepted solution to the Social Security "crisis" is to spend more money and get the government more involved.

The difference is the free market and competition. If a business has to work to keep it's customers, it has to offer more value tomorrow than it offered today. Or the company down the street gets the cash.

Even in mature industries, a company can't afford to do things the same way today that they did yesterday.

The exceptions are the businesses most heavily regulated or protected by government. They still are doing the same things thirty years later.

Posted Wed - December 5, 2007 at 05:48 AM  

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Mon - December 3, 2007

Does the Federal Reserve make the currency unstable?

Alvaro Vargas Llosa examines just what the Federal Reserve has done.

While the creation of the Federal Reserve was essentially a response to a series of bank runs, those crises were mild compared to the ones that were to follow. In 1913, the United States was under the gold standard. Although the government issued currency, the fact that currency was tied to gold meant the authorities could not manipulate the money supply easily. The Fed's initial mission was to guarantee the convertibility of deposits into currency on demand. A few decades later, the United States abandoned the gold standard and the Federal Reserve became the country's most powerful economic institution, exercising its monopoly in issuing currency based on the discretionary power of its board of governors.

All in all, financial instability has been far greater since the creation of the Federal Reserve. What did the Great Depression teach us? Essentially that even with the best of intentions, it is impossible for the authorities to manage the supply of money in accordance with the exact needs of the economy. A country's economy is the sum of millions of people making decisions that no single individual is in a position to anticipate. As economist Murray Rothbard showed in his book America's Great Depression, in the 1920s the Federal Reserve pumped up the money supply, expanding credit by more than 60 percent. Because the economy was very productive, this monetary expansion did not show up in the regular inflation figures. But, as is always the case with inflation, many resources went to the wrong kind of investments--until the crisis hit. The late Milton Friedman showed how the Fed made things worse by not providing the system with enough liquidity once the Depression was obvious.

The current housing market and debt market crises are in good part the children of the Federal Reserve. By cutting rates 13 times between 2001 and 2003, and then keeping them very low for years, monetary policy contributed to the housing bubble. That is not to say other factors--including financial instruments that made it difficult to see that the underlying foundation was not as solid as it seemed--did not play a part too. But, once again, the Fed has turned out to be a factor of financial instability. 

Congress shares it's responsibility in the collapse of the subprime market, and it looks like Congress and the Bush Administration are ready to make the mess worse.

But the important thing here is to realize that by moving away from a currency linked to a measurable commodity, the Fed has made the economy that much more unstable. There is no reason why our currency can't be tied to a standard, or even multiple standards. Such currencies adjust themselves without government interference.

Oh, and the first part of the article touches on the Liberty Dollar disaster. There is another brief write up on that here, and an AP piece here. I haven't covered the Liberty Dollar story before because I am not familiar with NORFED and unbiased sources have been impossible to find.

Posted Mon - December 3, 2007 at 12:08 PM  

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DRM going bye-bye?

In a great victory for the free market, Wal-Mart and Amazon are pressuring the record labels to drop digital rights management.

The timing is probably coincidence, but there is no doubt that this is what customers want.

Some of the biggest fallout may be with Micro$oft and their Zune players, which are built around a very oppressive DRM scheme.

Posted at 11:50 AM  

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Wed - November 28, 2007

Changing the truth?

Kevin D. Rollins has some amazing things to say about undermining free markets by changing the definitions.

Timberlake (225) answers that the "interwar gold standard was not a gold standard. It was an entirely different system than the pre-1914 gold standard that had existed for 100 years. Timberlake brings in Leland Yeager to make the case: "The gold standard of the late 1920s was hardly more than a façade. It involved extreme measures to economise on gold… It involved neutralization or offsetting of international influences on domestic money supplies, incomes, and prices. Gold standard methods of balance-of-payments equilibrium were largely destroyed…"

In other words, it was Fed policy, not the gold standard that precipitated the Depression...

If this sounds familiar, it should.

It gets better.

