Belmont Club

October 16th, 2008 5:02 am

Boom and boom

The search for the culprit in the current financial crisis continues. The Washington Post has an article which appears to put the blame on the Clinton Administration for failing to extend regulation into the burgeoning field of derivatives — but really puts the onus not on the Clintons but on financial industry lobbyists and the misguided spirit of a Republican deregulatory mania who led his administration astray. The basic storyline is that a lonely bureaucrat — Brooksley E. Born of the Commodity Futures Trading Commission — wanted to regulate derivatives but was forced back by the ‘Wall Street legends’ Alan Greenspan, Robert E. Rubin and Arthur Levitt Jr. Treachery overcame good intentions and here we are.

Efforts to establish the opposite narrative are made by the WSJ, which boldly makes the claim that “the only banking ‘deregulation’ in recent years was that of Fan and Fred.” In this version of events, things were under control until the knaves tricked the Republicans into letting them have a try at the stick, whereupon they flew the entire aircraft into the terrain.

In each of the first two presidential debates, Barack Obama claimed that “Republican deregulation” is responsible for the financial crisis. Most viewers probably accepted this idea, especially because Republicans generally do favor deregulation. But one essential fact was missing from the senator’s narrative: While there has been significant deregulation in the U.S. economy during the last 30 years, none of it has occurred in the financial sector. Indeed, the only significant legislation with any effect on financial risk-taking was the Federal Deposit Insurance Corporation Improvement Act of 1991, adopted during the first Bush administration in the wake of the collapse of the savings and loans (S&Ls).

The WaPo and the WSJ articles don’t technically contradict each other. The WaPo article claims that goverment failed to extend regulation into the Wild West of derivatives, while the WSJ claims that the only regulatory retreat was in the face of Fan and Fred. The arguments are like ships passing in the night. Either way the thesis is that more regulation might have stopped the problem from developing. But would it?

Tigerhawk probably has it right in his post, “Who deregulated what and when, and does it matter? “ when he argues that politicians rarely shut the barn door before the horse gets loose, though they typically install a 20 inch thick armored steel door after the fact. But the steel door is more to exculpate themselves in the historical record than to keep the next Black Swan from making its appearance, because they typically haven’t a clue what it will look like and so it will probably come in the back way. Tigerhawk writes:

I hold this truth to be self-evident: No government of men can design a regulatory system that will prevent the next bubble and ensuing panic. Only the collective memory of the last bubble prevents the next one, and when that fades with the turning of the generational wheel the lesson must be learned all over again. The reason is obvious: Bull markets — whether in stocks, tulip bulbs, railroads, or real estate — are fun, and nobody, and especially no politician, wants to stop the party before its natural end.

This panic will affect many people, especially the young traders, portfolio managers, and bankers who are losing their jobs or seeing their well-heeled friends fall back into the middle class. Those who stay in the business will remember it for the rest of their lives. Today’s twenty and thirty year-olds will indemnify the American and European economies against excessive debt and asset inflation for the better part of their careers. Schedule the next big melt-down in 40-60 years, when these people are long-retired and the generation born around 2025 deludes itself into thinking that it is “different this time.”

I think Tigerhawk really hits the mark when he argues that no real world regulator ever wants to be a party-pooper. Money making schemes, while they last, are essentially unstoppable. The Y2K bug and Carbon Trading will probably be regarded by future generations as examples of head-scratching foolishness. But their chief attraction, like the subprime mortgages, wasn’t that they made sense, but that you could make money off of them. Nobody stands in the path of the gravy train.

But there is another theory of why collapses occur that bears thinking about. It is rooted in the somewhat kooky discipline of “ponerology”, which defines itself as the science of evil. The basic idea is that while about 5% of the human population is psychopathic they tend to collect over time in the upper echelons of organizations. According to this theory, an inordinate number of really bad people are at the very top of society. Eventually they take it over and pervert it. Although most of “ponerology” sounds hokey and there is no rigorous reason to believe that scum rises to the social surface, I think it may be true that over time psychopaths learn to game the system simply because these are precisely the types of people who are obsessively looking for a way to gratify their socially prohibited desires.

So the same effect predicted by “ponerology” takes place but for a different reason. The psychos cluster around the lever they want to pull and eventually they get their hands on it. In time they find the way and turn a healthy system on its head. Perhaps bubbles and social catastrophes coincide in part with the discovery and rapid diffusion of a loophole which is rapidly exploited by evil people.

Two possible examples which come to mind are the phenomenon of pedophila and Islamic terrorism. “It was a bold man who first et an oyster,” a wag once wrote. But many a timid man followed the bold. Once the first pedophile discovered holidays in Thailand or a perverted clergyman spread the word that children trusted men of the cloth it was only a matter of time before a kind of bubble blew up which created a whole new category of tourist industry and very nearly collapsed institutions which had lasted for millenia. When radical Islamists discovered that Western civilization made cars, airplanes, the Internet and biological science available to the common man it wasn’t long before mass terror attacks using these implements were under way. One day evil people make a business process or technological breakthrough and for a time, they have a boom which to us looks like a catastrophe. Imagine the excitement with which real scammers must have regarded Fan and Fred, or the derivative market, as you prefer. Seek and you shall find.

It’s interesting to speculate about what bad guys may be looking for next. An amusing story is told about Kurt Godel, one of the greatest mathematicians of the 20th century. It seems that Godel applied for US citizenship and proceeded to his examination in company with Albert Einstein and Oskar Morgenstern when it occurred to him to tell the judge about a logical loophole he had discovered in the US Constitution through which America could be turned into a tyranny.

Einstein and Morgenstern coached Gödel for his U.S. citizenship exam, concerned that their friend’s unpredictable behavior might jeopardize his chances. When the Nazi regime was briefly mentioned, Gödel informed the presiding judge that he had discovered a way in which a dictatorship could be legally installed in the United States, through a logical contradiction in the U.S. Constitution. Neither the judge, nor Einstein or Morgenstern allowed Gödel to finish his line of thought and he was awarded citizenship.

It’s amusing until one realizes how often we discover, at intervals of 50 or so years, how a cohort of people more or less simultaneously learn to game a system until it crashes. I really do wish the judge had let Godel finish, though the 5% of men in the world would have been listening to his words more intently than all the rest.

Pajamas Media appreciates your comments that abide by the following guidelines:

1. Avoid profanities or foul language unless it is contained in a necessary quote or is relevant to the comment.

2. Stay on topic.

3. Disagree, but avoid ad hominem attacks.

4. Threats are treated seriously and reported to law enforcement.

5. Spam and advertising are not permitted in the comments area.

The clause regarding "hate speech" has been deleted because readers criticized it as being too loosely defined. We agreed.

These guidelines are very general and cannot cover every possible situation. Please don't assume that Pajamas Media management agrees with or otherwise endorses any particular comment. We reserve the right to filter or delete comments or to deny posting privileges entirely at our discretion. If you feel your comment was filtered inappropriately, please email us at story@pajamasmedia.com.

174 Comments

1. enscout:

21st century man has lost his power of discernment at the hands of PC. We are no longer encouraged by our ‘betters’ to think rationally, but to join the chorus of consensus.

Rational man knew that having the ability to accomplish does not constitute a mandate for action (because we can do it, we should).

I wish it were still only 5%.

Oct 16, 2008 - 5:30 am 2. The Anti Jihadist:

Maybe Obama, once he is duly elected, will stumble into Godel’s flaw. Or worse yet, he’s figured it out already.

Oct 16, 2008 - 5:39 am 3. cedarford:

Tigerhawk writes:

I hold this truth to be self-evident: No government of men can design a regulatory system that will prevent the next bubble and ensuing panic.

Tigerhawk is basically saying that the cherished free market of the Right is so powerful that it defies human efforts to regulate it.

Yet we have imposed regulatory and oversight systems that HAVE either prevented or mitigated against complex human systems, including sectors with a strong profit motive, from endangering the general public.

There was huge profit in the steamboat business, an urge to cut shipping costs to as low as possible while driving the steam boilers at or above limit because time was money.
The result was 1830s and 1840s ships blowing up right and left in the ocean, up and down America’s rivers and Great Lakes from boiler explosions. That almost completely ended when boilers were required to be made under a new Code, the ASME. And all ships were inspected for safety by Coast Guard and reps of Hartford Boiler Insurance Co.
In field after field, the same pattern followed of regulating the greedy and imposing ongoing oversight on them to verify compliance for the public good – and those
schemes seem to work once the public is dead serious about it – trust busting, food safety, mine safety. Codes imposed and monitored by de facto “guilds” like the Bar, the Association of Accountants, the AMA. State nursing licensing and discipline boards. Bank oversight, audit, and deposit insurance.

That is now coming back to Wall Street in a big way. They can moan about Sarbanes-Oxley, but they let the Enrons happen and screw millions of investors, so they get what they deserve. They can moan about the “precious freedoms!” fatcats may be losing with new and harsher measures intended to stop securities, deriviatives, mortgage Ponzis and toxic insurance paper sales, but THEY are the ones that screwed taxpayers and ethical investors out of trillions.

Oct 16, 2008 - 5:40 am 4. ADE:

Many great perspectives, W, and there is an element of truth to them all.

In my view, the problem was conceptual – nobody, least of all the masters of the universe – understood what they were in to. You cannot regulate what you don’t understand; deregulation is likely to be just as inane.

The conceptual mistake? CDOs were deemed to be probablity games (on average 5% of mortgages will default, normally distributed of course), when in fact they were a one-way option against the lender, once the balloon goes up (the music of ever increasing property values stops). This has been pointed out on this blog before, but under the name of covariance.

Life assurance is, too, a probablistic game. Why has it survived so long? Because there are escape clauses in the contracts (the policies) for when the game turns non-probablistic. Excluded are “war, riot, civil commotion, epidemic…”. IE, life assurance contracts are humble, honest. There are no similar clauses in mortgage-backed CDOs.

And yet the ratings agencies rated the CDOs AAA. If there is any culprit in the current debacle, it is the rating agencies. I believe that FITCH has issued belated new guidelines for rating CDOs.

Too late. Flat Earthers met greed, hubris, arcane mathematics, and of course an never-ending credit supply. Only The Chosen One can regulate against the inevitable wreckage. Change, don’cha know, but not one the markets believbe in right now.

I look forward to the class actions against the ratings agencies.

ADE

Oct 16, 2008 - 5:52 am 5. wretchard:

Perhaps one of the reasons the US Constitution has been so comparatively successful is that the concept of checks and balances has prevented extremists from getting hold of the levers of power. But ambitious people over time will have been thinking of nothing else but how to circumvent these checks and balances. And eventually they will succeed. Consider the example of lawyers. I was struck by how much of lawyering consisted of finding ways to evade regulations. “Innovation” is often just another way of describing a newly found loophole. It’s like a game of Roadrunner vs Wile E. Coyote. Wile E. keeps improving, but not nearly as fast as the Roadrunner.

My guess is that modern politics has found ways to create virtual power structures that cannot be regulated by the Constitution. Alliances with lobbyists, media, the academe, etc. have created things that can’t be kept back. One of these days they ambitious extremists will be able to mount an assault right over the top of the legal defenses. If not now then someday.

Oct 16, 2008 - 6:03 am 6. Thrasymachus:

First, the cover of the book is not cool. Hitler and Stalin on top, the entire Bush administration below. I don’t think the author probably approved the cover but it kind of tells you where the whole thing is coming from.

I think 5% is low, but if you want to be very conservative you can use that. I think 10% is probably more like it.

Oct 16, 2008 - 6:11 am 7. Insufficiently Sensitive:

My guess is that modern politics has found ways to create virtual power structures that cannot be regulated by the Constitution.

In the invention of Borking, Joe Biden, Ted Kennedy et al were indeed launching a new gaming of the system. Previously both parties had tolerated the other’s Supreme Court appointments, not particularly raising objections on a nominee’s supposed ‘politics’. But with Bork, the lefties perceived a possible Justice who would reliably vote against ‘penumbras’ in the law and put an end to the trend of the Warren Court. All-out warfare, therefore, and they escalated the advise and consent far beyond its previous limits. Presumably with the end of ultimately conjoining the Judiciary and Executive departments, and perverting the balance of powers concept for the benefit of some future kingly Executive reminiscent of FDR.

And now we have the Constitutional perverter and the King on the same grim electoral ticket.

Oct 16, 2008 - 6:19 am 8. Ben:

“It’s amusing until one realizes how often we discover, at intervals of 50 or so years, how a cohort of people more or less simultaneously learn to game a system until it crashes.”

Fifty years? Anyone who has played internet games knows that the time frame has been reduced to weeks, maybe days. Any complex system of rules will have players scrambling to find the hacks, cheats, and exploits- and they will. They’re smart. Any attempt to close those loopholes by changing the rules, or creating new ones, will only cause a brief correction before the new gimmicks are found.

Oct 16, 2008 - 6:27 am 9. sanchmo:

Nonsense.

We’ve had 3 cases of major targeted inflation during the past decade – first the dot-com stock bubble, then when that one burst the housing bubble, then when that one started to deflate the oil and food bubble. Coincidence?

Is it coincidence that the bubbles and inflation happened during the same time the Fed increased the rate of growth in M2 and decided to stop publishing M3? Is it a coincidence that we’ve seen inflation in those areas of the economy under-reported by the CPI (healthcare, housing, and the “volatile food and energy” componets)? Is it coincidence that the extra money in circulation flowed to those consumer that are most subsidized by government and employers (housing, healthcare)?

No, it’s not a coincidence. The Fed pumped in the fuel by expanding the money supply to stay popular, and the Dems directed where the fire should burn in order to avoid detection. Inflation is always and everywhere a monetary phenomenon.

Don’t take my word for it. Listen to the warning from May 08 from the former VP of the Dallas Federal REserve Bank: Asset Bubbles and their Consequences: http://www.cato.org/pub_display.php?pub_id=9389

Oct 16, 2008 - 6:30 am 10. American Muslim:

It appears that most people posting here have come to understand that man-made governmental, legal, and financial systems are inherently unjust and corrupt.

I suggest that it is time to take the next logical step and implement Allah’s (swt) law (Sharia).

It is time to move out of the darkness and into the light. Embrace Islam now and live in peace in submission to the will of Almighty Allah (swt).

Your grandchildren will be Muslim.

Allahu akbar!

Oct 16, 2008 - 6:38 am 11. Pascal:

Wretchard @ no.5.

Non-lawyer belief: Breaking constitutional bonds were sustained when SCOTUS invoked “Compelling State Interest” (CSI) and was unassailed by the other branches of government.

first to ignore Amendment 14 (UM Law School affirmative action) and then Amend 5 (Kelo).

No limit on government is assured as long as CSI is not eliminated.

