In numerous old legends, prior to two armies engaging in battle, the two kings or a champion for each king would first fight in single combat. Based on the result of that combat between the two individuals, one side might retreat or otherwise sue for peace. An example of such a legend is the biblical story of David and Goliath, where David, who was essentially an unarmed child, slew Goliath, the largest, most powerful, and most skilled of the Philistine warriors. The Philistines were so freaked out by this turn of events that they beat a hasty retreat.
From one perspective, an election is similar to a single combat preceding such a battle. The basis is, of course, somewhat different. In this case, it's assumed that the larger army would win. The votes are counted, the "larger army" is identified, and the minority begrudgingly "surrenders" and allows the representative(s) from the "larger army" to rule them for a while. This approach is obviously less costly than having a total war every 4 years.
However, part of the reason that the minority allows themselves to be ruled by the majority, is that the majority implicitly and explicitly agrees that oppression of the minority is to be limited by tradition, institutions that have resulted from tradition, and the constitution. There's also the implicit assumption that the minority will be better off living under the rule of the majority as opposed to taking up arms and fighting.
If any of these implicit and explicit bounds on ruling are breached by the majority, the minority may be better off resorting to violence or any other approach that can make the lives and/or the lives of their families and communities better. Note that revenge is a significant component of making lives seem better.
With the passage of Obamacare, there are a significant number of angry people. There are claims of violence and threats of violence by those who oppose Obamacare against those who supported and passed it. This is not surprising and fits the above narrative perfectly. It's an inherently subjective analysis for each member of the minority to determine whether or not the majority has exceeded its bounds, so some people will be ready to resort to violence and subversion before others. Assuming the claims of threats and violence are substantiated and significant (a handful of such incidents is meaningless), we may be seeing the beginning of the minority moving towards violent confrontation.
There are many who are calling on Republicans/Conservatives/Libertarians to condemn the threats and violence.
Not me. I can't imagine why I would. It's part of the deal of ruling.
66 comments:
Our side doesn't do violence easily, so I don't believe those reports. Of course, we can be pushed beyond endurance and then things can change.
I don't believe those reports either, especially since some of them are already being retracted and clarified.
On the other hand, Thomas Sowell has dissolved into ranting hysteria about the coming takeover of the socialists and the end of democracy.
Fortunately, I don't believe in polls, because Harris reports today that about one in four Republicans think Obama is probably the antiChrist.
You may be right about the restiveness of the minority (although I believe they keep proclaiming they are the majority by a large margin on this issue), but that doesn't mean that a lot of them aren't raving lunatics.
Remember the alleged racial epithets hurled at black politicians walking through a tea party rally last week? No such thing happened even though the crowd was provoked.
They can't make up stuff anymore. Everybody over age 10 has some kind of gadget that takes pictures or videos. If it happened, it's on the net within minutes.
Dr. Sowell will recover just fine. Meanwhile there is a counterattack mounting from David Horowitz, Andrew Breitbart, John Stossel and "An Army of Davids." I'm talking not just about healthcare, but about the pushback against statism. Is it too late? Possibly, but I don't think so. It will however require a Churchillian effort.
Harry, give me a break. Other than to grab headlines, why would a question like that be on a poll.
Here's a poll I'd like to see, how many Democrats think Obama is a god.
I've been a Sowell fan for a very long time and find him to be the exact opposite of hysterical. He's almost too dispassionate presenting his facts and his conclusions.
Harry,
Do you have a link regarding "Thomas Sowell" having "dissolved into ranting hysteria"?
Harry,
Do you have a link for the Sowell rant?
It's at VC.
Over my fish sandwich at lunch, I began reading Sowell's 'Housing Boom or Bust,' (revised ed), which was thrown through the transom.
It rackets along at a goodly pace. Amazingly, private business decisions had nothing to do with it. In his list of important players, only government agencies are named.
A glance at the notes shows a heavy dependence on the MSM. I was amused.
Sowell is right that private decisions had nothing to do with the housing bust -- so there's nothing amazing about his saying so.
Harry,
I search VC, and found one extended excerpt from Sowell:
" The corrupt manner in which this massive legislation was rammed through Congress, without any of the committee hearings or extended debates that most landmark legislation has had, has provided a roadmap for pushing through more such sweeping legislation in utter defiance of what the public wants.