Ignacio Briones and Hugh Rockoff investigate the larger question of free banking in their article, "Do Economists Reach a Conclusion on Free-Banking Episodes?" Like "the gold standard," they find that the term "free banking" has been used to describe monetary systems which had various levels of freedom from regulation, but none of which was totally free from government tinkering (315). None achieved the total free market in money envisioned by Hayek...

Or, to paraphrase Inigo Montoya in The Princess Bride,

You keep using those words. I do not think they mean what you think they mean.

Posted Wed - November 28, 2007 at 05:03 AM  

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Wonder about gas prices?

Richard Rahn writes the truth.

The high price of oil is a direct consequence of artificial supply constraints imposed by the Organization of Petroleum Exporting Countries and other countries, including the United States, and the incompetence and mismanagement found in most state-owned oil companies. OPEC is an international government cartel made up of Iraq, Iran, Kuwait, Libya, Angola, Algeria, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. These nations control about 77 percent of the world's known liquid crude oil reserves.

Most of these countries and other major oil producers that rely on mainly state-owned companies, such as Russia, have underinvested in exploration and development of new production facilities and mismanaged the ones they have. (If politicians understood the facts and were truthful, they would rant against "greedy" socialists rather than private oil companies.)

Venezuela, despite having perhaps the sixth-largest oil reserves in the world, has falling production because of the mismanagement by the Chavez government. Mexico also is suffering from falling oil production because the government refuses to allow private oil exploration and production companies, and the state-owned oil company, Pemex, is corrupt and incompetent. By contrast, the U.S. only has about 2 percent of the world's oil reserves, but produces little more than 8 percent of global production, largely because they are privately owned and managed.

Hugo Chavez constantly blames the United States for Venezuela's economy, yet as far as I can tell no American official has given him more than a passing glance.

Given a chance, the free market works better than anything else we have tried.

Posted at 04:44 AM  

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Tue - November 27, 2007

A bureaucracy is not a business

Jerry Kirkpatrick points out the differences between a business and bureaucracy. Emphasis added.

This lament is often heard today about medicine and education, among other fields. Business, however, is the last thing medicine and education have been turned into. Bureaus of the government would be a more accurate description. Why the confusion between bureaucracy and business?

The simplest answer is that most people do not understand the difference between the two. A bureaucracy, as Mises points out, is an organization dominated by methods of managing the affairs of government, whereas a business is dominated by the goal of making a profit through customer satisfaction.

Worth your time.

Posted Tue - November 27, 2007 at 06:05 AM  

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I wish I had thought of it

Every once in a while, Rush Limbaugh gets it exactly right. He did yesterday, and it will probably disappear behind his subscription wall today.

Imagine Health Care at the DMV.

The headline says it all.

No matter how good the intentions, a government provided service is ALWAYS subject to political whim. It won't be what people want or need, it will be what politicos decide people should have. And that decision is constantly changing.

Then there is the increased demand for the "free" government service because people believe they are getting something for nothing.

Government control creates shortages. Shortages trigger higher prices and black markets with unpredictable quality. Black markets make crime profitable.

Posted at 04:34 AM  

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Mon - November 26, 2007

Religious choice

I forwarded this one to about six ministers I know. And two priests. Emphasis added.

Can you put a price on faith? That is the question churchgoers are asking as the tradition of tithing -- giving 10% of your income to the church -- is increasingly challenged. Opponents of tithing say it is a misreading of the Bible, a practice created by man, not God. They say they should be free to donate whatever amount they choose, and they are arguing with pastors, writing letters and quitting congregations in protest. In response, some pastors have changed their teaching and rejected what has been a favored form of fund raising for decades.

The backlash comes as some churches step up their efforts to encourage tithing. Some are setting up "giving kiosks" that allow congregants to donate using their debit cards when they attend services. Others are offering financial seminars that teach people in debt how they can continue tithing even while paying off their loans. Media-savvy pastors, such as Ed Young in Grapevine, Texas, sell sermons online about tithing. And in a shift, more Catholic parishes are asking churchgoers to tithe, says Paul Forbes, administrator of McKenna Stewardship Ministry, a nonprofit that says it has encouraged more than 500 parishes to tithe in the last decade. Popes haven't requested tithes in recent decades.