Oct 16, 2008 - 6:52 am 12. Peter Boston:

Fan and Fred blew up when politicians replaced normal risk analysis with social engineering. Perhaps they are the best example of why social engineering wil always result in catastrophe. The range of unforeseen consequences will always be greater than the social engineers can envision.

Wrtechard – can you just blacklist this American Muslim character? He is tiresome and doesn’t add anything to the conversation.

Oct 16, 2008 - 6:57 am 13. Pascal:

Slade, Alexis, for when you arrive.

The Precautionary Principle and Compelling State Interest seem connected. What do you suppose that connection is?

Oct 16, 2008 - 7:04 am 14. Unsk:

Both the S&L Crisis and this Subprime crisis were caused by the political and financial exploitation of weaknesses of the regulation of bank reserve requirements and their public/private interface.

This crisis is not about the free market.

This crisis is about when politicians, and their financial cronies are allowed to play games with government guarantees and regulations. The highly leveraged derivatives were the means to which the crisis was exploited, not the cause.

It is always prudent to protect bank reserve requirements. Period.
Through intimidation, and deception the Democrats were able to create the illusion that the subprime and Alt A fraudulent schemes they pushed would not undermine Bank reserve requirements. We now know that they were horribly wrong and misguided. The leveraged derivatives just amplified the problem into an enormous world wide catastrophe.

When government mixes with private enterprise, the rules of the game must be clear and transparent. The public/ private interface is always a huge opportunity for crooks and scoundrels. The regulations of such arrangements need to be tightly controlled with bright lines and insurmountable barriers to corruption. The public needs to be well informed when these bright lines are crossed.

The problem we face today is that the Democratic Party’s primary source of support and income has come from the manipulation of regulations and government arrangements like public/private partnerships for the financial gain of legions of their supporters. The unions, universities, foundations, environmental groups and other interest groups, not only Freddie and Fannie, all have gotten into this game big time.

In this past, the news media would shine a light on these schemes. Now, the main stream media manipulates the narrative to blame the free market and Republicans. So the Dems get a two-fer. They get the windfalls from their frauds and they get to blame the Republicans when things go horribly wrong.

Oct 16, 2008 - 7:28 am 15. Thrasymachus:

People these days (90’s to now?) have been yearning for something that will take them past the grind of life, past the disappointments of the business cycle. In the past people feared and disliked it but understood it was part of life.

Our lords and masters are not more immune to this than the proles, in fact the opposite is true. Investors have come to expect a 10% to 15% return year after year as their due. Rich people have disliked Bush for a long time, they see the war on terror and cultural issues as a distraction from making money.

Now we have a new bubble, not really economic, but energized by the popping of the economic bubbles- the Obama political bubble. People are disappointed, and angry, and they want somebody to make it better. Life is supposed to be easy *all the time* and they are going to listen to somebody who promises it can be like that.

But this bubble is going to pop very fast. I venture to say it will pop before the inauguration. If not, the first 100 days. Obama just can’t do that much, even if he had the political skill and juice, which he doesn’t have.

Oct 16, 2008 - 7:34 am 16. Alexis:

Pascal:

“Compelling State Interest” is the case for government intervention. The “Precautionary Principle” ensures that there will always be a compelling state interest. Thus, government expansion in and of itself becomes a bubble.

State intervention cannot stop bubbles because state intervention often is the bubble. Here’s a case in point. During the 1990’s, there weren’t very many petroleum jobs for geologists. So, the curriculum in many geology departments became geared toward training future generations of environmental regulators.

I regard protecting the environment to be a laudable goal; I don’t necessarily share the skepticism found here. However, I do think environmentalism is a bubble that will eventually burst. Nowadays, it seems that every dirty industry on the planet claims to be “green”, if only for the sake of public relations. I’m reminded of where, in The Life of Brian, Brian got a pardon; all of the criminals then claimed to be Brian.

Albert Gore Jr. isn’t Brian.

Oct 16, 2008 - 7:50 am 17. Tamquam Leo Rugiens:

Whatever the proportion of sociopaths in the population their total number is tiny compared to the number of people who know that there is such a thing as a free lunch and that they, by God, deserve theirs. There’s a sucker born every minute, and they are easily herded. How are you going to regulate that?

Oct 16, 2008 - 8:07 am 18. Mel Williams:

Prosperity breeds hubris.

The old baseball analogy is apt: “Some people are born on third base and go through life thinking they hit a triple”.

In aggregated market terms, what you get from this is a very gradual onset of blindness. Risk fades from view.

Taking this a little further, I think any cultures’ inherited traditions are invariably conservative because they have taken into consideration the recurring 100 year floods. In good times, though, they seem antiquated and non-applicable.

We have strayed from sound financial practices and will be forcibly brought back to them. The market will see to that.

Oct 16, 2008 - 8:14 am 19. Night Owl:

Wretchard said:
“the concept of checks and balances has prevented extremists from getting hold of the levers of power. But ambitious people over time will have been thinking of nothing else but how to circumvent these checks and balances.”

Excellent point. Currently with judges attempting to legislate from the bench, “truth squads” attempting to suppress opposing POVs, and a major arm of the media nothing more than a propaganda tool for the Democratic party, I see these realities as the biggest threat to our freedom and personal wealth in this country for the foreseeable future. I am in agreement with those who feel that the Dem party has been hijacked by those with Marxist-socialist, basically anti-American leanings. Quite likely there are sympathizers within the Rep party as well. And I say this as one who is most definitely not into conspiracy theories. But like others who have their eyes open, I can see the writing on the wall, and I don’t like where we are headed.

These people want nothing more than to gain complete control over the wealth of the US. They will slower eat away at our freedoms until we are completely dependent on a bureaucrat to decide when to go to the doctor, where we get our news and even what we can cook for dinner. All in the name of “what is good for us”. Most of these leaders and representatives are probably sincere folks who want what’s best for people, who unfortunately become the naive useful tools to the psychotics you mention, who have their own agenda.

This financial meltdown, which has robbed the majority of hard-working, tax-paying Americans of much of their life investments, is major step forward. Now the govt. has its hands directly on the banking system and thus our pocketbooks. What next?

I for one will never again vote for the Dems until this leg of their platform is amputated. While I hardly believe the Repubs are pure, they concern me less than the Obamabots, Soros, Move-on, Ayers types who back the Dems. The entitlement philosophy of the Dems and todays “liberal progressives” lends itself more easily to marxist manipulation than the self-reliance philosophy of most Repubs and conservatives.

My feeble stand is probably not enough to stop what is coming. Too many people do not pay attention to what the career criminals in both parties are doing to our wealth & freedom in this country. And they are played by the puppet masters who like to highlight our differences, and build up resentments among different groups. If we as Americans are unified against them, they lose their power over us. Divided and fighting amongst ourselves we are weakened, and in the commotion those who can be convinced that they are the most downtrodden and weakest, will turn to their great leaders to save them. And lose their autonomy in the process.

Very provocative topic you raised. Thanks for the forum to vent.

Oct 16, 2008 - 8:24 am 20. Kenneth:

American Muslim,

You suggest Sharia is the solution to inherently unjust and corrupt man-made governmental, legal, and financial systems.

Are you referring to the examples of Islamic states now following Sharia, such as Saudi Arabia, Sudan, Iran or the former Taliban regime of Afghanistan? None of those examples seem just or free of corruption.

Oct 16, 2008 - 8:36 am 21. Eggplant:

I find it interesting how almost everything is dropping in price:

Dow 8,278.04 -299.87
Nasdaq 1,587.73 -40.60
S&P 500876.60 -31.24
10-year 3.93% -0.08
Oil $72.28 -$2.26
Gold $802.80 -$36.20

The noteworthy exception is the US dollar:

1 USD = 0.746 EUR +0.0011 (0.149%)

My impression is that almost everyone is pulling their money out of stocks, bonds, most foreign currency and gold. I presume they’re stuffing all of their money under the mattress (no point in trusting the banks). Why are people trusting the US Greenback more than gold or the Euro?

The Swiss franc is going up slightly:

1 CHF = 0.884 USD +0.0006 (0.071%)

It looks like people want to keep their money liquid. I guess everyone is waiting for the market to hit bottom and then dive back in (that’s what I’m doing).

When will we hit bottom?

At one time, Cramer was saying that Dow Ind 8400 was the bottom but I’m sure he was guessing (the market experts are just as clueless as the rest of us). Looking at charts and assuming a linear extrapolation for the Dow Ind from 1995, I would estimate a market bottom of about 7000 (I’m even more clueless than the experts).

I won’t go back in until after the US election is over. I’m assuming the market will free-fall after the Messiah gets elected (groan!). However if the Messiah gets elected, could the market free-fall to zero? Is that even possible?

Oct 16, 2008 - 8:56 am 22. Peter Boston:

I don’t know how low the Dow will go but there is a strong negative correlation between the perception that Obama will win the election and the dramatic drop in the Dow. The graph is more than two years of data so look only at Obama’s fast run up on the right side of the chart. Here’s the link. Election Markets

A Dow chart for the same period runs straight down.

People are not dumb and they will not put their capital at risk of government confiscation through taxes or otherwise. Money will flee the US capital markets on November 5 although it’s not clear at this time where it will go.

Oct 16, 2008 - 9:24 am 23. slade:

The Precautionary Principle and Compelling State Interest seem connected. – Pascal

I don’t fly quite at that altitude, Pascal but just off the cuff, looks to me like CSI is the fluttering constitutional “butterfly wing” linked to causation behind tsuanmis in all ports.

Great. Something else to worry about.

If the game is who has the best meta-theory of “life and such”, then my contribution would be that there are two kinds of people in the (modern) world – those who see apocalypse around every corner and those who recognize that life obtains from that. Whichever door you pick, the illusion of security is gone, baby, gone.

Oct 16, 2008 - 9:26 am 24. whiskey:

The question is WHY do the obvious corrupt and evil people succeed?

People such as Obama, or Mussolini, or Stalin make very little attempt to hide their true nature. Even the biggest con man is always fairly obvious, since no one can give a 24/7 performance, and everyone always reveals who they are to even the most casual observer.

The reason, as always, is who finds advantage in throwing in with the plans of evil and corrupt people. Those who look for shortcuts, particularly when society comes down to a winner-take-all, losers get nothing environment.

Look at the reaction to Sarah Palin. One of the most telling arguments against her was that unlike Obama, who is out of Harvard Law and Columbia, she went to various Junior Colleges and University of Idaho, working her way through school. This was taken as a mark against her, particularly by women, who largely hate her (exception: older, married women, working/middle class, with kids, who can relate to her struggles). But largely, women hate Palin. Because she lacks power/status/prestige as defined by the winner take-all rules.

Winner: Harvard, Columbia. Loser: University of Idaho.

IF it’s a question of either being a “Master of the Universe” Wall Street unscrupulous trader or lawyer, in cahoots with a crooked scheme, and having some sort of relationship, or being an extra in “Office Space” next to “Milton Waddams” then yes, of course any man who wants a relationship will always throw in with evil and crooked men. Since that is the price for happiness.

On the other hand, consider a man who is already married, is middle class, has his own personal happiness, and can leave a job that is middle class for another one. Evil and unscrupulous men have little hold on him. He stands more to lose, by throwing in with them, than gain. He could lose his middle class respectability and prestige, the love and respect of his wife and children, by throwing in with crooked schemes. He can always find another job, not so another family.

Evil just doesn’t triumph “because” and is not defeated by a few heroic “responders” (Cedarford did get that one right). It is kept in check by middle class men and women who will not tolerate it for their own self-interests. By contrast when the choice is between low-status urban loneliness, particularly for men, or high-status and instant girlfriend, you’ll see all sorts of young men, particularly traders, get involved in all sorts of crooked schemes. Older men sign on to this too, to extend their run of power, or expand their own personal empire. Dodd, Frank, and Obama come to mind.

Oct 16, 2008 - 9:33 am 25. El Baboso:

Wretchard,

There was one very big banking de-regulation in the 1990’s that you and both articles you cite seem to have missed: The Glass Steagall Act. It was enacted in 1933 to, well, keep pretty much this type of thing from happening again.

http://en.wikipedia.org/wiki/Glass-Steagall_Act

The wikipedia article is very informative.

Oct 16, 2008 - 9:34 am 26. Eggplant:

Peter Boston said:

“People are not dumb and they will not put their capital at risk of government confiscation through taxes or otherwise. Money will flee the US capital markets on November 5 although it’s not clear at this time where it will go.”

People are sheep otherwise the MSM would not be leading them to slaughter. However people try not to be stupid with their money. I think it’s a given that there will be capital flight after the Messiah gets annointed on 5 November. Where will it go? Some gueses:

1) Gold
2) Swiss Francs
3) ???

This tells me to sell gold shortly after the Messiah is annointed and the gold market peaks. If I thought the market could survive the Messiah then the best time to get back into stocks is shortly after the post-annointment crash.

Can the market survive the Messiah? hmm…..

Oct 16, 2008 - 9:48 am 27. Iconoclast:

Those interested in the most fundamental tear in the Constitution, through which the evil minority has ever after prospered, may wish to read Harvard Professor George Bancroft’s 1884 essay, “Wounded in the House of Its Guardians”, published here:

http://www.constitution.org/gb/gb-plea.htm

Oct 16, 2008 - 9:51 am 28. RWE:

Would anyone be the least bit surprised that the Cintons were unconcerned about playing fast and loose with real estate sales? Anyone recall a thing called Whitewater and what that was about? Anyone? Bueler?

Interesting article in the Wall Street Journal about former congressman Richard Baker, who introduced 8 bills and held 40 hearings going back to the mid-90’s over concerns with Fannie May and Freddie Mac. He points out that it wasn’t the unregulated part of the financial markets that produced the crash, but was in fact the regulated portion that was responsible.

Oct 16, 2008 - 9:53 am 29. Pascal:

I would suggest to the rest of you appreciate the kernel (sic) slade channels in 23.

I fear I am quite slow slade. I don’t think I’ve noticed your style before. I bet you could write a SOAW prequel.

As far as the substance of 23: It is possible you didn’t say anything with which I disagree. Let’s check.

Did you say? it’s too hard to bomb the target when remote; that CSI is a flashy and yet clearly flimsy excuse that succeeded in overwhelming our senses so as to screw us at every opening; those who like modernity must defeat their opponent; we’re quite late coming to see how much we have taken for granted.

If so, I really like the way you said it even if nobody else has a ring to play Sky King.

Oct 16, 2008 - 10:21 am 30. Roderick Reilly:

I concur with Night Owl in that non-Constitutional forces like judges imposing decrees, and runaway DAs and activists manipulating the justice system are end-arounds on our system of checks & balances. The House in particular has long since abdicated its responsibilities and handed them over to federal judges and the Executive branch.

Oct 16, 2008 - 10:28 am 31. Roderick Reilly:

RWE has a point. After all, if — as part of your “regulations — you have clauses in your “regulations” mandating and demanding that you must give very easy credit terms to certain classes of people despite the grave financial risks, then it means that the problem is indeed the regulated portion that is the problem.