" Too many critics of the Obama administration have assumed that its arrogant disregard of the voting public will spell political suicide for Congressional Democrats and for the President himself. But that is far from certain.
" True, President Obama’s approval numbers in the polls have fallen below 50 percent, and that of Congress is down around 10 percent. But nobody votes for Congress as a whole, and the President will not be on the ballot until 2012.
" They say that, in politics, overnight is a lifetime. Just last month, it was said that the election of Scott Brown to the Senate from Massachusetts doomed the health care bill. Now some of the same people are saying that passing the health care bill will doom the administration and the Democrats’ control of Congress. As an old song said, “It ain’t necessarily so.”
" The voters will have had no experience with the actual, concrete effect of the government takeover of medical care at the time of either the 2010 Congressional elections or the 2012 Presidential elections. All they will have will be conflicting rhetoric– and you can depend on the mainstream media to go along with the rhetoric of those who passed this medical care bill.
" The ruthless and corrupt way this bill was forced through Congress on a party-line vote, and in defiance of public opinion, provides a road map for how other “historic” changes can be imposed by Obama, Pelosi and Reid.
" What will it matter if Obama’s current approval rating is below 50 percent among the current voting public, if he can ram through new legislation to create millions of new voters by granting citizenship to illegal immigrants? That can be enough to make him a two-term President, who can appoint enough Supreme Court justices to rubber-stamp further extensions of his power.
" When all these newly minted citizens are rounded up on election night by ethnic organization activists and labor union supporters of the administration, that may be enough to salvage the Democrats’ control of Congress as well.
" The last opportunity that current American citizens may have to determine who will control Congress may well be the election in November of this year. Off-year elections don’t usually bring out as many voters as Presidential election years. But the 2010 election may be the last chance to halt the dismantling of America. It can be the point of no return."
Is that the "hysterical rant" you're referring to? Which part is hysterical?
The part about herds of recently minted citizens being driven to the polls by squadristas.
All my life, Republicans have claimed that if the Democrats won, there would never be an election. So far they're wrong.
Harry Eagar wrote: "All my life, Republicans have claimed that if the Democrats won, there would never be an election. "
Republicans? All Republicans? Or do you mean some Republican somewhere? Yes, you can always find an outlier.
And do you not think that activists try to get out the vote election day?
All my life, Republicans have claimed that if the Democrats won, there would never be an election. So far they're wrong.
I have never heard that claim.
Harry, all of us have lived lives quite different from each other, yet most of us have noticed that our individual experiences do not translate to cosmic truths.
So if your life was filled with mean-spirited Republicans (that in itself is an oddity since there were darn few Republicans in the deep south in your childhood) why do you use this small sampling to damn Republicans everywhere.
I grew up in Queens and never even met anyone who wasn’t a Catholic or a Jew and a Democrat until I moved to the suburbs after I got married. My own mother spoke little English and her life experience was in the tiny town of Korce in Albania. My father, having lived in the US since boyhood, was a bit more sophisticated and spoke English fairly well, but he also held on to the old ways.
I had to figure things out for myself, so don’t think all Irish Catholics are drunken wife-beaters although most of our neighbors fit that description, don’t think of all Italians as Mafiosi … Next door were Orthodox Jews who rarely interacted with others in the neighborhood, yet I don’t judge all Jews by them.
Your depictions of Republicans as monolithic – landlords, landowners, captains of industry getting rich on the backs of the serfs is ridiculous.
Without spending too much time on Google, one can ascertain that it is the left who are in those positions and the left who are getting their jollies and piles of gilt on the backs of not only the serfs, but the middle class as well.
Our righteous rage is so great we can throw a rock through a window on the 30th floor of a downtown Cincinnati office building (it actually looks like the WKRP building).
My we're powerful!
'And do you not think that activists try to get out the vote election day?'
Yes, but as Richard Nixon showed, once shooed to the polls, they do not always pull the straight ticket.
Judd was arguing, just a few years ago, that all those Mexicans were natural Republican voters, if given a chance.
erp, all those serf-owners were, at the time I knew tnem, registered Demcorats. But spiritual Republicans who (speaking of Nixon) once they got the chance rushed into the Republican party.
