Cowboy State Policy Institute

From a John Mauldin Newsletter published this month:

“The stock market continued its downward trajectory during the past week, experiencing wild swings on the back of a barrage of bad news in the financial sector, and ongoing concerns about the housing and credit markets weighing on investor sentiment.

“This prompted Bill King (The King Report) to raise the following questions about Fed chairman Ben Bernanke’s troubled facial expression: “How dreadful has sentiment about the economy and financial system become? If one picture is worth a thousand words, what are two pictures worth?”

Troubled, indeed. The government is pulling out all stops to avert a threatened recession, a recession being brought on by spendthrift policies and the regulatory practices which accompany them. The solution? You guessed it, more spendthrift behavior, more regulation. I’m not an economist, but my best shot at making sense follows.

The Federal Reserve exists for the sole purpose of allowing government to over-spend. The Fed enables spending addiction as a co-dependent enables a drug addiction. A co-dependent’s life involves painful but ineffective attempts to cope with aberrant behavior. Our co-dependent Fed chairman accommodates aberrant government debt-creation while dolefully aware of the long-term consequences — destructiveness not to himself, but to us as a nation. His tools are not nice. They include carefully-phrased speeches, price-fixing [setting the Fed borrowing rate to allow for a hidden tax of inflation, too bad about your pension] and counterfeiting [printing paper money, also inflationary, too bad about your pension]. Congress and apparently the president do the outright borrowing: too bad about your pension, the future tax payers, or worse, the national financial failure.

The following quote on indebtedness, taken from the same newsletter, tells why more debt doesn’t alleviate recession when the burden of regulation and interest payments gets too heavy.

The Wall Street Journal: A quote from 1993

“History shows that once nominal growth slows in a heavily indebted economy, there can be no recovery until the excess debt is eliminated. Political efforts to expand debt do nothing to lift the burden of debt service, which is the cause of slow growth and faltering incomes in the first place.

Source: James Dale Davidson, The Wall Street Journal, 1993.

Why then are our “experts” expanding debt via rate cuts, borrowing for a one-shot “tax relief” program, and printing money? Because the addict can’t or won’t stop spending.

I have added the idea of regulation into this discussion because a known solution for recession is to REDUCE GOVERNMENT REGULATION, an action which goes hand in hand with reduced spending. Impossible? Other countries have done this. Look out, America.

Susan

Washington, DC –Judicial Watch, the public interest group that investigates and prosecutes government corruption, today released its 2007 list of Washington’s “Ten Most Wanted Corrupt Politicians.” The list, in alphabetical order, includes:…

The article

There are two things pathetic about this. First, that it is even necessary. Second, that several of the people on the list are candidates for the highest office in the land. Which is worse will be left as an exercise for the student.

Nothing so upholds the law as the punishment of persons whose rank is as great as their crime.
Cardinal Richelieu
Quoted in Will and Ariel Durant, VII The Story of Civilization 384 (1961)

Or, what has telecoms deregulation got to do with the price of sardines?

We all (except for academic economists) know that deregulating an industry does wonders for the consumer and transforms the industry. A classic example is deregulation of telecoms in India.

By the early 1990s India’s Department of Telecommunications (DOT) and the two government telcos had installed only 8 million subscriber lines. Some 2.5m people were on the waiting list, some for seven years. It was so bad that people raised the cry of “DOT hatao, desh bachao!” (”Curb the DOT, save the nation!”). OK, a slight exaggeration. Or maybe not.

In 1997, the government had a rare spasm of good sense, and deregulated the industry. By the end of that decade, private providers could enter the field, regulated by the DOT. The result was the “voice revolution”. By March 2002, India had over 38m land subscribers and 6.7m mobile-phone subscribers. By August of this year, mobile subscriptions had topped 200m, making India the fasted growing mobile phone market in the world.

Indians are a loquacious lot. The average mobile user spends 471 minutes (almost eight hours) on the phone each month. Competition has driven down costs: mobile phone operators now earn under 300 rupees ($7.50) a month on average per subscriber.