Oct 16, 2008 - 10:31 am 32. mika2k1:

Binary choice is no choice at all. The American game has been gamed almost from the beginning. There are no checks and balances to the oligarchy, and really there never were. Oligarchy in is in the blueprint and lifeblood of America, America having been modeled after Rome. The only thing that has changed is the INTERNET and the analytical ability perceive past the propaganda.

Oct 16, 2008 - 10:42 am 33. Pascal:

RWE 27 and Reilly 30.

Would that this key cause and effect be converted into a devastating soundbite. Anyone? Wretchard?

Oct 16, 2008 - 10:43 am 34. S:

FNM and FRE are a large part of the problem. but Investment banks in general are sycophantic instutions that feed off the lving and breathing real econopmy. Sadly, they have hollowed out the carcus and hence we are left to watch it burn. It is worth reading Gklobal Guerrilas today for John Robb has it about right.

Much of this problem rests sqaurely at the doorstep of US trade policy. The Us made the decision to go all in the FIRE sector and that has ,misfired badly. indeed it has crashed the system> Rebooting will take time and in the process the US will have squandered its funding advantage. Instead of investing in productive growth the banks lefd along by the Fed encourage d the explosion of financial “innovation.” The entire US economy needs to be resturctured and casualities will include incumbant foreign and trade policy. Anyone thinking this storm too shall pass is deluding themselves. the world is in the process of a serious reboot and the US is not going to be one of the winners.

Oct 16, 2008 - 10:44 am 35. Pascal:

You can be extremely exasperating mika. Much that you say is as I see them, yet yours always tilts either green, red or both. Not unlike C4 whose tilt is what it is.

Oct 16, 2008 - 10:46 am 36. Eggplant:

Mel Williams said:

“The old baseball analogy is apt: “Some people are born on third base and go through life thinking they hit a triple”.”

I never heard that one before. I like it!

Unfortunately it describes my life all too well. It was my incredible good fortune to be born in the world’s most prosperous nation as it was approaching its social and economic peak. My good luck was compounded when the United States reached its peak just as I came of age. Now comes the nasty part where I grow old and get to watch everything around me turn into manure. Ah well, my cup is half full…

Oct 16, 2008 - 10:50 am 37. RWE:

I would like to know what he meant by the unregulated portion not causing the problem. I would guess that given his long term concern over Fannie and Freddie he means that they spurred both teh regulated and unregulated (e.g., derivatives?) portions of the industry into doing things that were disasterous.

Also, the main point of the 2004 hearings that Wretchard covered in an earlier post was that Fannie and Freddie DID NOT HAVE TO MEET the same regulations that the rest of the loan industry was required to. And the idea that they should have to be regulated like everyone else – advanced by the Republicans – was roundly crticized by the Barney Franks and Maxine Waters.

Also, speaking of “forgetting” – doesn’t anyone recall that when Rep Sen Jim Jeffords decided to switch to voting with the Dems that gave them the control of the Senate? That was a key feature of stopping drilling in ANWAR. This business of there being a Republican Pres and a Republican Congress for 6 of the years of the Bush Admin is absurd.

Oct 16, 2008 - 11:07 am 38. mika2k1:

You can be extremely exasperating mika. Much that you say is as I see them, yet yours always tilts either green, red or both.
==

85% of tax revenue goes towards military welfare. $1.4 trillion a year. For what? Over 1000 military bases abroad, what for? A debilitating deliberately disproportioned alienating segregative urban architecture and planning predicated on jihadi oil. Why?

Oct 16, 2008 - 11:24 am 39. Jeff:

Eggplant,

Are you sure that your half-filled cup isn’t half-empty? That’s what Obama would want you to believe. Just join all the rest of those who were born on third base, think that they indeed hit a triple, and now feel like America owes them a home run. Obama’s leftist illuminati beliefs will come back to haunt us if he is elected.

Oct 16, 2008 - 11:51 am 40. Alexis:

mika:

…and Rome was modeled on Carthage with its Synhedrion and Carthage was modeled on Tyre with its oligarchy. And that brings us back to the days of King Hiram and the Jewish monarchy and before that, to the Jewish confederation of twelve tribes. If a Senate or a Synhedrion is such an evil institution, what makes the Sanhedrin any better?

America’s ideals are NOT based upon Rome, but rather upon the ideals of the Enlightenment. One of the earliest Enlightenment philosophers, Benedict Spinoza, regarded the ancient Hebrew confederacy as the best basis for government, not monarchy, and not the Roman Republic. And indeed, there is a certain similarity between the federalism of the seventeenth century United Provinces (Netherlands) the later federalism of the United States of America.

Oct 16, 2008 - 11:52 am 41. Eggplant:

mika2k1 said:

“Oligarchy in is in the blueprint and lifeblood of America, America having been modeled after Rome.”

The American political system was based upon the very flattering and largely incorrect description of the Roman Republic based upon the writings of the Greek historian Polybius. Polybius as a foreign hostage living in Rome described an idealized model of the Roman Republic that the Romans themselves liked to have perceived. In reality, the Roman Republic was an oligarchy and carried within it the seeds of its eventual collapse. No doubt, we also carry the seeds of our own collapse but we did actually achieve the idealized political system that Polybius described.

Oct 16, 2008 - 11:56 am 42. Eggplant:

Jeff said:

“Just join all the rest of those who were born on third base, think that they indeed hit a triple, and now feel like America owes them a home run. Obama’s leftist illuminati beliefs will come back to haunt us if he is elected.”

True and perceptive… unfortunately…

Oct 16, 2008 - 12:00 pm 43. Pascal:

A debilitating deliberately disproportioned alienating segregative urban architecture and planning predicated on jihadi oil. Why?
========

Herded into tightly dependent corrals. Ok, why mika?

Oct 16, 2008 - 12:07 pm 44. El Baboso:

Of course repealing the Bank Holding Company Act of 1956 in 1994 didn’t help either.

http://en.wikipedia.org/wiki/Bank_Holding_Company_Act_of_1956

Oct 16, 2008 - 12:14 pm 45. mika2k1:

If a Senate or a Synhedrion is such an evil institution, what makes the Sanhedrin any better?
==

Nothing.

Oct 16, 2008 - 12:16 pm 46. mika2k1:

Ok, why mika?
==

Huh?

Oct 16, 2008 - 12:18 pm 47. mika2k1:

Benedict Spinoza, regarded the ancient Hebrew confederacy as the best basis for government,
==

I’m not interested in venerating personalities. As to the ancient Hebrew confederacy, it failed almost from day one, despite having in common ethnic and religious ties.

Oct 16, 2008 - 12:31 pm 48. Pascal:

Mika: “Huh?”

============

—>]mika2k1 [||||.
------>]mika2[||||.

capitulation?

Oct 16, 2008 - 12:35 pm 49. mika2k1:

capitulation?
==

No.

Oct 16, 2008 - 12:55 pm 50. Pascal:

Answering ones own question can be tacky mika. Especially where one wished for ones question to be rhetorical and then one was stung with an answer easily inferred but difficult to defend.

So I believe you mika. You haven’t capitulated to pressure to explain yourself. Wonderful.

Oct 16, 2008 - 1:03 pm 51. mika2k1:

You haven’t capitulated to pressure to explain yourself.
==

There’s nothing to explain. You either get it, or you don’t.

Oct 16, 2008 - 1:16 pm 52. Alexis:

Pascal:

One of the reasons why our federal government exists in the first place is because of our need for common defense. And if our problems in North America weren’t bad enough, several Muslim states declared war on the USA in the 1780’s, demanding higher and higher tribute. I sometimes wonder if the Whiskey Rebellion was partly a protest against not only exorbitant taxation, but also the fact that much of the money was sent to line the pockets of the despots of Barbary States.

We live in a world where the Barbary States and their ilk exist. Thus, we need some means to keep these raiders from carrying off American children to turn them into janissaries and harem girls. The federal government and its constellation of military bases may not be perfect, but a strong military is a vast improvement over getting oppressed by Islamist gangsters.

If the United States never had any imperialistic tendencies, the USA’s western border would be on the eastern edge of the Mississippi. If that. I suppose that certain hyper-libertarian ideologues would insist that the United States should never have expanded into the Louisiana Purchase. I oppose those who would seek to break up the United States of America.

Oct 16, 2008 - 1:31 pm 53. Cannoneer No. 4:

All Your Base Are Belong To Us

The military protested that they could not provide perfect security at their bases. But this wasn’t a case of perfect security being absent. There wasn’t much security at all. Now that the security story has been broadcast, the Dutch military will have to do something. That’s because their most powerful security asset, the public perception that their bases were well guarded, is gone. Now all the petty criminals and low level terrorists will be seeking new opportunities on military bases. Lots of neat stuff there to steal or destroy. These perceptions are powerful things, and you don’t realize how powerful until they are gone.

The perception that our national political and economic leadership was basically competent and worthy of followership, which is the basis of the social contract in which the governed consent to be governed, has apparently been managed to the detriment of our civic religion.

Seems like somebody has a plan to bring about chaos, anarchy, fear, uncertainty and doubt. They also have a plan to ride in on their white horse and rescue us, if only we will shed our cynicism, put down our divisions, move out of our comfort zones.

Oct 16, 2008 - 1:51 pm 54. outa my league:

I think Godel was about to say, “Charter some sort of Public Broadcasting System.”

Oct 16, 2008 - 1:52 pm 55. outa my league:

Mel 18,

“Prosperity breeds hubris.”

Equally in all time frames.

Obama is tanking, via Acorn & Joe the Plumber, and miscellaneous worms escaping the can.

Oct 16, 2008 - 2:06 pm 56. Cyber Johnnie:

38. mika2k1: “85% of tax revenue goes towards military welfare. $1.4 trillion a year. For what? Over 1000 military bases abroad, what for?”

Umm, nice table-pounding talking points for the student union I suppose, but not even close to reality.

The 2008 defense budget, including specific War on Terror funding is $627B which amounts to 21% of the budget – who knows where the “tax revenue” goes. I’m guessing there may be as many as 100 military installations abroad if you count every little detachment out there. If you want to count our Embassies with their marines then maybe I’ll concede 240. 1000? No where near this – even during the Cold War hey-days of General Lemay.

Oct 16, 2008 - 2:08 pm 57. manny:

As much as I hold the governing class in contempt, I find it necessary to defend them against one point you make. Politicians cannot BY DEFINITION devise regulation or strategy that will protect Joe Citizen because it is not predictable.

Interestingly Taleb doesn’t count the financial implosion as a Black Swan because he has been warning about it for some time. A hedge fund run by Talebs old business partner has made a killing.

Oct 16, 2008 - 2:09 pm 58. Charles:

TBoone Pickens has been talking about the US exporting +-780 billion overseas annully to pay for oil. Maybe that was when oil was at +-140@barrel.

Oil just went under $70@barrel and is still falling fast.

Something to consider.

Oct 16, 2008 - 2:16 pm 59. Konyok:

Charles,

Interestingly, the ONLY public figure (media and politics) that I’ve heard take the dynamic price of crude into consideration when making statements about the aggregate cost of oil imports is …

… the *unsophisticated* Sarah Palin.

Oct 16, 2008 - 2:21 pm 60. mika2k1:

The 2008 defense budget, including specific War on Terror funding is $627B which amounts to 21% of the budget
==

Nonsense. Lies. Balderdash.

In fact that $1.4 trillion is a probably a gross underestimation, as it only includes official accounting.

Oct 16, 2008 - 2:21 pm 61. slade:

Politicians cannot BY DEFINITION devise regulation or strategy that will protect Joe Citizen because it is not predictable. – manny

Which is why I reserve my scorn for the failures of aggressive compliance and enforcement during the 2004-2008 time frame rather than tracking all the way back to CRA in 1977. Unloading the derivatives gravy train during a multi-year time-frame – the same time frame when multiple analysts were predicting asset bubbles and slowing growth – the devastation to retirement portfolios would have been confined to a 15% to 20% market correction. The effects of carrying 30:1 leveraged securities at the end of an asset bubble was completely predictable. Everybody knew. Except the ones who are now paying for it.

Oct 16, 2008 - 2:32 pm 62. Cyber Johnnie:

60. mika2k1: “In fact that $1.4 trillion is a probably a gross underestimation, as it only includes official accounting.”

Source/Citation please…

Oct 16, 2008 - 2:34 pm 63. Peter Boston:

At $70 a barrel the Russian infrastructure starts to become unsupportable. The sharp side of the sword suggests that Putin and his ME allies will cook up something to create a supply crisis.

Hope it happens (if it’s going to at all) before November 4 because Obama will almost certainly say something stupid and conciliatory.

Oct 16, 2008 - 2:40 pm 64. Bob Murphy:

“There’s a sucker born every minute, and they are easily herded. How are you going to regulate that?”

By proper education of the young to prepare them for the real world and that is no longer happening.

Oct 16, 2008 - 2:53 pm 65. Iconoclast:

I still think the root of the problem was the abandonment of the Constitutional command of limited and enumerated powers for the Federal government. Once powers became unbounded, and fueled by the power to command that Federal paper be taken as legal tender, the rot set in. The roots of our current economic circumstances go far deeper than is commonly understood. There was a good reason that Thomas Paine declared that any politican even proposing legal tender laws should be put to death.

Oct 16, 2008 - 2:53 pm 66. Bob Murphy:

@Kenneth:
“American Muslim,
You suggest Sharia is the solution to inherently unjust and corrupt man-made governmental, legal, and financial systems.
Are you referring to the examples of Islamic states now following Sharia, such as Saudi Arabia, Sudan, Iran or the former Taliban regime of Afghanistan? None of those examples seem just or free of corruption.”

But Sharia law societies are so incredibly dysfunctional that they can’t even manage to produce a bubble in the first place.

End of one problem, beginning of another.

The difference between our god and American Muslim’s god is that our has a sense of humor.

Oct 16, 2008 - 2:58 pm 67. mika2k1:

Source/Citation please…
==

Too lazy to google?

Here you go:
http://voices.kansascity.com/node/1728
http://www.warresisters.org/pages/piechart.htm

Oct 16, 2008 - 2:59 pm 68. Panday:

Wretchard,

Interesting theory. But have you heard of Hanlon’s Razor?

http://en.wikipedia.org/wiki/Hanlon%27s_razor

Oct 16, 2008 - 3:03 pm 69. Konyok:

Sol Stern is still on the job:

http://online.wsj.com/article/SB122411943821339043.html?mod=djemEditorialPage

Regardless of the election results, Ayers must be confronted and disgraced.

Oct 16, 2008 - 3:15 pm 70. Konyok:

Thank you, Panday.
When you can name a thing, understanding is closer.