Why, I am so old, I can remember when there were liberal Republicans. All gone now.
Harry, life without you would be dull indeed. Spiritual Republicans indeed?
I didn't mention Nixon and never do unless I want to point out that he was a socialist and RINO.
Remember, erp, Bush Jr. visiting Bob Jones University tars the entire GOP, but Obama's "inexusable" assocation with Reverend Wright in no way reflects on the Democratic Party. Not to mention the fact that the passing of actual Jim Crow laws doesn't reflect on the Democratic Party, but the absence of any such legislation is merely a ruse by the GOP and in no way reflects positively on the party.
SH. you are obviously a spiritual Klanner just waiting for your first opportunity to join them openly and I defy you to deny it.
"An example of such a legend is the biblical story of David and Goliath..."
An interesting exchange I once saw about that:
"Goliath had 'sword and spear and javelin'. Why didn't he throw the darned javelin? Not very bright to wait for hand-to-hand..."
"Since the shepherd's sling has a maximum range of perhaps 200 meters, and could be both deadly and accurate up to 100 meters, Goliath may not have had an opportunity to close to javelin range.
"If he failed to take a shield, or to dodge, duck, and weave, then it was overconfidence more than David's skill which doomed Goliath."
"re: slings and javelins
"One thrown javelin is easy to dodge; a barrage of them thrown against packed ranks would not be. Similarly, a sling is nearly as deadly as a bow, but requires extensive training to use and plenty of space - a sling-armed army would just whack each other in the heads repeatedly.
"Goliath's error was bringing weapons appropriate for mass close-infantry fighting to a duel."
"Sowell is right that private decisions had nothing to do with the housing bust..."
Oy vey.
Private decisions had everything to do with the housing bust.
Who made decisions to buy 10-20 houses at a time, to "flip 'em" and "make a fortune"?
Who made inflated appraisals?
Who falsified mortgage applications, sometimes without the knowledge and/or consent of the applicants?
Who accepted those decisions, appraisals, and applications, knowing full well that they contained falsehoods and misinformation?
Who packaged those toxic mortgages into MBS's?
Who accepted payment to rate those MBS's "AAA", on the basis that they were "insured against default" by companies with minuscule resources?
NONE of those things were done by the gov't, ALL of them were done by individuals.
Which is not to say the the gov't, and especially factions and individuals therein, are blameless, merely that it's ABSOLUTELY INCORRECT to claim that "private decisions had nothing to do with the housing bust." Individuals in the private sector may have been malincentivized, but they made the decisions, and are mostly responsible for the predictable outcome.
To argue otherwise is to say that sin is excusable if temptation is present. (Which is also the Islamofascist approach to gender relations, and who wants to agree with those abominable headcases?)
SH, examples not parallel. Bush went to BJU. Obama ran away from Wright.
Bush thought associating with Bob Jones would get him votes. Obama realized (unbelievably late) that associating with Wright would lose him votes.
Are you serious?
First, Bush went to BJU once, Obama went to Reverend Wright every week for 20 years, which is over 1,000 times. That's hardly "running away". Obama disavowed Wright only after it became public on the national stage.
Second Obama went to Wright's church to get votes, it got him a lot of "street cred" in Chicago politics.
Third, if you were correct, that Obama went to Wright's church not to get votes, then it must be because Obama agreed with Wright's views. Isn't actually believing racist ranting worse than pandering to it for votes?
Overall, it looks clearly worse, by your standard of guilt by association, for Obama. You labeled Obama's presence at Wright's church "inexcusable". Now you're making excuses? I think that proves my point, that it's the party, not the acts, that make your judgments on this topic.
Anonymous wrote: "An interesting exchange I once saw about [David and Goliath]..."
It's a plausible story that's been analyzed from every possible angle and that's why it's a great story. It's primarily a story about overconfidence and arrogance versus courage, skill, luck, and belief, but certainly one can also look at the tactical blunders made by Goliath. I don't find the tactical aspect very compelling because even if the story is based on a single, actual event, I'm sure there were distortions and embellishments along the way before it was written in its current form so details like the efficacy of javelins versus slings seem only remotely applicable.