Church leaders say tithing isn't just a theological issue, but a financial one. Americans gave an estimated $97 billion to congregations in 2006, almost a third of the country's $295 billion in charitable donations, according to Giving USA Foundation, a nonprofit educational organization in Glenview, Ill. But giving to religion is growing more slowly than other types of giving, says Patrick Rooney, director of research at the Center on Philanthropy at Indiana University. That's partly because people are attending church less frequently, says Mr. Rooney, and are giving to a wider array of causes, including secular ones.

So why am I mentioning this article? Because I am a passionate believer in the free market. That means that people must be free to choose ANYTHING, including their faith.

That also means that people have a right to expect fair value for their money or that they can walk away to find alternatives.

No matter what "they" say, churches are human institutions subject to all the failings of humanity. They may be divinely inspired, I'm not going to debate that here. I will say that membership in a specific church brings no particular virtue, any virtue depends on the words and deeds of the individual members and not on the social structure of a group.

Posted Mon - November 26, 2007 at 07:15 AM  

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Wed - November 21, 2007

"There's no money in it"

Great piece here and worth your time. Emphasis added.

...Any phone that can run software is vulnerable to malicious software. The reason why we don’t have outbreaks of malware on phones to the degree of PCs is that there is little business model for doing so: no practical way to roll out spambots or popup advertising schemes. Part of the reason is that there is no common platform at all; it’s hard enough to design a small Java game that will reliably run on a variety of phones, let alone devise a way to roll out viral adware, particularly since its tough to install software on phones, intentionally or nefariously.

So everything is vulnerably in theory, but there are few actual exploits happening because there’s a) no money in it, b) it’s not as easy as infecting PCs, c) infections could be easily cleaned up because they’d only affect a specific group of phones due to the lack of portability. Some Symbian phones were infected with a Bluetooth virus that could spread itself. The infection was mostly a proof of concept design, but the result was an immediate fix that shut down that entire angle of attack.

Compared to the PC problem, Microsoft allowed spyware and adware to get out of control on Windows PCs because it had a financial interest in data mining itself. It bundled Alexa software on Windows starting with the first versions of IE, and was in talks to acquire Claria, the maker of the notorious Gator spyware. Microsoft didn’t act to stop the problems when they were beginning to take off, because it hoped to own the market. Once it became entrenched, the problem is much more difficult to attack.

With the iPhone, Apple has the opposite circumstances: it wants to market its own product in a tightly controlled way, not use software to data mine consumers of the PC maker’s products. That gives Apple a financial motivation to stop any outbreaks before they become serious.

The problem is that security is the opposite of convenience. It is very likely that when Apple launches its SDK (software dev kit) for the iPhone, planned in February, that third party software will only be made available through a secure downloading mechanism in iTunes, just like today’s iPod games, and that Apple will keep the web available as its more open API for shareware developers who don’t want to deal through Apple. This will allow the company to tightly manage software and prevent malware or malicious software from gaining any business model or distribution mechanism.

His answer to question number six is terrific. Go read, you'll be glad you did.

Posted Wed - November 21, 2007 at 05:24 AM  

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Tue - November 13, 2007

"Big Tobacco" blamed for failure of tax initiative

I've only one thing to really say about this one.

Maybe it wasn't "Big Tobacco" against sick children.

Maybe it was just people who thought they didn't need additional taxes.

Posted Tue - November 13, 2007 at 02:22 PM  

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Verizon follows the money

Nothing like changing the rules in the middle of the game.

Last week, it was revealed that Verizon Wireless is mailing a notice advising wireless subscribers that if they fail to Opt Out within 30 days, Verizon will begin SELLING their Customer Proprietary Network Information (CPNI) to “third parties and affiliates”.