Oct 16, 2008 - 3:17 pm 71. Leo Linbeck III:

I find the “psychopath” explanation for failure as unconvincing as the “great man” explanation for success.

Fact is that our world is extraordinarily complex, and serendipity (Providence to the believer) plays a large and perhaps dominant role in determining winners and losers. The big problem is not that our system disproportionately selects psychopaths as its leaders. The big problem is that leaders, after having been extraordinarily lucky to be selected to lead, begin to believe that luck had nothing to do with it. Rather, they believe it was something they did, some special gift they possess, some amazing action they took, that put them at the top of the pyramid.

In other words, psychopaths don’t become leaders so much as leaders become psychopaths.

This is another way of saying power tends to corrupt. If I am solely responsible for my success, then it is only a short step to believe that my actions are, ispo facto, successful. I feel free to do what ever I want, confident in the notion that it will be right. C’etat, c’est moi!

No regulation in the world can stop this from happening. It is a consequence of our flawed human nature. In fact, regulation makes things substantially worse. Regulators will always end up doing two things:

1. Increase risk-aversion. They’re there, after all, to keep failures from happening, or, if failure is unavoidable, they disguise it. If a company on their watch fails, they’ve failed in their mission. So the important information derived from failure is never learned or shared.

2. Increase concentration. Regulation is hard work. It is very difficult to regulate an industry composed of 100,000 firms. It’s much easier if there are only 10, and easiest if there’s only 1. That is why large firms love to be regulated; it increases the unit cost of smaller competitors much more than the large firm.

So, when failure eventually occurs, it is industry-wide. Like a driver who starts skidding and instinctively turns the wheel against the skid, the public reacts to the regulatory failure by calling for more regulation, thereby increasing the need for regulators. Nice gig.

The other problem with regulation is, intriguingly, related to Gödel’s Theorem. Gödel proved that a formal system cannot be consistent, axiomatic, and complete. The regulatory analogue to this theorem is the assertion that no regulatory system can be consistent, rule-based, and comprehensive.

- If the rules are applied consistently, there will be actions that can be legal but not intended by the regulations. This makes the regulations unsuccessful.

- If the regulatory regime is consistent and comprehensive, it cannot be rule based but must rely on the discretion of the regulator. This makes the regulators vulnerable to corruption.

- If a rule-based system catches all transgressions, it is only because the rules were applied inconsistently. This makes the regulatory regime appear unjust.

My sense is that we need to stop looking for the magic bullet of a closed-form solution to the nonlinearity of our world, and satisfy ourselves with the trial-and-error of Newton’s Method. After all, it’s not like cedarford’s steamboat operators made a profit when their ships exploded. Any operator with a survival instinct would realize more design margin was needed, and adjust accordingly, ASME or no ASME. Regulation didn’t make steamboats safer; self-interest did.

Maybe this is what Gödel realized before his day in court. If so, it was probably just as well he didn’t tell the judge.

Oct 16, 2008 - 3:21 pm 72. Alexis:

I don’t think it was wise for Ambassador Bremer to disband the Iraqi military. Now, it appears that certain people desire to repeat Ambassador Bremer’s mistake, this time with the avowed intent to dismantle the United States Armed Forces.

Oct 16, 2008 - 3:25 pm 73. Ben Franklin:

I think for once Richard, who is clearly a genius, has missed the point. The MBS’s weren’t even remotely part of the problem. They were just mechanisms to trade income producing assets just like any other mechanism such as bond funds etc… Nor was regulation at the root.

The problem was that these mortgages were essentially guaranteed by the US Government through Fannie and Freddie. This made them trade at levels much higher than they were actually worth. It also inflated the worth of the assets on which they were based.

It’s true that lawyers such as Obama were busy intimidating and regulating banks into making bad loans, but regulation only played a small part… it was the incentive caused by the guarantee that made things go astray. Imagine if I indemnified you against any losses you were to make in Las Vegas while letting you keep the gains. What would you do? You would be foolish not to bet the farm. If you lost you could always borrow more. Indeed your losses actually became an asset that you could sell based on the promise that I (Uncle Sugar)would eventually make them whole.

That was essentially the problem. The redlining litigation and community development regs only hastened the process by getting people to make riskier bets while the MBS’s slowed it by allowing losers to exchange their vouchers for cash. Sure, the whole thing could have been prevented had the government also insisted on certain standards for loans receiving the guarantee… BUT THAT WOULD HAVE DEFEATED THE WHOLE PURPOSE of providing houses to those who could not afford them. The market would have done as much by itself as it had always done.

The massive government interference in the market was an incentive that destroyed the entire rational basis on which the mortgage industry had been based.

The only other thing I would add is that I am in the advertising industry and most of the ads for sub-prime loans had dried up before the recent bail-out bill. As soon as that went through the volume for these ads went up 10 times. Whatever the government did to “fix” the problem ain’t working because all they did was just give everyone who didn’t make money the first time around another shot at the craps table.

The small business community that I am a denizen of is absolutely livid at the bailout because they see very clearly what has happened. They have good noses for how to make money and can see how the government system could be exploited by people less wise or scrupulous than they are. It seems funny this should be the case when all of the Harvard MBA’s in Washington and on Wall Street drove right into it.

That is why Joe Plumber is resonating so much. Common sense seems to be in short supply amongst this country’s intellectual elite so it is refreshing when one actually hears someone allowed to voice what everyone else in the business community already knows. Obama wants to do for Healthcare what was done for housing… guarantee your right to have it. That is the most dangerous thing the government can do to any industry. The fact that no one on the right in Washngton or the media can seem to make these points (or even understand them) shows just how divorced from reality our opinion leaders have become. And just how useless…

Oct 16, 2008 - 3:31 pm 74. slade:

I don’t do too many “amen” posts but that parallels my thinking exactly – the military is the next domino to fall – after the culture, the economy, and government.

Oct 16, 2008 - 3:40 pm 75. wretchard:

This is true in when the system is fundamentally benign. People rise to the top, as you say, and then forget that it is due to luck or the system itself and begin to imagine themselves as annointed. But in some case I think there is truly a process of the selection of the most morally worst. People who join Communist or revolutionary parties tend to consist of the idealists and the schemers. What seems indisputable is that the idealists are all killed off and used as martyrs for propaganda while the moral monsters rise to the very top.

Some posts ago I noted that when Barack Obama was a young man, he rejected community organizing as a career for losers. Using Martin Luther King as an example, he made the argument that politics needed the Great Man to bring about change. In his own way, Obama was taking the Stalin path while leaving the chumps to earn the moral points he would later attribute to himself. Look at who “leads” their movement: the Wrights, Farrakhans, Ayers and Obamas. I am sure there must be much better people in Chicago then that crew. How do they wind up on top? Intellect is only part of the reason. The other is ruthlessness.

A friend asked me on the phone why Obama is so far ahead among many American voters. I answered that it was because many voters were simply too decent to believe they could be lied to on such a scale. If you can pass for a gentleman among gentlemen you would be amazed at the amount of money you could scam from them because they could not believe you would stoop so low. As Saul Alinksy said, ‘go outside the opposition’s experience and they won’t know how to react to you’. Step outside the spectrum and you’re invisible.

So in in general, the psychopath theory of history may not hold. But it may have an applicability in some cases.

Oct 16, 2008 - 4:04 pm 76. Bob Murphy:

72. Alexis:
“I don’t think it was wise for Ambassador Bremer to disband the Iraqi military. Now, it appears that certain people desire to repeat Ambassador Bremer’s mistake, this time with the avowed intent to dismantle the United States Armed Forces.”
The unalterable fact, Alexis, is that Iraqi soldiers had already shed their uniforms and gone home.
There was no Iraqi Army left to disband. They had flown the coop.

Oct 16, 2008 - 4:13 pm 77. Bob Murphy:

And that’s the biggest difference between the Iraqi Army and ours.
Ours is the best kick ass army (and Marines) in the world.
It would be utterly mad to disband the best of its kind in the world.
It would throw away all the accumulated expertise and technology from the last ten years that has made it the best.

Oct 16, 2008 - 4:16 pm 78. Bob Murphy:

And it could only be reassembled the hard way, if there was a functioning economy left to fund it.

Oct 16, 2008 - 4:17 pm 79. NahnCee:

It may come down to what do we want to pay for: the world’s best army or the world’s best internal economy.

Oct 16, 2008 - 4:22 pm 80. cedarford:

“It’s amusing until one realizes how often we discover, at intervals of 50 or so years, how a cohort of people more or less simultaneously learn to game a system until it crashes.”

That is because too many people think they are safe being gameplayers and rigging the system. No accountability. It would be different now – if we had earlier lined up Ivan Boesky, Michael Millikin, Dennis Levine, Andy Fastow, Jeff Skilling, Jack Abramoff, Dick Grubman, Charles Keating, Sen. Alan Cranston against a wall and shot them.
Told Israel to cough up “Crazy Eddie Antar” and other conmen like Marc Rich or we’d give the Pals a Pershing missile for every month they delayed…

Rigging an Internet game is easy, simply because – who gives a shit about consequences? Rigging a poker game played for money is easy too, but no one, or at least an infintesimal minority tries gaming the system because the “regulatory and oversight” structure was not and still is not in the “lawyer’s game-playing arena”. But regulation and keen oversight are pervasive.. Half our history, cheaters were killed on the spot. Then the Mafia broke their fingers when shooting at the card table became declasse`. Now they are systematically ostracized.

The notion that the slick will always prey on the honest and be one step ahead is not true if we were somehow able to return to swift and sure justice to effectively intimidate the con artists and unethical rip-off specialists.

I see the incident where someone walked up to Dick Fuld of Lehman Brothers and decked him as welcome vigilantism. Let other such lessons and long stretches in non-cushy Fed prison ratholes await others that partially wrecked America.

It took Revolutionary China just two years to wipe out the opium trade and all the slick, slick merchants, shippers, den owners, and dealers that thrived since the 19th Century, unstoppable, adept at creating and using legal loopholes.
They shot them.
Then they went to the addicts, and if the addict – being sent off to prison to dry out or die trying didn’t name dealers, they shot the addicts.
Then they shot the surviving dealers.

By 1951, the opium problem was under control and never a big problem again. All the “clever” people knew it was there asses to try and “game the system” again.

Think about how nice and saluatory it would be to have Phil Gramm, Alan Greenspan, Barney Frank, Chris Dodd, and Dick Fuld swinging from lamposts. Plus a random dozen Congress critters and lobbyists swinging alongside them for being part of the corrupt “pay to play” system the Ruling Elites have perverted American democracy into.
And George W. Bush headed for a token prison stretch for becoming so obsessed with “Islamofascists and Noble Iraqi freedom-lovers” that he screwed the American public by negligence and being a lapdog to wealthy Corporatists.

Politicians cannot BY DEFINITION devise regulation or strategy that will protect Joe Citizen because it is not predictable. – manny

Uncorrupted politicians can. Those not bought and sold like meat, as opposed to those who have special interest lawyers come in and rewrite bank, immigration, tax law and insert all the dodges and loopholes.

It also requires massive flaws in the US Constitution be fixed. (Preferably, IMO, by a new Revolution. We have had one two major Revolutions since getting Independence. The 1st to fix the 1st failed effort of the all-wise Founders – the Articles of Cofederation. Then the Civil War. then we had the minor Revolutions:
1. Jacksonian Democracy rising, tossing lawyers out, and prevailing against the Banking Establishment.
2. Counter-Reconstruction.
3. The Grange Revolt against Railroads and the Banking interests.
4. The trust-busting, anti-monopoly era.
5. The Wilsonian Revolution against communists and anarchists that discarded that era’s “terrorist rights” and any lawyers in the way.
6. FDR’s “New Deal” for the People and against the Corporatists and Banking interests.
7. The Civil Rights revolution.
8. The Reagan Revolution that helped swing the pendulum back from too much democrat government control and regulation of the Owner Class and the jobs and culture of the middle class.

Time for a new one. Hopefully a little violent. Bloodshed keeps the evil ones – the ones Richard Fernandez alerts us are now studies – a little more cowed and honest. More deckings of the Dick Fulds and firings of complicit establishment assholes like Christopher Cox, please. And let’s hope that taxpayer money does not go to make many greedy speculators “whole again” while the little people stay screwed..

Oct 16, 2008 - 4:31 pm 81. RWE:

Wretchard: Something I have observed is that All Great Minds Think Alike. Or rather, at the rarefied atmospheric levels of the top élites in both industry and government, people tend to think like the other elites, rather than like their own people.

Thus, a politician’s idea that is regarded as horrible by the rank and file of an industry will be embraced by most captains of industry as a simply great idea. Similarly, a CEO’s idea of a way to gain some margin on his competition, but presented in altruistic terms will be seized by politicians as the best industrial idea since mass production.

Whether this is because to do otherwise would exclude you from The Club At The Top, or because it is seized upon by the unscrupulous on the basis “We do that and I’ll be able to outthink the dummies who thought this up.” Or because they are out of touch. Or because there really are a very few Big Ideas at the top and, given this paucity, they cannot be wasted. In any case the net effect is the same, and may come to have the same impact as the machinations of a psychopath, especially when things start coming unzipped and desperate attempts are made to fix blame and make repairs without ever admitting anything was wrong in the first place.

Also, Washington DC, collectively, does not believe in management. There are far too many other things that are of great importance to the class there, and the net effect is to rule out this provincial and quaint little emphasis on cost, schedule, and performance.

Oct 16, 2008 - 4:43 pm 82. whiskey:

That is a good point Wretchard, but Obama may have blown it.

His goons have put Joe the Plumber out of business — for asking a question.

Now the Press, and Obama’s “Truth Squad” have: posted Joe’s address, phone number, tax records, and parking tickets on the Web. The city of Toledo, run by Obama’s allies, have said they will not allow Joe to work, because they can’t “find” his apprentice paperwork.

People don’t like sneering elites picking on a working man. Obama just lost every White working man’s vote in OH. He’ll probably LOSE working White married women too — only among young women will he do well with this episode.

The mask slipped off — and people don’t like it.

Oct 16, 2008 - 5:16 pm 83. elijah:

Joe the plumber?

After some investigation by the Obama campaign, it seems his real name is not even Joe.

It’s John Galt

Oct 16, 2008 - 5:20 pm 84. enscout:

Whiskey:
Proof positive that the Obama hacks hate the middle class.
They hate Sarah & ‘Joe’ and you and me because we don’t parrot the party line.

This from a Bloomberg News HACK!

http://www.bloomberg.com/apps/news?pid=20601087&sid=aC4j3T5.s_eQ&refer=home

Oct 16, 2008 - 5:46 pm 85. Marcus Auerlius:

No regulation can stop an evil person, no regulation is needed for a wise & good man. Regulations are for the good & ignorant. Which is where most of us fall.