Anonymous wrote: "Private decisions had everything to do with the housing bust."
Well, I'm not exactly sure what erp meant, nor did Sowell exactly say that private decisions had nothing to do with the crisis.
What Sowell has said was that those private decisions, from bankers to individual buyers of houses, were predictable given government policy so the root of the crisis was not the individual decisions.
I dunno, seems to me there's a difference between embracing a racist and not embracing a racist.
Is Obama a racist? Some of his emotional reactions suggest that he's primed on the subject, although his thought-out positions are antiracist.
I'll take that. I don't think the passage of the Voting Rights Act, Civil Rights Act of 1965 or Equal Employment Opportunity Act changed the emotional opinions of a lot of the people I grew up with, but it did change their behavior, and that's a start.
Mr. Eagar;
Obama embraced a racist for 20 years. Then, suddenly, when the spot light is on, he changes his public stance. If you are taking that at face value. Is that a standard you are willing to apply to anyone in the GOP? That if they make a public denouncement, that's sufficient?
Of course, you've just blatantly blown off just such an agreement, as linked above, involving guilt by association, in that you consider the Tea Party tainted by listening to Tom Tancredo once, but Obama complete untainted by listening to Wright for 20 years, even though you called it "inexcusable". Is that description no longer operative?
Harry, we can finally agree on an issue. Obama is a racist even if he doesn’t overtly act out -- in public at least.
Anon and Bret, Harry doesn’t supply links, so I didn’t see the quote alleged to be from Sowell, but in any case, individuals, even the most corrupt, just don’t have the scope to crash the housing market all across the land and banks are so regulated that were they to start giving unsanctioned mortgages for $750,000 to those whose annual income is $14,000, they wouldn’t been put in jail, but in the funny farm.
The object was to crash the housing market before the end of Bush’s term in office and that’s exactly what they did.
SH, you seem to forget that I am not an admirer of Obama's.
In this country of out and out antiblack racists, it took a lot of misfeasance by the other side to elect a problack racist who is actually black.
As Rough correctly recalled on your blog last week, I supported a Republican for president last time around.
"The object was to crash the housing market before the end of Bush’s term in office and that’s exactly what they did."
For the sake of argument, let us accept your absurd statement at face value. What are the implications?
Well, two possibilities spring immediately to mind:
1) Bush agreed with the plan to "crash the housing market".
2) Bush disagreed with the plan, or didn't know about/understand it. Under this scenario, Bush was (pick one or more): Stupid, incompetent, weak, ineffectual, cowardly.
Whether Bush was part of the plot to crash the economy, or whether he was incompetent or powerless to stop it, if you truly believe that such a plot existed than it only reflects badly on Bush.
You may wish to reconsider. Or at least, to add some more layers of complexity to your conspiracy theory.
"What Sowell has said was that ... the root of the crisis was not the individual decisions."
The root of it was not, I agree, but we cannot excuse the responsibility of individuals for agreeing to go along with what erp has correctly labeled "insanity".
Peer pressure or temptation explains sin, but does not excuse it.
The gov't set up the casino. Each individual gambler decided to "step right up, spin the wheel!!"
Ordinary, individual homebuyers might be excused for participating, but RE speculators, multi-home buyers, appraisers, mortgage brokers, Realtors, mortgage underwriters, MBS packagers & salespeople, MBS buyers, the rating agencies...
By 2006 they all knew that it was fraud-based. They were all betting that they would be able to time the top and find a seat once the music stopped.
"...banks are so regulated that were they to start giving unsanctioned mortgages for $750,000 to those whose annual income is $14,000, they wouldn’t been put in jail, but in the funny farm."
There is a HUGE difference between being allowed to write such a mortgage, and actually DOING it.
(And between being able to be approved for such a loan and actually taking it.)
It was individuals who decided to act imprudently. Those were the decisions which ultimately sank the ship.
Besides, I thought that you were big on personal responsibility, on "hard work and self-reliance being the route to a good life."
But here you're implying that the Nanny State should have stopped lenders and buyers from making mutually-insane contracts?!?