CPNI information includes all the calls you place or receive on your cell phone (along with date, time and call duration). Verizon intends to allow “targeted ads” created by their affiliates sent to your phone.

You know, if this information is so profitable for Verizon, don't you think the people who supplied the information in the first place ought to be paid for it? How about the price that Verizon charges, plus twenty percent?

Posted at 02:20 PM  

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Screw Major League Baseball

Here's another reason I don't like professional sports. They don't care about their fans.

Allan Wood (a baseball megafan who has written a book about Babe Ruth) purchased over $280 worth of digital downloads of baseball games from Major League Baseball, who have just turned off their DRM server, leaving him with no way to watch his videos. MLB's position is that since these videos were "one time sales," and that means that Wood and everyone else who gave money to MLB is out of luck -- they'll never be able to watch their videos again.

MLB shut down the DRM server because they've changed suppliers, and now they expect suckers to buy downloads of games in the new DRM format. Anyone who does this needs their head examined -- using DRM itself is contemptible enough, but using DRM this way is just plain criminal.

It sure looks like another way to pick your pocket

Posted at 02:15 PM  

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Thu - November 8, 2007


Someone asked what I thought about the "Google phone." Right now I don't have enough information. When there is a shipping product somewhere, then I will take a closer look. Until then all I can really say is that competition is good for the customer.

There are two links that I think you might want to think on, courtesy of Daring Fireball.

It's not a phone, it's an alliance. from the Secret Diary of Steve Jobs (the fake Steve).

And I really liked this quote.

A 34-company committee couldn't create a successful ham sandwich, much less a mobile application suite. It's going to be some half-baked turd undoubtedly based on GPE since that's, you know, better than starting from scratch, right? (Wrong.)

For heaven's sake: Find someone, ONE person, with a unique vision. Lock them in a room with some programmers and a graphic designer. Twenty people, tops. Change the world. Quit re-hashing the same old bullshit and telling me it's new, exciting, or in any way innovative. Be ready to fail, many times, but for love of all that is holy take a stand on something.

I think cell phones and especially smart phones are poised to really explode into something that the customers will really want.

Posted Thu - November 8, 2007 at 01:44 PM  

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Tue - November 6, 2007

Illegally yours

More than a week ago I said I would tackle illegal immigration again.

I've no objection to immigrants working in the U.S. at whatever jobs they can get their hands on. There are actually more jobs now than there were three years ago, five years ago, ten years ago, and twenty years ago.

Those jobs may not all be in the same field, and not every job pays more than it did then. Still, the number of jobs is growing, the economy is growing, and opportunities are growing.

Don't buy into the lie that illegal immigrants steal jobs from good Americans. It is not true and never has been.

But in a free market, there is nothing that guarantees that you will always have a job. If someone has more value to offer, then they will get the business. Notice that word value. That doesn't always mean a lower price. Factors like reliability, trust, and image also play a part. None the less, if it is a choice between paying someone $27 dollars per hour plus benefits or manufacturing somewhere else and spending less even with shipping, guess what most companies are going to do?

No, the real question for American workers is how to offer more value to justify their cost? One way is expertise, it's why engineers are paid more than janitors.

Now my problems with illegals are simpler. First, I think that any non-citizen who commits a violent crime or a property crime should be kicked out of the county never to return. No exceptions. It's a privilege for visitors to be here, not a right.

Second, I don't think non-citizens should get social benefits. I don't think citizens should get social benefits either, but that is another entry.

Third, I don't think birth in this nation should automatically confer citizenship.

Fourth, I am tired of the rule of law being undermined in the name of "civil rights." Non-citizens do not have a right to vote. Generations of immigrants arrived and added to the nation without having alternate languages provided for them. And claiming civil rights violations to keep violent criminals here offends both the spirit and the law.

Those are my issues

Posted Tue - November 6, 2007 at 03:15 PM  

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Masonmist economics

It's not too hard to see where I fall with this.

Most economists favor the free market, with reservations. Masonomics rejects the reservations. If John and Mary are free individuals, and John trades with Mary, then John and Mary both are better off. End of story.