However, enough fall into the first category. Add more regulation and things become murkier, does anyone think all required disclosure paperwork makes things more understandable?

The evil person can always find a way to game regulations to their benefit, the rest of will be at worst paralyzed by the regulations at best stymied for a time.

As Wretchard states all choices come with a cost, and so too does regulation. I curse Sarbannes Oxley on a daily basis, a one minute program change, one hour of testing is followed by days of paperwork and review.

Oct 16, 2008 - 6:31 pm 86. buddy larsen:

Sarbannes-Oxley fortunately causes Fannie & Freddie no difficulty at all –they are, by act of congress, exempt.

Oct 16, 2008 - 7:19 pm 87. mika2k1:

And George W. Bush headed for a token prison stretch for becoming so obsessed with “Islamofascists and Noble Iraqi freedom-lovers” that he screwed the American public by negligence and being a lapdog to wealthy Corporatists.
==

So why were you so quiet about it, Cederfard? I could be excused, being an ignorant foreigner, and not being aware of the oil/car/military mafia and their corporate welfare scam, until I understood what a farce of a fake war the US is fighting. But you, you knew, yet you embraced it. So that makes you what exactly? Cedarfard, champion of the “little people”? Yeah, right.

Oct 16, 2008 - 7:27 pm 88. newscaper:

regarding
“I don’t think it was wise for Ambassador Bremer to disband the Iraqi military.”

I still truly think the jury is out on that bit of coventional wisdom.

Things have been tough along the way, but *now* the Iraqis are putting together a military that is of the people, mostly trusted, and not leftover thugs on the payroll.

The burden is on those claiming “mistake” to make the case that their way would have resulted in a better situation with the Iraqi army *now* — something I don’t think they can do.

Oct 16, 2008 - 7:46 pm 89. fred:

whiskey,

I agree with you. If there is enough time left for a miracle, the backlash against the Obamabots, Obama’s campaign, and the elites will be strong. Even I, a white collar worker, identify with people like Joe the Plumber.

Barry’s gonna be a job killer. Now, how are the young dudes and young ladies going to like having an experience like what we had in the Seventies? We took jobs they would never do, which now are done by illegals, because just to have a job was a good thing. Idiots, the lot of ‘em!

Oct 16, 2008 - 8:00 pm 90. Unsk:

Whiskey –

The Toledo fascists going after Joe the Plumber is a potential game changer. Huge and scary.

But will the public hear about it?

Oct 16, 2008 - 8:38 pm 91. Leo Linbeck III:

I agree that some systems are more prone to the rise of the ruthless psychopath than others. I suppose I believe (and admit it may be delusional) that the US system is particularly resistant to this particular form of cancer. Not immune, mind you, but highly resistant.

But we all have two immune systems: innate and adaptive. The adaptive immune system is the one most of us know, the system of B-Cells and T-Cells that hunt down and kill pathogens. This is like our Constitution and common law system. It is targeted and highly effective, but takes days to react to an invading bug, unless we’ve preloaded the system with a vaccine.

The innate immune system, on the other hand, is the front line defense. It is widely distributed, fast-acting, and broad spectrum. It may kill as many as 99% of all pathogens before they trigger the innate immune system. It relies on local proximity, but is short term and has no memory. This is like our culture of manners, norms, and social conventions.

Our system has traditionally had a very robust innate system for dealing with proto-psychopaths (i.e. social pathogens). It relied on the enforcement of norms of decency and decorum, and the use of ostracism and censure as its tools. If that failed, we fell back on the laws for enforcement. Like our immune system, this worked well because few psychopaths could make it past this initial defense, so the adaptive response was not overtaxed.

The Soviet Union, on the other hand, destroyed this culture of local self-reliance. It actually turned that local support against itself, much as an autoimmune disease. The loss of this culture allowed more psychopaths to survive, and then thrive, and then take over, eventually killing the host.

We have certainly weakened our innate defense through cultural solvents like PC, various derangement syndromes, pornography, political corruption, etc. So, yes, it is no coincidence that Barack Obama hails from one of the most corrupt political environments in the US.

But our innate defenses still live on in the likes of Joe the Plumber, and are likely to survive this particular challenge. So there is hope for the future.

Oct 16, 2008 - 8:57 pm 92. Alexis:

Whatever one’s views about Ambassador Bremer’s tenure, I would like to emphasize that it would be folly to disband the United States Armed Forces. (Disbanding the Iraqi military wasn’t just about the active military; Iraqi veterans wound up losing their pensions.)

The reason why I make it abundantly clear that I oppose disbanding the American military is because a certain poster on this blog appears to be campaigning for precisely that result.

Oct 16, 2008 - 8:58 pm 93. buddy larsen:

http://corner.nationalreview.com/post/?q=NDI0ZTZmODRhNGI4MWEzNGQ2NWNmZmI3Nzg3ZGFmZDg=

Joe the Plumber file

Oct 16, 2008 - 9:01 pm 94. Aristide:

Video: Obama mocks Joe the Plumber!

Oct 16, 2008 - 9:21 pm 95. Dave:

Ben Franklin in #73 above puts his finger
on the key terrain. The government guaranteed
that anything Freddie and Fannie resold would be paid by the taxpayer. That is what put the proverbial penny behind the fuse and why the house is now burning.

Without that, any holes in deregulation would have been sealed long before there was a crisis. And the actions of existing regulators would not have been as harmful as they have been.

Nice going Ben. And give my regards to Amos, if you would.

Oct 16, 2008 - 9:30 pm 96. peterike:

There were lives that were as dark as are the fears and intuitions
Of a child who knows himself and is alone with what he knows;
There were pensioners of dreams and there were debtors of illusions,
All to fail before the triumph of a weed that only grows.
There were thirsting heirs of golden sieves that held not wine or water,
And had no names in traffic or more value there than toys:
There were blighted sons of wonder in the Valley of the Shadow,
Where they suffered and still wondered why their wonder made no noise.

— Edwin Arlington Robinson

Oct 16, 2008 - 9:41 pm 97. Dave:

Michael Barone in a recent Townhall.com piece wrote about an “Emerging Thugocracy”.

Der Barack Fuehrer to be the head “moderate” of course. Nothing unusual there. Stalin, Hitler, Mao, Pol Pot ad nauseum all projected images of smiling reassurance to their respective publics. That is how they rounded up the majority of their victims.

Their other trick will be to prolong any and all financial/economic crisis for as long as they can. They will do this instinctively
because that is what will get keep the victims compliant. Their relief checks might not be in the mail if they complained.

Stop and think about it: What Obama is proposing on the economic front replicates the economy of the ante bellum south. 95% of us will not qualify as taxpayers. Only that top 5% who will hold all the revenue will be able to excercise any clout at all.

Only question now is, will the S. O. B. get away with it.

Oct 16, 2008 - 10:17 pm 98. JMH:

serendipity (Providence to the believer) plays a large and perhaps dominant role in determining winners and losers. The big problem is not that our system disproportionately selects psychopaths as its leaders. The big problem is that leaders, after having been extraordinarily lucky to be selected to lead, begin to believe that luck had nothing to do with it..In other words, psychopaths don’t become leaders so much as leaders become psychopaths.

I used to work for a big software company. As big as they come. It was phonominally successful for many years, but lately has been struggling quite badly. Poor leadership is the reason. For years, Micr-, er, my former company, had an ability to hire absolutely outstanding people, and a culture of promoting the best of them into management positions. When the company was small, ~~Bill~~ it’s founder was able to exercise a great deal of control over those promitions, and ~~Bill~~ the founder’s great gift was a sharp nose for baloney. He could smell a phoney and was legendary for tearing apart poortly thought out plans.

Well, eventually the company got too big for him to personally keep tabs on everyone getting promoted. But the concept of promoting only the best persisted. Except everyone was smart and hard-working. If you were an ambitious junior manager in that environment, how do you stand out among your co-workers? You’re smart, but so are they. You work hard, they do too. You can’t outwork or out think them, so what do you do?

You gamble. A small fraction (maybe 5%, at first) began to cut corners on their work, using the time they saved by shirking part of their job to do extra-credit work. Some of them lost that gamble and the corners they cut blew up in their faces, but others got lucky. The things they shirked flew under the radar and the extra credit work they did instead made them look like superstars. They got promoted. Since there were only so many promotions to go around, every gambler who got one aced out someone else who had been more responsible. Quickly, the psychopaths were the bulk of the mid-level managers at Micro, the company. And they repeated their behavior at each level, and at each level some of them lost the gamble and went away, but some won twice or three times in a row. Eventually, almost the entire operational managment of the company was psychopathic in the sense that they didn’t care about doing a good job, just about getting the next good review. The company thought it was selecting the best of the best, but was in reality selected the luckiest of the reckless. But luck is not a skill and eventually every high roller craps out if he keeps playing. That’s how Vist, er, I mean, their latest large project ended up such a fiasco.

Now, eventually they will pay a price as the company contracts and new leadership cleans house, but they were able to propser for quite some time because the previous success of the company had created a revenue stream with great inertia. The money kept rolling in even when bad decisions were being followed by worse decisions. There was a great deal of lag in the financial feedback loop.

Oct 16, 2008 - 11:04 pm 99. JMH:

There was a great deal of lag in the financial feedback loop.

Sorry, meant to try and tie that to W’s question about the vulnerabilities in the US Constitution. I think the feedback lag is the critical problem that allows psychopaths to cluster around the levels of control. With enough lag, they’re able to yank on the lever for a very long time, gathering more of their kind as they do, before the system (in this case, the People) process enough feedback to clear them out and change the levers.

The biggest feedback lag in the US Constituion is, of course, the Supreme Court. Lifetime appointments and limited recourse for the public to correct bad USSC decisions. Another massive lag is with Federal Courts, where judges have nearly as secure a position as those on the USSC. This makes the discovery of judicial activism by the Left one of the most dangerous loophole exploits.

Gerrymandering and Campaign Finance laws serve as feedback dampers, insulating elected officials from all but the strongest feedback. Voter fraud (should we just call it ACORNizing?) and bogus racism charges are white noise generators, attempting to swamp the feedback amid too much background noise.

These are the tactics currently being employed by those who want the levers. The saving grace is, it lets you identify them fairly easily, but as Whiskey said, it’s not that hard to spot them anyway. Whiskey’s right that the middle-class married family are the best defense against them.

Oct 16, 2008 - 11:23 pm 100. slade:

The massive government interference in the market was an incentive that destroyed the entire rational basis on which the mortgage industry had been based. – Ben Franklin

Good point. I think. No doubt about the negative impact of this experiment with F&F coupled with the “road to hell” legislation leading to bad loans.

Nevertheless, the financial services industry takes a hit for imprudent leverage of CDS’s, without “transparency” in accounting. In my view, CDS’s were – and are – accidents waiting to happen, as are the larger class of derivative paper. The high stakes craps game is apt analogy. S&L. LTCM. The bets on market movement aren’t going away – and have little to do with government or GSE’s except as they present opportunities. As long as “normal” market forces produce asset bubbles, derivative-type bets remain problematic. I don’t much like the vehicle because it is a pure crap play – it is not a business move backed by assets or product – so I would not mind seeing this type of vehicles confined in some manner.

My point is that – with or without the government – derivatives remain a very dicey play.

Cramer is now saying that “Buy and Hold Blue Chips” philosophy is no longer valid. I believe that is true at least for the next ten years. I don’t much care what is done with derivatives, but whatever happens, the old conservative Blue Chip portfolio should be isolated from the impact so those of us who opt out of the high stakes game don’t have to be glued to our HDTV sets or hire a full-time adviser.

Sarbanes-Oxley sounds like a loser (the name of some senior citizen cereal) but I don’t have the details. Failure of Congress to implement.

And yes, health care is next. The very first Obama policy position that turned me against his candidacy.

Oct 17, 2008 - 2:17 am 101. Sima Qian:

Godel was referring to Article V, the process of constitutional amendment. Your logical loophole is also an instrument of great power that allows for the regulation of future, heretofore unseen threats to the constitutional order.

Oct 17, 2008 - 2:59 am 102. slade:

Sarbanes-Oxley sounds like a loser (the name of some senior citizen cereal) but I don’t have the details. Failure of Congress to implement.

Actually I do have (some of) the details but the rhetoric of critique remains opaque. Enron failed in part because the accounting firm of Arthur Andersen was complicit. This seems to me like a classic case of failure to self-regulate means somebody else will do it. Seen that happen in industry after industry. CDS’s being the Wild West of financial vehicles. Which is of course the rub.

Enron was different from the current portfolio cruncher because the employees stupidly put all their eggs into the Enron basket. The current meltdown is across the board and structural – market performance severed from predictors and metrics.

If the regulatory blowback is proportional, brace yourselves.

Oct 17, 2008 - 3:25 am 103. DocJim:

I agree with TigerHawk, too. A simple moment soon after I had joined the US Air Force gave me that insight. I was a young doctor, “board eligible” in internal medicine when I arrived at the base hospital. I was assigned as “Chief of Medical Services” and as such, every Thursday afternoon for the next two years was devoted to committee meetings. I think in my “position” I had to sit on them all. One afternoon I was reviewing minutes from some meeting and the First Sergeant of the Hospital, a grey-haired man who had transferred from the US Army Air Corps when the USAF was founded commented to me that the first set of Air Force Regulations was one book. Twenty years later the Regulations comprised many volumes and took up two shelves of a 30″ book case. What happened? People. People found loopholes. Loopholes required more regulations. Until the human heart is changed, there will be a consistent probing of regulations for loopholes to enable that person to get ahead of the pack. It is not a problem of regulations, it is problem of theology or philosophy or simply a problem of imperfect man and original sin.

Oct 17, 2008 - 3:54 am 104. Bob Murphy:

92. Alexis:
“(Disbanding the Iraqi military wasn’t just about the active military; Iraqi veterans wound up losing their pensions.)”
The US, while it was the responsible authority (having rolled the Saddam government) was hardly going to pay former enemy soldiers for doing nothing.
But I think the Iraqi government has moved to cover the pensions of former soldiers.
That is now a matter for them.

Oct 17, 2008 - 4:31 am 105. Bob Murphy:

But, come to think of it, given the fact the Saddamite armed forces were dominated by Sunnis…
Those pensions aren’t going to be lavish.

Oct 17, 2008 - 4:32 am 106. bobal:

#67

Cutting the number of countries we’re occupying should be the first step. If we’re going to decrease terrorism, giving potential terrorists less reasons to hate us would be a good idea.

from the Kansas City Star article

I’m still waiting for that map with the pins on it showing me what countries our ‘empire’ is ‘occupying’. I can think of an argument for two. And I’d disagree with the argument.

The Kansas City Star used to have a good writer named Ernest Hemingway for a few months, back in the day.

Oct 17, 2008 - 4:49 am 107. Wadeusaf:

Acorn gaming banks the way Rev. Jesse J gamed corporations, black mail over mortgage loans aided and abetted by the full faith and fury of the US Government.