Soon the million or so fishermen in Kerala were able to call ahead to buyers as they headed into port. This meant they could land their catch at the buyer who offered the best prices. That upped their profits by 133 rupees a day-and reduced the price of sardines by 4%. Not much, maybe, but spread that across an entire subcontinent, hundreds or thousands of industries, and a billion Indians.

Sources: The Economist, Nov 8th 2007 and Wikipedia.

RON PAUL Tells Ben Bernanke To Shove It

http://www.bloggingstocks.com/2007/12/05/ron-paul-tells-ben-bernanke-to-shove-it/

Watch this video before reading my commentary.  It is a pointed confrontation between Representative Ron Paul, who wants to abolish the Federal Reserve Bank [“the FED”], and Ben Bernanke, who heads the bank. 

I heard Bernanke speak this fall at a CATO monetary conference.  My take on him is this: he endeavors to maintain political and economic stability by holding steady to a political game based on misrepresentation – misrepresentation of economic truths as well as Congress’s hypocritical misrepresentation of our interests.

The conference audience consisted of international central bankers, a phalanx of press, and academic economists.  When I asked the representative of a German bank sitting beside me why we need the FED, he shook his finger, explaining that central control is necessary or things get out of hand.  But – things are out of hand.  Representative Paul explains this to Mr. Bernanke when he confronts him with the fact that they are out of hand due to actions of the FED. 

The fallacy of carrying central control too far came home to me in an eerie way in Paris in 1987, two years prior to the collapse of the USSR.  I was there to help promote an international Antarctic dog team expedition.  One of the 6-member expedition team was the athletic Dr.Victor Boyarski from St. Petersburg.  Other expedition members were from the US, China, Japan, France, & UK.  When I learned that the quiet Russian couple who shadowed Victor were KGB agents seeing to it that he didn’t get out of hand, I nervously wondered who watches them, and who watches that watcher, and who watches that watcher, and who . . . ?  Vaclav answers this question in his essay The Power of the Powerless.  Russia was a “post totalitarian” system that took on a life of its own.  Individuals were cogs in a machine that ran without reference to individuality.  Cogs were replaceable, no matter where they were in the hierarchy.  The power of the powerless is to erode the machine by asserting individuality. 

The notion that somebody who “knows better” should use force to “keep things from getting out of hand” is carefully addressed by our Constitution.  A healthy civil society is prerequisite to a functioning Constitution.  When individuals in society don’t assert themselves, government takes over functions forbidden by the Constitution – functions it is in fact incapable of performing well if at all!  It even invents functions that are total fiction, such as “Anti-Trust”!  Written law becomes a spiritless façade. 

Rep. Paul introduces un-discussable issues with Mr. Bernanke.  Why un-discussable?  Mr. Bernanke himself explains why: he is carrying out a Congressional mandate to insure full employment and keep prices in line.  To answer Rep. Paul’s questions directly would be to prove Congress, his boss, phony.  The tools the FED uses – setting the price of borrowing, and printing money — have pernicious long-term effects.  They do not ensure employment and they do cause inflation.

Here’s the game.  In order to get elected, members of Congress dole out pork and pretend to solve problems.  This is inordinately expensive.  It requires behemothic regulatory burdens.  To pay for the spending addiction it deems necessary for re-election it taxes us directly, it has the FED print money [hidden tax], and it borrows [future tax].  Currency is deflated, productivity is hamstrung, and our “pursuit of happiness” is usurped.  Why do we vote for them? 

The proven, effective antidote to this poison is to shrink government.  When New Zealand fired her government workers, they soon found jobs in a private sector that thrived because New Zealand reduced the governmental regulatory burden.  Areas that had been regulated, such as ecology and education, revived.  We have heard similar news from Ireland, Slovakia, Chile, and Hong Kong.  But try telling Congress, or the French, German, British, and Belgian regimes, that they can’t bribe voters with pork and fantasy solutions.  Try telling them to serve people instead of robbing them.  No wonder Dr. Paul sometimes votes alone.