Most other economists believe in the need for government intervention. Like many non-economists, they talk about government policy in terms of we. We must, we have to, we need, we should, etc.

Once upon a time, "We, the people" was the preamble to a charter that reminded those in government of the limitations on the power granted to them. In today's political discourse, "we" is more often the preamble to something like a call for an involuntary collective health system.

If you want to be a Masonomist, you have to lose the we. When people use we in today's politics , they are doing two things.

1. Appealing to a moral entity that stands apart from and above John, Mary, or any other individual

2. Treating government as the embodiment of that higher moral entity

You can be a Masonomist and believe (1). It is a good thing to have a conscience and moral standards. It is a good thing to engage in volunteer work, to form organizations that address the needs of others, and to act unselfishly toward family and others in your community.

Masonomists encourage our noble impulses. Tyler Cowen's book is a cross between a self-help manual and an essay on moral philosophy. In one section, he suggests ways that one can modify one's behavior in order to give enough to charity and to ensure that one's charitable contributions are made wisely.

However, Masonomics is unrelenting in its rejection of (2). For many years, George Mason has been the home of Public Choice Theory, which says that instead of imagining what a wise, omniscient, benevolent government might do, one should pay attention to how government operates in practice...

Good stuff and thought provoking.

Posted at 02:09 PM  

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I have a couple of links for cellphones that are worth your time. First up is "Why cell phones are still grounded," and it is not why you think.

The reason is that cell phones interfere with the airplane's electronics, right?

Well, no, actually. The risk posed by cell phones to airplane equipment is unknown, and will remain unknown for as long as possible.

Phones are banned for two official reasons:

1. Cell phones "might" interfere with the avionics (aviation electronics) of some airplanes.

2. Cell phones aloft "might" cause problems with cell tower systems on the ground.

Both of these risks are easily tested, yet somehow neither the Federal Aviation Administration (FAA) nor the Federal Communications Commission has been able to get a definitive answer in the past 20 years as to whether phone calls in flight cause these suspected problems. (The FAA is responsible for the flight safety portion of all this, and the FCC is responsible for the cell tower part.)

The government's dirty little secret is that it cultivates uncertainty about the effects of phones in airplanes as a way to maintain the existing ban without having to confront the expense and inconvenience to airlines and wireless carriers of allowing them.

The second link is 10 Reasons to Hate Cellphone Carriers and it has some pretty good information too. This one leaped out at me.

• They're a cartel

Policies, practices and, of course, prices, are startlingly uniform across the board. By owning the framework of wireless telecommunications, the major carriers can deny market access to potential competitors, and few laws exist to effectively limit collaboration and trust.

A manufacturer of cellular technology told us recently that the carriers effectively control their access to the market: it's as simple as that. If you're in the business of making phones, you develop what the carriers — not the customers — want.

That is one reason why the iPhone has been such a runaway success. It's the first smartphone that gives the customer some of what they want. Personally I still want to see more, like encryption to prevent eavesdropping, but it is a great start.

Remember that when a company's "exclusive" market is protected by the government, they don't usually have consumer's best interests at heart. Customer choice and competition keeps companies honest and customer focused.

Posted at 01:53 PM  

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Mon - November 5, 2007


Every once in a while, there is a company that does it exactly right.

Levenger is one such company.

They aren't cheap. But they aren't high end either. Just good quality at a fair price. And very nice packaging.

I absolutely love their lap desk.

Recently I bought a card wallet from them. Just something a tad oversized to hold the business cards I give out and collect. A month later I get a new one along with a note.

It seems that the previous one was from a batch that didn't meet their standards. So they were replacing it. Free of charge. And without me asking or complaining.

I'm still happy with the first one I got.

But guess where I am going to look the next time I need something they sell. They just made at least one customer for life.

Oh, and I have bought my last four wallets from them. Including the pocket briefcase that I have been using for the last year.

Posted Mon - November 5, 2007 at 06:22 AM  

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