Never to be repeated until we forget again.

Oct 17, 2008 - 4:58 am 108. bobal:

The damned fools haven’t the sense to make the most compelling point–Joe the Plumber is a skinhead!

Oct 17, 2008 - 5:01 am 109. Bob Murphy:

79. NahnCee:
“It may come down to what do we want to pay for: the world’s best army or the world’s best internal economy.”

How long do you think we would have the world’s best internal economy and the all the riches it produced, without a very effective army to defend it, NahnCee?

Oct 17, 2008 - 5:13 am 110. slade:

The 21st Century:

Waiting for Godel.

Oct 17, 2008 - 5:47 am 111. Leo Linbeck III:

JMH,

Great posts, great story.

The best way to shorten the feedback loop is through subsidiarity: only have the Federal Government do those things that cannot be done at a lower level.

The shortest feedback loop is my family; next, my block; next, my neighborhood; my city; then my state. We must reclaim the power we have delegated to Washington before it is too late and the Leviathan becomes too powerful, and the only option is to destroy it. I don’t believe we’re there yet, but we don’t have a lot of time.

Oct 17, 2008 - 6:43 am 112. Leo Linbeck III:

slade,

Heh.

Oct 17, 2008 - 6:54 am 113. Charles:

“If once the people become inattentive to the public affairs, you and I, and Congress and Assemblies, Judges and Governors, shall all become wolves. It seems to be the law of our general nature, in spite of individual exceptions.”

Thomas Jefferson quotes (American 3rd US President (1801-09). Author of the Declaration of Independence. 1762-1826)
http://thinkexist.com/quotation/we_have_the_wolf_by_the_ears-and_we_can_neither/250758.html

Oct 17, 2008 - 6:59 am 114. Charles:

103. DocJim:
Twenty years later the Regulations comprised many volumes and took up two shelves of a 30″ book case. What happened? People. People found loopholes. Loopholes required more regulations. Until the human heart is changed, there will be a consistent probing of regulations for loopholes to enable that person to get ahead of the pack. It is not a problem of regulations, it is problem of theology or philosophy or simply a problem of imperfect man and original sin.
/////////////
This pretty much sums up the problem at the time of Jesus. The ten commandments had turned into into many 100’s of laws. Rabbis made their mark by inventing new ones.

From what I understand the problem is the same in the Moslem world today.

Oct 17, 2008 - 7:22 am 115. Charles:

however good/bad was julius caesar after a couple of generations of power — his family was promoted to gods and they went nuts.

Oct 17, 2008 - 7:35 am 116. JMH:

The best way to shorten the feedback loop is through subsidiarity: only have the Federal Government do those things that cannot be done at a lower level.

Agreed. Is it any wonder then that the psychopaths always try to federalize everything?

Oct 17, 2008 - 8:03 am 117. Konyok:

L3 #91 is genius.

I would say that the analog societal “innate immune system” is the conservative impulse itself. (VDH makes a specific case in “Fields Without Dreams: Defending the Agrarian Ideal” that farming families constitute the essential reservoir of American values and common sense. This argument is easily dismissed as nostalgic, but, in my view, only by those who never have lived at the mercy of the elements.) We are ourselves this first line of defense.

We have become confused. Is the pathogen racism or the racist? Should we attend to the categorical or the specific? It’s true that the modern networked world is more complex than anything pondered by the old-timers, but viscous human nature is stil best managed by conventional ethics. (”Evolving” ethics ought to be the longest-period feedback loop.)

Again L3 #111.
The short feedback loop is we ourselves, the innate immune system. Not leaders or parties. Each family, each community, each state. An army of Sarah Palins.

Oct 17, 2008 - 8:13 am 118. David M:

The Thunder Run has linked to this post in the – Web Reconnaissance for 10/17/2008 A short recon of what’s out there that might draw your attention, updated throughout the day…so check back often.

Oct 17, 2008 - 8:28 am 119. mika2k1:

I’m still waiting for that map with the pins on it showing me what countries our ‘empire’ is ‘occupying’.
==

Bob, when your military budget dwarfs all others by a factor of ten and more, it’s hard for others to say no. Would you agree? If others really need your help, you can sell them your weapons systems. Keep your troops your bases your ammunition dumps at home.

Oct 17, 2008 - 9:08 am 120. Joe Buzz:

We are all “Joe the Plumber” now.

Oct 17, 2008 - 9:12 am 121. Charles:

there will be some profound benefits to defeating obama.

the democrats will say to themselves “we have an unpopular war and the biggest economic crackup since the great depression” and still our guy didn’t win…

there for there is something wrong with us.”

obama will make the third democrat liberal in a row to be defeated by a liberal republican.

imho the first thing that they will think to jettison will be their pro abortion stance.

This will be profoundly healthy for the system.

Oct 17, 2008 - 9:23 am 122. Eggplant:

Leo Linbeck III said:

“The best way to shorten the feedback loop is through subsidiarity: only have the Federal Government do those things that cannot be done at a lower level.”

For years conservatives have been trying to reduce the size of government by limiting funding, e.g. tax cuts, etc. This has largely failed and resulted in massive budget deficits with accumulating debt. Obviously the national economy is in trouble and the federal government is trying to prevent a depression through massive bailouts to the private sector. The federal government was already laboring under serious debt and anticipated a tsunami of debt when the Baby Boomers began drawing Social Security and Medicare benefits. I anticipate a calamity for the United States if B. Hussein is elected President and implements a socialist agenda while reducing national defense.

Where will this all end? What is the United States’ End Game after having gone broke from creeping socialism coupled with a major terrorist attack and the follow-on Third Conjecture consequences?

This talk of “shortened feedback loops” leads me to one conclusion: The United States will eventually breakup like the Soviet Union did. In place of one Super Power, the United States would breakup into about 4-6 separate nations. The old US dollar would be demonetarized and the old debt repudiated (all those trillions of dollars in T-bills would go “poof”). The old US Constitution would end up in the trash can with the original Articles of Confederation.

I don’t like this conclusion but the logic of “shortened feedback loops” leads directly to it. Also the logic of slow death by Gramscian programming leads to the same conclusion.

Please show the fallacy in my reasoning here (I’d love to be wrong about this).

Oct 17, 2008 - 9:32 am 123. Konyok:

Eggplant,

A couple of things.

It’s possible that Obama will NOT be elected.

The states of the Former Soviet Union are ethnic nations. They have distinct languages, cultures and histories which were annealed by antagonism to Soviet Power. Neither the blue/red nor the white/black/latino divides approach the existential intensity of the nationalities question in the FSU. One of the primal goals of the Soviet Union was to create a new “Soviet Man,” a Soviet identity that would transcend the various nationalities of the olf Russian Empire. They failed. American nationality is a precise analog to Soviet aspirations.

One could argue that one of the tactical aims of the progressive project is to sunder the American nationality into a hyphenated melange. However, despite the best efforts of the Afrocentrists or Aztlan theorists, none of these alternative identities have the critical mass (culture, history) to precipitate a distinctive ethnic nationality from the ubiquitous American matrix.

What you propose is *possible,* but I think, barring a complete economic/political/technological collapse, it would take decades or centuries.

Oct 17, 2008 - 10:12 am 124. Vogz:

Been looking for a neo-Marxist group that translates all this degenerative thinking into some semblance of a working plan. These guys come close:

http://casinocrash.org/?p=235#more-235

(Tim) Blair’s Law is coming true.

Oct 17, 2008 - 10:52 am 125. slade:

RE: casinocrash website

I see the “plan” includes a ban on derivatives. I guess that makes me a good little proto-Marxist.

Zone Alarm flagged the site for being new – established on October 14 of this year. Someone’s little imagination clicked into high gear with world events.

Oct 17, 2008 - 11:42 am 126. Eggplant:

Konyok said:

“It’s possible that Obama will NOT be Yelected.”

That would be fantastic if it would happen. However
I think the sheep are now patiently waiting to be slaughtered (the MSM has done its job).

Konyok also said:

“The states of the Former Soviet Union are ethnic nations.”

This was true. The breakup of the United States would not be due to ethinic differences. It would be due to economic collapse and the failure of leadership at the federal level. One can imagine many scenarios. Some examples:

1) Two or more American cities disappear under a nuclear cloud. B. Hussein dithers because he’s way out of his league. A military leader takes command and removes Hussein from office. The state governors then say: “This is unconstitutional and we have no legal recourse”. The US then breaks up as different states go their separate ways.

2) States like Texas and Alaska which have their financial houses in relative good order take a look around and realize that they are subsidizing states like California that are economic basket cases. The well off states then ask “Why are we paying for welfare bums in San Francisco and New York?” If central authority has already broken down due to an incompetent President and a Congress loaded with moonbats, then breakup at the federal level would logically follow.

3) There is an attempt at a Constitutional Convention but it is bungled because too many of the convention delegates are moonbats.

4) Come up with your own variation…

Oct 17, 2008 - 11:44 am 127. Jim Nicholas:

Some thoughts about risk-aversion (Linbeck, comment # 71):

During my early years in medicine, the surgery department had a “death conference” every Friday afternoon, at which every death on the surgery service was reviewed with the goal of understanding if it had been preventable. This was at times quite painful for the physicians in charge of that patient’s care, but it probably prevented deaths in the future. This conference was eventually terminated when it became apparent that the conference created legal risks for the physicians. Honest recognition of mistakes became financially hazardous for the physician and the hospital. Avoiding one risk, a successful law suit, increased another risk, not learning from mistakes. And perhaps, over time, failure to learn led to mistakes that increased rather than avoided the risk of successful law suits.

It seems to me that the the goals of punishing mistakes and learning from them are in conflict. I think society’s bias is toward punishment, and punishment has its place: incompetent physicians should not be allowed to continue to practice. And some of my lawyer friends truly believe that threat of punishment fosters good medical care. But I wish that the bias were more towards learning from bad outcomes from risk-taking.

Oct 17, 2008 - 12:05 pm 128. Konyok:

Eggplant,

Hurricane path predictions are usually depicted graphically: a widening cone extending from the storm’s present location which allows uncertainty to be seen. When you said “like the Soviet Union” you defined just such a cone. When you loosen your prediction to include any of a number of bad outcomes, your cone becomes a circle, centered on an independent variable – the election of Senator Government. At this point, That One’s presidency is not assured – there remains considerable uncertainty.

You haven’t shown that your scenarios 1-3 are uniquely dependent on Obama’s election. Are one or all of these scenarios possible with a McCain victory? Although I would agree that they would be much less likely, I can’t entirely remove them from the universe of possibilities. That leaves us with more independent variables. With so much uncertainty and so many degrees of freedom, I would be comfortable trying to lay odds of an asteroid impact or magnetic pole reversal on any given day.

Better to just work in the time we have left for a McCain victory.

Oct 17, 2008 - 12:33 pm 129. buckets:

http://pajamasmedia.com/blog/justice-dept-targets-gop-activists-warning-of-illegal-voting/

I’m pulling a Doug. I also hate to sound like a Black-Helicopter-the-apocalypse-is-nigh type of person, but the recent Obama-related assaults on freedom of speech in the U.S. are genuinely frightening. Just look at the Left’s personal destruction of Joe the Plumber – and remember that Obama walked into his neighborhood! These events, isolated, can be explained away. But when looked at together, they are disturbing.

Oct 17, 2008 - 12:54 pm 130. NahnCee:

The media assure us the election is pre-won and Obama is Da Man. However, I’m seeing several commentators who think this might be a ploy to trick Republican/conservative voters into staying home and not voting.

I don’t know if it’s an overt pre-thought-out ploy or not, but I do think it’s early to declare a total McCain defeat. Polls are consistently not showing that big a gap, and you just KNOW that the pollsters are tilting and weighting their numbers to the max, which means the gap must be even smaller.

People overhead in the office and on the bus seem to be much more thoughtful in their conversations now. Whereas a month ago, there was a lot of excited chatter about Obama and CHANGE, I just am not hearing that any more. I am hearing fairly dispassionate conversations about this or that small thing — like Joe the Plumber, for example — with no resolution and the question just left hanging in the air. People seem to be aware of the left’s angry violence, even if they’re not familiar with the details.

My guess is that those hanging questions will transfer into a not-Obama vote once in the secrecy of the voting booth, or maybe a stay-at-home non-participant.

But it is vital that ACORN and the millions of fake registrations it has poured into the system be dealt with and dealt with expeditiously. ACORN did this very same thing the last election; I can’t believe they’ve been allowed to do it again four years later.

Oct 17, 2008 - 1:04 pm 131. Habu:

OPEN LETTER TO THE DEMOCRATIC PARTY.

I want this in the public domain. I have mentioned it before; the realization of its nightmare draws closer.

The Democrats are on the way to owning all three branches of government. President, Congress, and soon the Supreme Court. And there is the rub. With the most definite possibility the Democrats will gain a supermajority in the Senate they will immediately pack the Supreme Court, the Appellate Courts and all the Attorneys Generals with young socialists/communist.

Nineteen judges, two additional Chief Judges, all Marxists or Marxist leaning. They will take cases from the lower courts, the Solicitor General will, like the shadow plays of the East , argue the cases for the US. Their target will be the US Constitution. Within two years it will unrecognizable from anything we have had in the past, and there is NO way short of revolution from stopping them. Any Democrat not going along will be “handled” by some tragic circumstance. The remainder will fall in line.

It will mean that no subsequent election in this country for perhaps three generations will truly matter for even the weakest Democratic Party can get a case in front of a Marxist court and the outcome will be totally predictable.

We are less than three weeks away from having that nightmare become a reality, and then each American must decide whether it is better to die on your feet or beg on you knees for the Rights you already have. No regime will allow any opposition and since the Supreme Court will have ruled that freedom of speech is not acceptable then the population’s recourse to freedom comes by only one method. The price we paid in the Revolutionary War.

Argue it all you care but that is what is at stake. I simply want it to be stated by me that I will not beg on my knees for the Bill of Rights, they are already MINE. I will not beg for the Constitution that has produced more freedom for mankind than any document in history.

Many of you will not have the will to stand against tyranny, not everyone has the makeup for it. I understand. Good luck to you.

Oct 17, 2008 - 1:12 pm 132. Konyok:

buckets #128,

Not a good case.

Mr Nguyen wasn’t merely expressing concerns about illegal voting. He was sending letters to people at their homes warning them that if THEY vote illegally there will be bad consequences.
He has the right to challenge voters at the poll place, but such a pre-emptive letter smacks of voter intimidation. Any qualified US citizen receiving such a letter would be well justified in being PO’d to the point of pressing charges.
I don’t think that Nguyen will be found guilty of any crime, but his actions seem to me more symptom than solution.

Oct 17, 2008 - 1:18 pm 133. Konyok:

Nahncee,

I had an encouraging experience yesterday.