Anonymous (Rough? Is that you?) wrote: "Peer pressure or temptation explains sin, but does not excuse it."
In religion, I suppose, but there aren't really "sins" in economics short of unlawful behavior.
You listed a bunch of classes of individuals (speculators, etc.) who apparently shouldn't have "sinned" (participated). But all of them had incentives to do exactly what they did due to the government policies that were in place.
In a free market without distorting regulations and incentives, one would expect and even hope that each person optimizes their position based on the rules - that's how wealth creation is maximized. With the set of government policies in effect, that same attitude of optimizing led to disaster instead of wealth creation.
The earth is not populated by angels. People respond to incentives.
erp wrote: "The object was to crash the housing market before the end of Bush’s term in office and that’s exactly what they did."
Whose object was it to do this? How did those specific people cause it to happen?
Mr. Eagar;
You seem to forget that my point is about the Democratic Party, not Obama. That is, if Tancredo speaking at a gathering taints the Tea Party, why doesn't Obama being the leader of the Democratic Party taint that party? This, of course, according to the standard you set at the link above.
Bret and Anon,
Carter started it with the CRA, ACORN became their enforcement. Banks were intimidated into giving mtges to those unable to pay them, they sold these losers to larger banks which in turn sold them to even larger banks ...
Those behind it were the same people now in power, Rahm, Frank, the rest of the Democratic leadership, the Soros' billionaires club ...
The housing bubble crisis was just one of the crises (remember swine flu) orchestrated to elect Obama or some other lefty who could advance their agenda of income redistribution and control of every aspect of our lives.
They thought they could accomplish this when Clinton was elected via Perot's candidacy, but bubba was too dissolute to stay the course. Bush's ability to govern even with 9/11 and his ability to work with other world leaders set them back, but Obama was the perfect storm. Get in and get everything done before anybody wakes up and finds out what they've done.
They didn't realize we weren't all brain dead and a lot of still us remember what the U.S. is all about, so maybe we can get control back in November and get the socialists completely out in 2012.
How ever it works out, the ball's in the younger generation’s (that means you guys) court now.
Harry, you are wrong about this country being racist. To quote Skipper, WRONG, WRONG, WRONG. I can't imagine what kind of society you live in.
Why do you constantly bring up Tancredo? He is less than immaterial.
OK. That's the "who" (Soros' billionaire club, Frank, with the help of ACORN) and even the "why".
The "how" part is still quite unclear to me. How did they manage to get the housing bubble to peak right then. Soros has moved markets before, but I'm not seeing this one.
(Rough? Is that you?)
Yes, it is I.
Sorry, inexplicably I failed to notice the non-acc't "name" option.
"In a free market ... one would expect and even hope that each person optimizes their position based on the rules. [...] With the set of government policies in effect, that same attitude of optimizing led to disaster..."
My point is that individuals chose to gamble, to put their short-term optimization ahead of their long-term optimization. That's not rational behavior.
At the point when market participants recognize that it's based on fraud, then thoughts should turn towards fallback positions and hedging, NOT pressing the bet and continuing the activity in the hopes that a "greater fool" will bail you out.
The gov't can misincentivize. It takes individual choices to play. Nobody was forced to make insane housing loans to the middle-class, nor to accept the terms of such loans, and certainly not to buy multiple homes.
IOW, it wasn't a closed system. Choosing not to play was a viable option for almost everyone involved. It wasn't like tax-system misincentives, where everyone has to deal with them in one fashion or another.
Therefore, individuals are liable for choosing to play.
Was it legal? Yes. Was it wise?
I forgot the IMO at the beginning of my last comment since I don't have any incontrovertible evidence other than that of the empirical persuasion.
How did they do it?
There was run on the banks October of 2008 which Bush was forced to staunch that was the finishing touch. The bubble bursting started a couple of years earlier when they stopped propping up the mortgage Ponzi scheme.
With unlimited financial resources and non-existent scruples a lot of evil can be done.
Rough asks: "Was it wise?"
Hard to know, isn't it?
For an economic action to be wise, the expected risk-adjusted return has to be worthwhile. However, risk-adjustment has a large subjective component: risk-aversion. Some people have very low or even negative risk-aversion and it's based on the subjective marginal utility of the cost of the investment versus the subjective values of each of the possible returns in the distribution.