Of course Mr. Benanke didn’t answer Dr. Paul’s questions in front of his Congressional sponsors.  He instead confirmed his role in the Congressional game by referring to the mission Congress gave the FED.  We are Congress’s fools.  We believe that Congress can “take care” of full employment, inflation, and prices through the FED.  Congress is a runaway dog, a reverse Santa Claus whose sell-outs — financed by taxing our falling dollars — foster unhappiness, ill health, and poverty.

While I was in Washington I had lunch at the Capital Grille with an old friend who, after years of government service, is now chief financial officer for FEMA.  I wanted to get an inside view of bureaucracy.  In response to a question about problems of working for government she listed issues such as the following.

     In government it is almost impossible to fire somebody, even if they come to work drunk. She recently did manage to fire a convicted pedophile.

     Planning is neither strategic nor long-term [she favors abolishing FEMA].

     Young people start their government jobs idealistically but discover they can’t change anything.

When asked about the supposed “wiggle room” whereby people in government can do positive things,  she responded that what little wiggle exists comes only after years of working one’s way up the hierarchy.

This last point became more apparent when I visited Senator Barrasso.  I had reviewed a couple of the bills on the Senate docket, noting foolishness such as proposals to teach business how to innovate, or dictate our purchases of light bulbs.  When politicians legislate on the basis of presumed expertise about such things as business innovation and light bulb technology, they perpetrate enormous damage, as with central banking, the ethanol fiasco, and the cholesterol myth.  Senator Barrasso is 100^th in seniority and puts his hopes in cooperation.   For the most part he goes along with these things.

Pundits are saying that due to changes in technology and globalization, central bankers will have increasingly little wiggle room in the future.  That sounds like a healthy trend. 
 

In Iraq, the Critical Networks Are Social — Not Electronic

The future of war began with an act of faith. In 1991, Navy captain Arthur Cebrowski met John Garstka, a captain in the Air Force, at a McLean, Virginia, Bible-study class. The two quickly discovered they shared more than just their conservative Catholic beliefs. They both had an interest in military strategy. And they were both geeks: Cebrowski — who’d been a math major in college, a fighter pilot in Vietnam, and an aircraft carrier commander during Desert Storm — was fascinated with how information technologies could make fighter jocks more lethal. Garstka — a Stanford-trained engineer — worked on improving algorithms used to track missiles.

Over the next several years, the two men traded ideas and compared experiences. They visited businesses embracing the information revolution, ultimately becoming convinced that the changes sweeping the corporate world had applications for the military as well. The Defense Department wasn’t blind to the power of networks, of course — the Internet began as a military project, after all, and each branch of the armed services had ongoing “digitization” programs. But no one had ever crystallized what the information age might offer the Pentagon quite like Cebrowski and Garstka did. In an article for the January 1998 issue of the naval journal Proceedings, “Network-Centric Warfare: Its Origin and Future,” they not only named the philosophy but laid out a new direction for how the US would think about war.

How transformation came about, and where it hasn’t worked. The full article.

Now, an organisation from outside the teaching fold — McKinsey, a consultancy that advises companies and governments — has boldly gone where educationalists have mostly never gone: into policy recommendations based on the PISA findings. Schools, it says, need to do three things: get the best teachers; get the best out of teachers; and step in when pupils start to lag behind. That may not sound exactly “first-of-its-kind” (which is how Andreas Schleicher, the OECD’s head of education research, describes McKinsey’s approach): schools surely do all this already? Actually, they don’t. If these ideas were really taken seriously, they would change education radically.

The Economist summarized the McKinsey report, “How the world’s best performing schools systems come out on top”, in its October 18th issue. The article is well worth reading.

Among other shibboleths that come crashing to the floor, there is no correlation between teacher pay and results. Nor total spending per pupil. McKinsey recommends that teacher training be hard to get into, not easy. There’s plenty more. Reading this, I have to wonder if Wyoming schools are doing anything right.