Riding the bus home I was oblivious to the Obama campaign ad over my seat. Entering the bus, a research scientist for the Bureau of Reclamation saw the sign and became quite indignant. “Isn’t that a violation of the Hatch Act? This bus is subsidized with federal money, isn’t it?” asked this middle-aged African American woman. She didn’t let it go and continued asking people: “Do you think that’s right? They’re taking federal money and now they’re telling us to vote.”
She is a Christian – culturally conservative, but economically liberal. I had thought for sure that she’d support Obama, but her displeasure yesterday suggests maybe not …

Oct 17, 2008 - 1:28 pm 134. enscout:

Now this from Bloomberg.
Ohio may be lost to ACORN.
Damn SCOTUS!
http://www.bloomberg.com/apps/news?pid=20601087&sid=a8VcTV6qWpA8&refer=home

Oct 17, 2008 - 1:35 pm 135. Ursus Maritimus:

“This tells me to sell gold shortly after the Messiah is annointed and the gold market peaks.”

So what? It’s not like gold ownership by the small people hasn’t been outlawed before.

“Barak will never allow you to go back to your lives as usual!”

And afterwards everybody will whine “Ve knev nooothink. Noothink at all!”

Oct 17, 2008 - 1:43 pm 136. Konyok:

I meant “telling us HOW to vote.”

Oct 17, 2008 - 1:50 pm 137. Konyok:

buckets,

Now, here is the real McCoy:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aAYOYsAX8sQs&refer=home

Oct 17, 2008 - 2:34 pm 138. buckets:

Konyok –

Respectfully, I disagree entirely. The guy might be a jerk, and anyone receiving a letter like that probably wouldn’t vote for him, but what he did is NOT illegal. The Justice Department is basically a loaded weapon waiting to be aimed. If they really wants to hurt you, they can, it’s that simple. It is a federal crime to lie to an FBI or Justice Department agent. “False statements” to a federal investigator carry serious jail time. This has never really been of great concern to the American public, because the people targeted in this way are usually white collar criminals, dirty businessmen, or crooked politicians of both sides of the aisle.

In fact, this is how alot of people (who the Justice Department wants to target) end up doing time. The U.S. Attorneys don’t have to go through the difficult task of proving bribery, gratuity, steroid use, illegal stock trading, etc. – they can hit you for lying to them during a conversation in your own home, or for mail fraud or conspiracy.

I respect your opinions a great deal, but you are absolutely wrong to think that just because he probably won’t be found guilty = no harm, no foul. As anyone who has been involved in litigation can tell you, it can be enormously expensive. Moreover, facing the full weight and power of the U.S. government – when it’s trying to imprison you – is a scary and stressful experience.

And maybe you are right, this is simply a bad case I’m pointing out. But this is not an isolated incident. The Justice Department is becoming increasingly politicized, and I really do see prosecutions like this becoming more common. There’s always been accusations of politically-motivated prosecutions (Bush’s U.S. Attorneys have been accused of this, too) but I see alot more dark clouds on the horizon.

If you want the model of a principled U.S. Attorney, look at Patrick Fitzgerald of the Northern District of Illinois. Among others, he took on Gov. Ryan (Republican) and Tony Rezko (may be squealing on some guys pretty close to Obama). I will be EXTREMELY interested to see if Obama pardons Rezko and/or fires Fitzgerald.

Oct 17, 2008 - 2:44 pm 139. slade:

It seems to me that the the goals of punishing mistakes and learning from them are in conflict. I think society’s bias is toward punishment, and punishment has its place Jim Nicholas

Another dimension to risk management is the axis that connects the general with the specific. Wretchard contextualizes modern events within a Big Picture framework to better identify the meta-trends, as I call them, as he has in this post. And I don’t disagree with the “derivative” generalizations in the comments.**

But I take strong exception that punishment can factually be reduced to a mere “bias” in this case. It is much more than that. It is richly deserved by those in the mortgage industry that knowingly generated substandard loans, those in the financial services industry that repackaged them as CMO’s and CDO’s and then bet against them with CDS’s, and those in government who pushed the social agenda. The “specific” details of this market “correction” warrant indictment, prosecution, and prolonged face-time with a 10×10 cell based on facts, not emotional catharsis.

**Except the one-way link between psychopathology and federal regulatory code. As noted by several others – well only two – failure to self-regulate leads to the next higher level of control. And buried within the CFR is some meaningful work – the kind that puts rebar in an I-beam and keeps toxic chemicals out of drinking water and children out of sweat shops.

Oct 17, 2008 - 2:45 pm 140. Storm-Rider:

I believe we are witnessing a Marxist Revolution in the United States. Who will lead us in defending the American Revolution? Who will defend our American God-given rights to life, liberty and creative pursuit of happiness? This Marxist Revolution is peaceful at present, but Marxism is tyranny; and there is no such thing as peace under tyranny.

http://www.investors.com/editorial/editorialcontent.asp?secid=1501&status=article&id=309049794517352

Oct 17, 2008 - 3:13 pm 141. slade:

It seems to me that the the goals of punishing mistakes and learning from them are in conflict. – Jim Nicholas

I do take your point about using forensics to learn from mistakes. That’s true in my profession as well. Invaluable exercise.

The recent financial crisis was not a “mistake” – honest or otherwise.

In any way, shape, or form.

Oct 17, 2008 - 3:14 pm 142. Konyok:

buckets,

I think that Nguyen came awfully close to harassment. His only saving grace is that he’s a private citizen, not an incumbent official. If an elected official sent a letter implicitly threatening prosecution/deportation if a person votes, that’s a clear cut case of voter intimidation. You have to be really careful what you send people in the mail.

Did you see that second link? Right on cue, I saw that one and immediately thought of you. That is simply mind boggling. I think that the Obama campaign has jumped the shark.

I know that they’re setting the stage for the recount phase of this election. (Thank you, Al Gore! He will rival Richard Nixon in the hall of shame.) Obviously they did this on Friday to avoid publicity, but this will fire up Republicans like nothing else. It is absolutely surreal, and does indeed make your original point.

Oct 17, 2008 - 4:09 pm 143. Pascal:

Storm @139;

I recently dusted off to my Western Civ text to verify something I vaguely remembered.

On the night of November 6-7, 1917, the Bolsheviks took over the telephone exchanges, railway stations, and electric lighting plants in [Petrograd]. — Palmer & Colton

What I sought to verify was my recollection that the radio stations also were seized. Not in this textbook anyway. It was probably something mentioned in class by the lecturer over 40 years ago. For surely, were there radio stations, they were taken over too.

Anyway, this description of events in dead center in the paragraph that begins “Lenin now judged that the hour had come for the seizure of power.”

Maybe there is some cosmic significance to the fact that we’re coming up on the 91st anniversary of the Bolshevik revolution. Perhaps that will be remembered sometime after humanity reemerges from the dark.

Oct 17, 2008 - 4:46 pm 144. veracious:

Ben Franklin @73:

Assuming MBS means Mortgage Based Security, your quashing them relative to the importance of government F&F backing isn’t true unless the vast majority of them were F&F related, which I’d question. Further, the cascading effect upon the CDS (derivates) web and the peer effect on _all_ mortgage prices seems overlooked. It seems likely the formulas were optimistic and unlike other _insurances_, didn’t factor in group failure or exclude them from the contract.

Conceptually, CDS are new unregulated insurance policies. They and the rest of the derivative pretend to guarantee the web of debt holders to the tune of >$50 Trillion maybe $200 Trillion. This seems a impossible illision.

Oct 17, 2008 - 4:52 pm 145. Storm-Rider:

“The American people will never knowingly adopt socialism. But, under the name of “liberalism,” they will adopt every fragment of the socialist program, until one day America will be a socialist nation, without knowing how it happened.” Norman Thomas, U.S. Socialist Party presidential candidate 1940, 1944 and 1948

“The history of all previous societies has been the history of class struggles.” Karl Marx

“The theory of the Communists may be summed up in the single sentence: Abolition of private property” Karl Marx

“In one word, you reproach us with intending to do away with your property. Precisely so; that is just what we intend.” Karl Marx

“You must, therefore, confess that by “individual” you mean no other person than the bourgeois, than the middle-class owner of property. This person must, indeed, be swept out of the way, and made impossible.” Karl Marx

“The proletariat will use its political supremacy to wrest, by degree, all capital from the bourgeoisie, to centralize all instruments of production in the hands of the state… Of course, in the beginning, this cannot be effected except by means of despotic inroads on the rights of property” Karl Marx

“In short, the Communists everywhere support every revolutionary movement against the existing social and political order of things. In all these movements, they bring to the front, as the leading question in each, the property question, no matter what its degree of development at the time.” Karl Marx

“The meaning of peace is the absence of opposition to socialism.” Karl Marx

“The goal of socialism is communism.” Vladimir Lenin

Oct 17, 2008 - 4:58 pm 146. veracious:

Iconoclast @67 and earlier,

I agree that by paper currency and other feats, the Federal government is freeing itself from the limits within the contract which created it. Other posters don’t seem to have commented, so there’s mine.

Now, how can a country built upon laws, survive, when its laws aren’t upheld? Seems we’ve allowed hedging and special CSI cases, to nearly make the law of the land irrelevant. Mere policy determines what is allowed, funded and enforced. This resembles a kingdom, where the King, or Lords _do_ whatever they will. The policy/law sloshes back-n-forth, in the moment, tearing at structures we’re now clinging to, which previously were upon dry land.

Oct 17, 2008 - 5:17 pm 147. Ex-fetus:

The loophole is easy.
If a President wanted to reign instead of rule he just needs to get a ‘volunteer’ off death row, arm him and send him over to kill whoever he thinks needs killing. Then you write that person a full pardon and have lunch.
Congress gets frisky, grab a dozen or so terrs from gitmo and send them in with SAW’s blazing. The State Governors will appoint new Congress critters and if they don’t co-operate, repeat step 1 until you get some that do.
Or you can declare a national emergency and put Martial Law into effect (only good for 90 days, unless extended by congress. See step one above). President’s Lincoln, Wilson and FDR suspended parts of the Constitution at one time or another.

http://info.detnews.com/redesign/history/story/historytemplate.cfm?id=185&CFID=12539680&CFTOKEN=21799626

http://www.mrlincolnandnewyork.org/inside.asp?ID=91&subjectID=4
That last link is a tad biased. Other sources say the ‘riots’ were ‘protests’ until the police got heavy handed with the protesters. Sort of a Kent State only the police didn’t have automatic weapons and were facing larger, more serious crowds. Nothing like automatic weapons to help with crowd control.

And for Wilson;
http://hnn.us/articles/960.html
The American Protective League made the SS look like schoolboys on a pantie raid.

TheConstitution has been put aside several times. In the End, the Presidents doing that died and the Constitution lived on. This might be another of those times, then again, it might not.
Ohhhh…..BAAMA! is a Tyrant in the making. Like ALL Tyrants, he will eventually die. Of old age if America cannot find another Booth. The question is what happens while we are waiting for that blessed event.

Oct 17, 2008 - 5:36 pm 148. fred:

What the chekists have done to Joe the Plumber should be taken as fair warning to the rest of us of what could very well be in our future.

The man asked an honest question of a candidate for POTUS. He was given a rather open answer. And the shitstorm it set off set the thugs to the task of raping this poor guy in public.

That there are people out there working in offices who are perfectly willing to fork over information of a private nature to these chekists SHOULD RAISE THE ALARM about the moral fiber of this nation. The people who collaborated with, approve of, and enable this ghastly gang rape of an innocent man are swine who like being down in the muck.

Oct 17, 2008 - 8:08 pm 149. Leo Linbeck III:

Konyok,

I stand corrected. You are most assuredly right. The shortest feedback loop – and the foundation of our cultural innate immunity – is the individual, ourselves.

However, I would say that no man is an island, and if everything else is screwed up – family, neighborhood, city, state, and national – an individual cannot long stand. Except for the Great Man, which is, as we discussed, in short supply. System-wide, we don’t stand a chance if we require a Great Man.

Sinners are many; saints are few.

Oct 17, 2008 - 8:47 pm 150. Habu:

ex -fetus,

He has a two year window to accomplisj this foul deed should he go down that path. The 435 members of the house will be reconfigured. This very rare alignment of the stars comes with that grace. He must act quickly. I believe he will

Your solution would not, is not, the way they can cement chages to our founing documents nor insure lasting hegemony over the laws, for as we have seen for over sixty years, the Supeme Court has been allowed to legislate from the bench.

Oct 17, 2008 - 8:47 pm 151. Leo Linbeck III:

Eggplant,

What you describe is certainly one possible, perhaps even likely, outcome.

However, there is another possibility. It is possible that the sovereign citizens of our nations (after all, the citizen is still sovereign) will band together and change the Constitution in such a way as to circumscribe the Federal Government.

I have suggested, in earlier posts, that this is a Constitutional process, and therefore full-scale revolution is not necessary for dramatic change. What is needed is for a critical mass of citizens to decide that they will lobby their state legislatures to call a Constitution Convention under Article V of the US Constitution. The states, by controlling the process, can force the Federal Government to shrink both is scale and its scope.

The time when this much be done is quickly approaching, IMHO. If the Federal Government reaches the “tipping point,” the only mechanisms for reform will be revolution and secession.

If Obama wins (not a foregone conclusion, mind you), the concentration of power in Democrat hands may be the catalyst for serious, structural change.

The problem with effecting such a change has always been that the average person – Joe the Plumber – had no real interest in making it happen. But that may change with Democrat domination of the Federal Government.

Time will tell. But regardless, as true conservatives, we should only undertake such actions when there are no other options that are feasible. Which, it is sad to say, may be true sooner than any of us thought.

Or hoped.

Oct 17, 2008 - 8:59 pm 152. Leo Linbeck III:

Jim Nicholas,

I agree. If we punish mistakes, it is harder to learn from them, because people will misrepresent what happened to avoid getting punish. It’s only human.

The situation you describe – avoiding learning to lessen the possibility of punishment – is all too common in American commerce. But it is natural, given the incentive structures.

I understand – and even share, to a certain extent – cedarford’s frustration and desire to use violence in the pursuit of justice. But the problem with that approach, as I see it, is that the end-game is “might makes right.”

You line up all of the “bad guys” and shoot them. FIne. Feels good for a while. But the bad guys are not dumb. They realize now that the implications of being caught are, well, ugly. So they deploy their own resources to protect themselves, and that ultimately means they put themselves beyond reach of the legitimate authorities. Private armies proliferate, and the thugocracy is born. If you need an example of that outcome, look at Russia.

Yes, it is frustrating that the bad guys get away with things. Yes, it is disheartening that good people are taken advantage of. Yes, it discouraging that real businesses are hurt by the proliferation of scams and schemes.