The players you've mentioned (speculators, etc.) probably really do have very low risk-aversions, so it could well be that their behaviors were wise given the policies in place at the time.
I remember reading that one of the major partners at one of the bankrupt firms (I can't remember which one) who had lost $1 billion said something to the effect that it was hard to consider his strategy over the last 20 years a failure considering he still had $600 million left. Seems wise enough to me.
The classes of people who were the losers in this are the taxpayers and those who have to toil in the now damaged economy. All of the other groups had winners and losers but it's not clear that they made unwise bets.
"The bubble bursting started a couple of years earlier when they stopped propping up the mortgage Ponzi scheme."
Interesting that you'd consider that proof that Bush's adversaries pulled the plug on the housing bubble, considering that a) one of the chief architects of the mortgage Ponzi scheme was Goldman Sach's Hank Paulson, who ended up as Bush's SecTreas, and b) Bush could have ended the mortgage Ponzi scheme at any time by, e.g., simply making a televised speech where he says "homes are overpriced, and people should stop being foolish."
So, given that Bush both invited Paulson into his admin, and didn't do anything to attempt to stop what even his most ardent supporter is willing to call a "Ponzi scheme", it's hard to see Bush as anything but a co-conspirator.
Although it's funny to see erp imply that Bush was a powerless dupe, as that's more or less what Bush's detractors have been claiming for a decade.
"...one of the major partners at one of the bankrupt firms (I can't remember which one) who had lost $1 billion said something to the effect that it was hard to consider his strategy over the last 20 years a failure considering he still had $600 million left. Seems wise enough to me."
Sounds like an idiot to me.
If he'd acted wisely, his firm wouldn't have been bankrupted, and he wouldn't have lost 60% of his fortune.
In fact, if he were actually clever, he'd have both stopped participating in the fraud, and he'd have gone short - then he'd be able to brag about how he was now worth $3 billion, instead of about how he'd lost only one billion dollars.
Rough, it doesn't matter how you characterize Bush. The fact is he was up to his *ss in alligators and yet kept us secure, the world as peaceful as could be expected, the economy humming ...
All of this is in the past. It's your turn now. Let's see what you can do.
Rough wrote: "Sounds like an idiot to me."
So your subjective opinion is that it's better to make nothing at all than to end up with $600 million.
That's an interesting outlook.
Personally, I've always wanted to lose a $1 billion.
'In religion, I suppose, but there aren't really "sins" in economics short of unlawful behavior.'
No? It isn't illegal to use other people's money to create stupid SIVs entailing risks you don't start to understand, but it's sin and I;'m ag`in it.
Use your own money, and it's investing.
Also, Alan Greenspan thought we (that is, the victims in this system) would be protected by counterparty surveillance, but that didn't occur. Not illegal (although conceivably actionable as a tort, I suppose), but, ag`in, sin.
"Rough, it doesn't matter how you characterize Bush. The fact is he [kept] the economy humming..."
NO. HE. DIDN'T.
That's the part that you refuse to face. Even if you were well-versed in finance or economics, there's simply no way for you to empirically show that Bush did any such thing, and there's a mountain of evidence to the contrary.
If, I say if Bush had managed to make it to the end of his term before the economy crashed, which was his specific and stated goal, then we could possibly (although mistakenly) blame President McCain for the carnage. But that didn't happen.
Your own words damn Bush. In this thread alone, you have implied that Bush was weak, incompetent, and stupid. That's not my characterization, and in fact I disagree with you about those things. That's what YOUR OWN DESCRIPTION of what happened to the housing bubble makes Bush out to be.
"So your subjective opinion is that it's better to make nothing at all than to end up with $600 million."
Well, I thought that I was pretty clear that my subjective opinion is that it's better to NOT LOSE A BILLION DOLLARS, and even better to end up with $3 billion rather than a mere $600 million.
All he had to do was to cash out, and sit on the sidelines to avoid losing 60% of his fortune. And some people who saw this coming made billions betting against it.
So in no way can I praise this unnamed boob. Yeah, it's cool that he's still rich, but his performance over the past half-decade suggests that he was simply lucky, not smart. How much brains does it take to simply stop gambling, and take your winnings off the table?