The problem for parents is that it will be a long time before McKinsey’s proposals are adopted in this country, if ever. Certainly not in time to help your children. What, then, to do? There are many things one can do: home school, unschool, send your children to private or religious schools, shoot your television. Above all, help your kids preserve the love of learning they’re born with. All of those come under the rubric of take responsibility for your kids’ education. Then encourage them to do the same. That’s not exactly rocket science, either.

Recently, Attorney General nominee Judge Michael Mukasey refused to define waterboarding as torture. Well, why don’t you call in an expert witness, Judge Mukasey? Take the word of someone who has done it for a living. For the United States Navy.

As a former Master Instructor and Chief of Training at the US Navy Survival, Evasion, Resistance and Escape School (SERE) in San Diego, California, I [Malcolm Nance] know the waterboard personally and intimately. SERE staff were required undergo the waterboard at its fullest. I was no exception. I have personally led, witnessed and supervised waterboarding of hundreds of people.

…

There is No Debate Except for Torture Apologists

Waterboarding is Torture… Period

Any questions?

The Supreme Court has agreed to hear District of Columbia v. Heller, No. 07-290. There is a reasonably good (even for us non-attorneys) article on the background of the case, with emphasis on the NRA’s influence, in the November, 2007, ABA Journal.

Your correspondent played a small part in getting the Beeb to correct an article. That the BBC is willing to correct their articles where American media usually are not is yet another reason to read non-American media.

Public servants frequently communicate two [or more] contradictory things in one breath, such as: “I favor local control of education and I support a $76,000,000 grant from the federal government for Wyoming’s No Child Left Behind program.” [Wyoming Congressional Representative Barbara Cubin takes this position.]

Local control properly means direct parental control rather than local voter/bureaucrat/teachers’ union control. PARENTS ARE NOT PRONE TO LEAVING KIDS BEHIND. The authors of Private Education Is Good For The Poor, which studied simple private classrooms in India and Kenya, reports “The raw scores from our student achievement tests show considerably higher achievement in the private than in the government schools . ” [see Cato.org] New Zealanders found similar results with voucher-funded public schools under the sole control of trustees who were parents of kids enrolled in their school. American private education students, including minority students who receive vouchers, clearly benefit. Home school students have an achievement edge over public school students, and students in states that put “standards” on home schoolers show no improvement in achievement scores. Contrary to “expert” opinion, parents as a whole are more qualified to judge educational excellence.

BUREAUCRATS ARE PRONE TO LEAVING KIDS BEHIND Cato research cites evidence that NCLB lowers standards as schools adjust testing to assure passing grades. [see End It, Don’t Mend It Cato Policy Analysis #599] The best teachers agree. [see Rafe Esquith’s There Are No Shortcuts, or Teach Like Your Hair’s On Fire]

Dare we notice who is not being “left behind”? Authors of Private Education Is Good For The Poor write, “In all cases this achievement advantage was obtained at between half and a quarter of the teacher salary costs.” One school choice study indicates costs can be reduced by 20% when parents & kids can opt out of the mainstream public system. Another cites public school “waste” at 35%. Taxpayer organizations such as the North Dakota Policy Council are pushing for public school budget transparency. Home schoolers, whose parents pay taxes, simply ask to be left alone.

Rafe Esquith teaches 5th grade in a Los Angeles public to kids who speak Spanish or Korean at home, starts his teaching day at 6:00 am, goes home about 6:00 pm, and meets with kids on Saturdays. He advises other public school teachers on how to avoid compliance with bureaucratic meddling in the classroom, laments the loss of precious teaching time to senseless testing, raises private money to fund his programs, and endures a pay cut when he takes his class on an annual field trip to Washington, D.C. He says scornfully that there is no such thing as “no child left behind.” Some children will fall through the cracks, or choose to be left behind. The name “No Child Left Behind” is yet another misrepresentation.

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