But we should be careful about the unintended consequences of abandoning our traditional commitment to the settling of grievances through the law. For, as Thomas More said (I quote from memory), once the law is destroyed, and there is nothing between us and the forces of evil, what then? Who shall we turn to for protection?

As I said in other posts, I am voting for McCain, but if Obama is elected he will be my President. But that doesn’t mean I can’t support fundamental reform. The problem is not Obama. The problem is a system that gives rise to Obama.

I can’t change Obama. But together we can change the system.

FWIW.

Oct 17, 2008 - 9:18 pm 153. JFSanders:

Mr.Linbeck,

Well reasoned discourse as per your usual high standards. Now that we have identified the illness of our great nation. And we can see the progression of the disease to its end.

What is the prudent antigen or antigens? Can they be administered in time to ward off death?

Will amputation be required as Habu prescribes?

I believe that the education of our children is the long term answer.

We as parents have as our most important duty the proper education of our children. In this we have to provide the environment and information to insure their ability to think critically and how to learn on their own.

To provide those requirements I believe it may be necessary renew the foundations of our government. Maybe with force. I hope not.

I submit that the leftists of our own country are more of a problem than the likes of American Muslim.

Someone once said. “let us not be so tolerant as to tolerate intolerance.”

Jim

Oct 17, 2008 - 9:43 pm 154. Unsk:

Buckets-
You have got to be kidding?

Patrick Fitzgerald a principled US Attorney?

Let’s see. He knows from the very beginning of the Plame Investigation, that Richard Armitage was the one who leaked Plame’s name and status.

He still goes on a three year witch hunt.

He never prosecutes Armitage and tells Armitage’s buds Colin Powell and Marc Grossman to keep quiet even though their President has publicly asked them to reveal the source of the leak.
Marc Grossman just so happens to be Joe Wilson’s college roommate. BTW. That isn’t too fishy. if you remember, Colin Powell through a fit over failed intelligence just after Wilson accused the CIA and Bush of lying, even though he knew the intelligence ( Saddam’s shopping for Uranium in Niger) to be true.

But on to Scooter. Everyone wondered why Scooter just didn’t use the typical lawyerly caveat that his memory was hazy and the best he could recollect was so and so. Well according to FBI agent who interviewed him, he did. But then her notes were somehow lost. And her supervisor who didn’t do the interview overruled her.
Now if that isn’t reasonable doubt I don’t know what is.

Then Fitzgerald wouldn’t allow Libby to call all his witnesses. Andrea Mitchell whose story conflicted with Russert’s, Fitzgerald’s most damning witness, wasn’t allowed to be called by Libby’s attorney’s to testify.

What a complete crock.

Now the DOJ wants to investigate the guy who ran against Loretta Sanchez. Perhaps the reason the Nguyen sent out that letter was that Sanchez, when she first won the seat, used thousands and thousands of votes from Illegals to win a fairly safe Republican seat.

Oct 17, 2008 - 9:48 pm 155. Eggplant:

Konyok said:

“Better to just work in the time we have left for a McCain victory.”

I definitely agree that this is a better use of our time. The United States has been lucky before….

If by some miracle we dodge this bullet, we need to think carefully about better managing our Main Stream Media. Yes, I know that freedom of speech and the press are protected by the US Constitution. However the founding fathers never imagined a monolithic political force like the MSM. The founding father’s vision of the press was small scale operations (under 20 people) working in country towns running hand set printing presses. The MSM has almost become another branch of the government that is managed by shadow oligarchs like George Soros. This needs to end or eventually someone like B. Hussein will establish himself as tyrant.

Oct 17, 2008 - 10:14 pm 156. Konyok:

I just had an interesting conversation with one of my daughters-in-law. She says that the issue in her church is whether Obama is the antichrist, and, if he is, whether they should vote for him in order to accelerate the rapture.

It is certainly distressing to think that we could be this vulnerable to a demogogue. Ominous storm clouds scud in from the horizon and our self confidence is tested more than we are used to. But, we are Americans. Why do we surrender to dark dreams?

I remember walking across the bridge at Deception Pass. The wind howled, the passageway was wet and slippery. As I looked down at the wave tossed logs down below, I felt an irresistible urge to jump.

In just a few years we have lived through Y2K, the recount crisis and 9/11. For decades we have absorbed Hollywood’s dystopian visions. So many of us have been hypnotized by conspiracy theories and the illusion of arcane knowledge. Transgression has become our most prized artistic virture. Are we now victims of some societal post traumatic stress disorder that fascinates and paralyzes us? Do we have an irresistible urge to jump?

I believe that the body politic is a useful metaphor. Useful to the extent that I think the placebo effect is an important aspect of societal health. As long as we believe that things are OK, they are more likely to indeed be OK. Confidence in ourselves and in our fellow citizens has always been our best asset, it is why America is rich and strong and Mexico is poor and weak.

Something in human nature seems to need drama and catharsis, even when the proper course is calm and methodical. President Bush was right to urge the country to go shopping, though we felt disappointed not to have the sacrifice of rationing and black outs.

Once again, calm and methodical is the proper course. We ought not jump. We do need to perform triage.

I think that the first thing is to defeat Barack Obama. The cobra attempts to hypnotize his prey, we must remain clear-eyed and alert.
Then we repair our economy.
Then we contest our opponents for every inch of lost ground.

Oct 17, 2008 - 10:25 pm 157. Konyok:

Eggplant,

The good news is that the MSM are slowly going broke. We can help them along by voting with our dollars.

Oct 17, 2008 - 10:30 pm 158. Eggplant:

Konyok said:

“I just had an interesting conversation with one of my daughters-in-law. She says that the issue in her church is whether Obama is the antichrist …”

Google “Obama 12th imam”. You’ll be amazed at what pops up.

Also, the Antichrist (or the 12th imam) would be smart enough not to associate with people like Bill Ayers or Jeremiah Wright…

Oct 17, 2008 - 10:47 pm 159. Konyok:

L3,

Habu is an excitable boy.

I reject amputation absolutely.

Such half-cocked discussions are mischievous at best and trends to malignancy.

Such a surgical euphemism – amputation. Could that take the form of the Wannsee final solution? After all, cancer must be treated aggressively, no? Are these really things to discuss flippantly? Is this even an option in a mature representative republic?

Amputation, civil war, armed resistance. Words that fall off of the tongue so grandly. Words that horrify any true patriot. Words that are shockingly juvenile with the election still almost three weeks away. Are we really so envious of the *vibrant culture* of the third world? Do we really want to taste Europe’s tragic bitterness?

And what of those so compelled by those dark visions? Are they perhaps provocateurs? Pranksters? Are they maybe driven by an agenda worse than our acknowledged opponents? Are they merely stupid or thoughtless?

No, I reject amputation or any discussion of it. Some doors ought to remain closed until the house really and truly is aflame.

Oct 17, 2008 - 10:59 pm 160. Konyok:

Eggplant,

Truth is usually stranger than fiction.

Obama is not a muslim, but he reasonably could be considered an apostate. I would expect that if he were elected, the fatwas would fly fast and furious on inauguration day.

Oct 17, 2008 - 11:04 pm 161. Eggplant:

Konyok said:

“Obama is not a muslim..”

I agree. B. Hussein is probably a crypto-Marxist. Doctrinare Marxists are supposed to be atheists. My guess is B. Hussein uses religion like a union card to gain access to exclusive groups. If there was a political advantage in being a Moslem then B. Hussein would pay lip service to Allah. However in the US, there is no political advantage in being a Moslem (or an atheist) so B. Hussein pays lip service to Jesus.

Oct 17, 2008 - 11:42 pm 162. veracious:

JFSanders@:
I submit that the leftists of our own country are more of a problem than the likes of American Muslim.

There is score hundreds of billions in foreign money channeling thru our government, institutions and corporation. If this amount of money cannot figure out to seriously fund leftists and other organizations boring worm holes though our way of life, then I submit those overseeing the spending of said money are very stupid. Ie., they may need to spend a billion of that fortune hiring someoneo who can figure it out for them.

They aren’t that stupid; hopefully we can understand how simple this is?

Oct 18, 2008 - 12:00 am 163. Sima Qian:

The loophole is not the pardon power, because the President may not pardon himself in the event of impeachment. Some of the comments here are absurdly overwrought.

Oct 18, 2008 - 12:16 am 164. Al_Batross:

some interesting thoughts from this side of the pond on the return of hard times and how they might (well we can hope) change us:

http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2008/10/18/do1803.xml

Oct 18, 2008 - 12:36 am 165. Belmont Club » Who will Colin Powell endorse for President?:

[...] Boom and Boom, I raised the possibility that from time to time we are reminded that the law of dog eat dog has [...]

Oct 18, 2008 - 1:56 am 166. slade:

Very late to this post but just to get it out there, I don’t disagree with the general tenor of your position that the interface between government and private capital is a breeding ground for corruption. Two points.

First, the “breeding ground” was tolerated for many years because it greased the wheels – both government and commerce – without too steep a price. The price got decidedly steeper in September 2008 causing a major rethink.

Second, never underestimate the power of the “means”. To claim that Democrats are more inventive at using government to provide opportunities than the (presumably Republican-dominated) financial services sector is at providing the tools is a tough sell. Government might be the snake pit but derivatives are the snake oil.

Oct 18, 2008 - 4:39 am 167. sf:

Let me try to summarize what I think are the best of the comments above:

“Fan and Fred blew up because politicians replaced normal risk analysis with social
engineering.” (Peter Boston)

In this past the news media would have blown the whistle on this scheme. But today the mainstream media blames the free market and Republicans for the disaster. So the Dems get a two-fer. They get the windfall from their frauds and get to blame the Republicans when the programs the Dems created explode.
==

MBS’s weren’t the problem. They were just mechanisms to trade income producing assets just like any other mechanism such as bond funds.

The problem was that these mortgages were *guaranteed by the US Government* through Fannie and Freddie. This made them trade at levels higher than they were actually worth. It also inflated the face value of the assets on which they were based.

The main problem, of course, was Congress’s passing of the CRA, which forced banks to make more risky loans. This law–like many others–may have been created by good intentions but allowed pressure groups like ACORN to intimidate banks into making a couple of million bad loans.

The cost of writing off these bad loans (mortgages) probably could have been absorbed over time. But the fact that they were *guaranteed by Fannie and Freddie* made a merely bad problem catastrophic.

Imagine if the government indemnified you against any losses you were to make in Las Vegas, while letting you keep the gains. What would you do? You would be foolish not to bet the farm.

The CRA forced banks to make loans to all applicants, regardless of creditworthiness.
The number of bad loans increased drastically due to lawsuits by activist groups alleging violation of the CRA, and by pressure on banks from demonstrations by Democratic-base groups like ACORN. As a result, banks put increasing amounts of assets into bad mortgages, while the MBS’s–backed by Fannie/Freddie, allowed banks that made these loans to exchange their unsound portfolios for cash.

In sum, massive government interference in the market destroyed the rational basis on which the mortgage industry had been based.
(My take on Ben Franklin’s excellent analysis)

Oct 18, 2008 - 6:45 am 168. Dave:

sf; Good summary. Fannie and Freddie bought so much that they had to raise cash to buy more. So they resold some of what they bought
and got a premium price by attaching and promoting that “government guarantee”.

Now while only a portion of the resold bill of goods is in default, they are bundled into
the debt instruments in such a fashion as to make the taxpayer liable for the total amount.

This is why I suggested using revenue bonds to
settle the liabilities and to service/retire those bonds directly by the income produced by those mortages not in default.

The bondholders would suffer some irregularities in payment but this would be counterbalanced by paying up to 15% on the face value of those bonds and by selling them at a 20 to 25% original discount.

This is a (primarily) market-based technique correcting statist induced difficulties. It takes the taxpayers off the hook and rewards the rescuers most handsomely.

Oct 18, 2008 - 7:56 am 169. slade:

OK guys.

Oct 18, 2008 - 10:07 am 170. veracious:

sf,

The CRA forcing bad loans as the starting point. The protective reaction was MBS/CDS/derivatives. These new instruments were flawed by optimistic risk analysis, greed and the lack of government oversight (unregulated insurance).

Oct 18, 2008 - 10:43 am 171. veracious:

A tiny side issue:

The mortgage+derivative stack of over-leveraged debt was likely played by those scores of hundred billion foreign dollars. At the least by removing it all from everything but TBills during the last year; this info is easy to find. Add to this the gargantuan outpouring of wealth for oil @$130; how much of that as debit?

WalidP is researching indications of economic terrorism:
”
a re-reading of al Qaeda and other Jihadi literature, speeches and statements about the Silah al Naft (Weapon of Oil) and more particularly the calls by Ayman Zawahiri on “selling US dollars and buying Gold, ahead of American economic collapse”
“

Oct 18, 2008 - 10:56 am 172. Leo Linbeck III:

JFSanders,

Thx for the thoughts.

I absolutely agree that the long-term solution is education of our children. To continue the immune system metaphor (and I’ll leave it at this post, before it becomes too silly), education is a form of vaccination. It prepares our children for the time when they confront the inevitable social pathogens that enter their life. It is also crucial in helping them differentiate between the “healthy” and “unhealthy” forms of outside intervention – the difference between Beethoven and Snoop Dog. They learn to reject the latter while embracing the former, just as our immune system learns to overlook beneficial flora in our intestines while neutralizing harmful bacteria like certain strains of E. coli.

The question that remains, however, is whether the current concentration of pathogens is so high that it endangers the entire body politic. Education, like vaccination, is a long term solution. If you already have a tetanus, a tetanus shot won’t won’t help you. You need antibiotics, and you need them quickly.

I am from the group that says we still have a chance; amputation is not necessary. Besides, amputation carries its own risks. That’s why we should do everything we can before giving in to radical surgery.

After all, we shouldn’t immediately assume we’d be the amputee. We could end up being the severed limb.

Oct 18, 2008 - 4:11 pm 173. MNotaro:

Everybody wants to blame someone else for the financial turmoil we are in…but let’s just move on and accept we are in turmoil and figure out how to fix it……
All I know is our economy is in turmoil and I haven’t heard any of those left wing illuminati in Washington come up with any ideas to help out the American people! Do any of them care people are losing their homes, their jobs, and their retirement accounts?

Oct 22, 2008 - 10:27 am 174. Expressions:

The regulation done by the liberal illuminati is responsible. The fact that they encourage people to go out and spend money, as their party does, made banks lend and people go into debt. Now those who didn’t borrow and overspend have to pay for those who did.

Oct 25, 2008 - 11:40 am

Sorry, comments for this entry are closed at this time.

Richard Fernandez

Pajamas Media

Belmont Club

Boom and boom

174 Comments

Richard Fernandez

Blogroll

Pages

Archives

PajamasXpress Blogs

PJM Political

DAILY DIGEST

THE EDITORS @ PJM