Here's a prediction for ya: I say he's going to be worth $300 million or less by 2012. If the economy roars between now & then, then I'll acknowledge that I was wrong, and that he's more insightful than am I.
To clarify re: Bush and the economy - the economy started collapsing in 2008. Clearly, in America we historically blame the sitting President for economic downturns, regardless of how fair or accurate that might be. By that standard, Bush = fail, and in fact that's why Obama is in the White House right now.
erp says that Bush ought not be blamed, as a malevolent cabal of shadowy leftists are actually responsible for the economic carnage.
But the entire time that these jackals were supposedly maneuvering, Bush was the most powerful person on the planet.
Therefore, in order to accept the premise that it wasn't Bush's fault, we must assume that he was played. Was he simply too weak to overcome a problem that he perceived, or did he bungle the response, or was he simply oblivious to the danger?
Weak, bungling, stupid OR responsible - take yer pick. In no case does Bush come out looking good.
But I eagerly await erp's explanation of how it could be that the most powerful person on Earth could allow something like this to happen, without blame attaching.
I don't know about any grand conspiracies, however, there are some important pieces of the puzzle missing from this discussion. That terrain to be covered in a separate series of posts.
Bloomberg has just put up a story about Ireland's banks, whose capital deficit is close to $50B, in an economy with a gross turnover of only $226B.
Yeaawwh, dogies! That's impressive! Gotta hand it to those clever leftists who engineered that one, in order to . . . to, what, turn Eire socialist?
"Never assume malice when incompetence will do," but not just incompetence of the bankers, we need to include GSEs, regulators and central bankers.
Rough wrote: "Yeah, it's cool that he's still rich, but his performance over the past half-decade suggests that he was simply lucky, not smart."
Not so.
I worked with a financial and commodities futures trading firm during the 1990s and did much of the modelling of trading strategies and virtually all of the statistics during that period for the firm.
One of my tasks, for marketing and disclosure purposes, was to characterize the expected returns and volatility of the various pools. I don't now remember the exact numbers but they looked something like this: the expected return was 20+% per year but the volatility, which we measured as peak-to-valley drawdown (loss) was also substantial. For example, we could virtually guarantee that in a ten-year period, you would experience at least one peak-to-valley loss of between 1/3 and 2/3 of your capital.
Those predictions were made in 1994. How did it turn out? Pretty close to exactly as predicted. I know people in that fund who never withdrew any money that have literally about 20 times their original capital over 15 or so years. However, during that period they also experienced at least one loss between 1/3 and 2/3 of their capital.
At the point of the loss they lost (percentage wise) about what the investment banker did (a bit less, but the upside was probably somewhat less as well). So, in your opinion, when should've they gotten out exactly. After they were up 100%? 200%? 300%? 500%? 1000%? Now? And why?
Clearly if they allow themselves to have any significant loss, you'll consider them stupid even though taking the risk of such losses has enabled them to get a pretty nice return. Doesn't seem stupid to me.
Howard wrote: "That terrain to be covered in a separate series of posts."
Everytime I write a post I hear all your numerous drafts crying out, "Post me! Post me! Don't leave me here to languish! Post me!" :-)
Rough, whoa, I didn't say anything about Bush planning to keep the economy going until he left office????
You said he was the most powerful person on the planet, not I.
If I were an economist, I'd be ashamed to admit it.
"So, in your opinion, when should've they gotten out exactly."
How about the first time they're down 25% from the highest point after realizing that THEIR BUSINESS MODEL WAS UNSUSTAINABLE?
Do you also feel that it was reasonable for people to ride their dot com stocks all the way down to zero?
The person that we're talking about either a) failed to realize that housing was a bubble, or b) bungled the hedge.
In neither case do I see anything to admire.
When you were modeling trading strategies in the '90s, did you run across a market that was ludicrously overbought, and riddled with ACKNOWLEDGED FRAUD, to the extent that they had cute acronyms for the types of fraudulent activity?
If not, then your experience is not directly applicable to evaluating the U.S. housing industry circa 2006, although it may have applied in 2000.
If a person can see that an investment mania is occurring, but then analyzes it using models developed for unexceptional times, where common events happen with normal frequency, should we say that such a person is reasonable, or wise?
What if they fail to see the obvious mania? Should we laud their investing acumen in that case?
LTCM, anyone?
I dunno, maybe I'm a certified genius and investing god for seeing the bubble and making serious coin by selling it short, and I'm being unreasonably scornful of those who were less perceptive.
But I don't think any of those things. I think that the bubble was painfully obvious, and that nearly everyone in the industry with any experience knew that the good times couldn't last. Why do you think that people like Angelo R. Mozilo of Countrywide were selling their stock holdings as fast as they could without moving the market?
"Rough, whoa, I didn't say anything about Bush planning to keep the economy going until he left office????"
No, Bush did.
Do you believe that his plan was to allow the economy to fail at some point, for some reason?
You did write that he "kept the economy humming"...
Did you mean, until he didn't?
"You said he was the most powerful person on the planet, not I."
A simple statement of fact. But if you don't believe that a sitting President of the United States is the most powerful single person on Earth, and has been since the conclusion of WWII, I'd be interested in hearing about whom you believe is more powerful.
And if you can't point to anyone more powerful, then what's the point of your objection?
Rough, I told you I won't repeat myself. Re-read my comments if you care to know what I said.
I didn't know, until recently, because it was something I didn't pay attention to, that the municipal bond insurers were setting aside 0 loss reserves.
This is the most interesting of all the factoids to have come to wider attention (if it has) since the collapse of Reaganism. It deserves deep contemplation.
But, so far as I know, it isn't getting it.
If you are going to start analyzing the economic system, you couldn't do better than to start there.
Very clever of the leftists to devise THAT business model.
Let's see if erp can pin this on Barney Frank:
'March 31 (Bloomberg) -- Joseph Cassano insisted American International Group Inc. would be fine.
'The insurer had quit guaranteeing securities tied to U.S. subprime loans in 2005, before lenders got reckless, the head of AIG’s derivatives unit told investors on Dec. 5, 2007, as home prices plummeted and mortgage losses mounted.
'Cassano didn’t mention Lou Lucido, 61, a guitar-playing bond buyer at TCW Group Inc. in Los Angeles with a taste for the Rolling Stones. Throughout 2006 and 2007, Lucido had been buying bundles of subprime loans for an investment pool that AIG was bound by contract to insure against failure.
'In one such purchase, 11 months before Cassano, 55, reassured shareholders, Lucido’s team bought $7 million of a mostly subprime bond. They put it in a $1.5 billion fund managed by TCW called Davis Square Funding III Ltd., which was created by Goldman Sachs Group Inc. and registered in the Cayman Islands. A few months later, Lucido bought $3 million more.
'By May 2008, the bond was worthless.
'Without having to ask AIG’s permission, firms such as TCW, hired to oversee funds called collateralized debt obligations, replaced maturing assets with junk that quickly went bad. Managers including Lucido said they didn’t realize how severe the mortgage crash would be and were called upon by CDO contracts to reinvest. At the same time, buying riskier assets could mean bigger paydays.'
Pin what?
The collapse of an unregulated market.
Last I looked, it was the job of congress to make laws?
It turns out that the AIG collapse was driven more by regulated markets than unregulated. Observationally we have that the more regulation, the worse the result for AIG.
It turns out that the AIG collapse was driven more by regulated markets than unregulated. Observationally we have that the more regulation, the worse the result for AIG.
That's not what the piece you linked to says, nor do the numbers match up with the Bloomberg report I started from.
Depends on what the "indirect support" means. But fine, I will withdraw the point.
Here's another way to view "one of the major partners at one of the bankrupt firms, who had lost $1 billion" - the Fed's Maiden Lane II & III LLCs, which were set up to bail out Bear Stearns, have lost a collective 60% of market value, approximately the same loss as the unnamed businessperson.
But the point of the Maiden Lane vehicles was to be a trash dump, to take most of the absolutely worst refuse off of Bear Stearns's balance sheet.
So our unnamed businessperson has managed to match the market performance of rubbish. Spectacular.
Said unnamed business person also match the return of many investments that recovered and went on to do very well.
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