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Connecting the Dots on Financial Reform

Posted in economics, liberty, politics, USSA by dingodonkey on January 22, 2010

Let’s take just one paragraph from a recent speech by Pres. Obama, beginning with the line:

Banks will no longer be allowed to own, invest, or sponsor hedge funds, private equity funds, or proprietary trading operations for their own profit, unrelated to serving their customers.

Forget for a second about whether this is a good regulation or not, because what’s way more interesting is the way our president described it.  Read that again, with some emphasis added:

Banks will no longer be allowed to own, invest, or sponsor hedge funds, private equity funds, or proprietary trading operations for their own profit, unrelated to serving their customers.

Hoo-boy.  So the problem, in Pres. Obama’s eyes, is not that there is some grave systemic risk posed by banks running “hedge funds, private equity funds, or proprietary trading operations” (many reasonable arguments that this is true have been advanced), but rather that it is wrong for them to do so unless they are acting on behalf of their customers (i.e. “the people”) instead of for their own profit (i.e. “themselves”).  I know a word to describe this way of thinking:

Collectivism: Personal or social orientation that emphasizes the good of the group, community, or society over and above individual gain.

Don’t buy that interpretation?  Well, here’s the president’s very next line, seeming to confirm it:

If financial firms want to trade for profit, that’s something they’re free to do.  Indeed, doing so — responsibly — is a good thing for the markets and the economy.

Who decides whether they’re responsible with their money?  Doesn’t this ring of “well if you want to do [insert discouraged action here], you’re free to do so, but….”?

This president could not wait to force public bailouts on even those banks that didn’t want them (he voted for it), and then refuse to allow them to repay as soon as they could (in his capacity as president).  Why would he do that?  So he can justify direct government control of the financial sector with statements like what he said next:

But these firms should not be allowed to run these hedge funds and private equities funds while running a bank backed by the American people.

This is effective nationalization, and nothing less.

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American Fault Lines

Posted in liberty, philosophy, political by dingodonkey on September 2, 2009

We’re saved from civil war by geography.  To the extent that we are a deeply divided nation (and I believe we are, albeit along different fault lines than have been acknowledged until recently), it is not a geographic division.  It is not a division that roughly corresponds with existing political entities.  The Civil War was possible because the South was a region of the country and it was a region of the country with political structures separate from the rest of the country.  Thankfully, we have a much higher hurdle to pass today.

I picked up Thomas Paine’s revolutionary pamphlet, Common Sense.  I was at the bookstore a while ago, thumbing through a big stack of books that I had little intention of buying — a typical trip for me.  I was eager to crack into this one, having never read it but living in such interesting times that it could be strangely relevant once more.  When I finally got past the introduction, the very first sentence (and its subsequent articulation) struck me so hard I closed the book and felt no need to read on.

SOME writers have so confounded society with government, as to leave little or no distinction between them; whereas they are not only different, but have different origins. Society is produced by our wants, and government by our wickedness; the former promotes our happiness POSITIVELY by uniting our affections, the latter NEGATIVELY by restraining our vices. The one encourages intercourse, the other creates distinctions. The first is a patron, the last a punisher.

Society in every state is a blessing, but Government, even in its best state, is but a necessary evil; in its worst state an intolerable one: for when we suffer, or are exposed to the same miseries BY A GOVERNMENT, which we might expect in a country WITHOUT GOVERNMENT, our calamity is heightened by reflecting that we furnish the means by which we suffer. Government, like dress, is the badge of lost innocence; the palaces of kings are built upon the ruins of the bowers of paradise. For were the impulses of conscience clear, uniform and irresistibly obeyed, man would need no other lawgiver; but that not being the case, he finds it necessary to surrender up a part of his property to furnish means for the protection of the rest; and this he is induced to do by the same prudence which in every other case advises him, out of two evils to choose the least. Wherefore, security being the true design and end of government, it unanswerably follows that whatever form thereof appears most likely to ensure it to us, with the least expense and greatest benefit, is preferable to all others.

I don’t really believe that “liberal” and “conservative” are very useful labels for classifying the country politically.  I know a lot of politically liberal people that I would say are, in their general sensibilities, conservatives.  I’m not saying they’re economically conservative, or socially conservative, or somehow libertarian, but that they are conservative in the sense of having a prudent disposition and a deference to tradition.  When I say that I am a conservative, it is chiefly this to which I refer.  I also believe that this is something fundamental to the American system.  This sort of conservatism is the natural heir to classical liberalism.

This disposition leads me to very naturally separate government and society.  I can say that I love America but that I despise the government.  I can say I have the highest confidence in America and the least in her government.  I can say I believe that America owes her existence to Divine Providence, but also that this falls very far short of giving our government the sort of divine sanction traditionally attributed to the monarchies it overthrew.  These are ideas very old and deeply ingrained in America, but are today in peril.  There are many who do not draw these distinctions.  When their ideological opponents are the dominant party in power, they despise the nation and are ashamed to call themselves Americans.  I saw this attitude pervade the far left during the Bush years, it has always existed in the (smaller) far right.

This is the fault line.  The parties may reflect a certain kind of liberal/conservative split, but forget about that for a minute.  Here I’m talking about basic philosophy of government and society.  It’s not liberal/conservative, Democrat/Republican.  I don’t have the language to describe it, but I’m coming close saying it’s collectivist/individualist, statist/libertarian.  It’s not about policy, all of that is secondary.  It’s about identity.  Because of that, these are groups that can and do span liberalism and conservatism and both parties.

When the government becomes tyrannical, the American thing is to oppose and if necessary overthrow it.  Most of the left was very familiar with that concept during the Bush years, and most of the right is very acutely aware of it now — Americanness is not rooted in the government; in fact, the two necessarily exist in tension.

Complex World

Posted in liberty, philosophy, political by dingodonkey on August 30, 2009

Complexity, emergence, self-organization, evolution — these are all related ideas that have been written and read about pretty extensively in the last few years.  They’re good and valuable ideas, and I’m glad we’re doing a better job now of using them in our thinking.  The idea that order and structure can emerge and organize based on a few basic thermodynamical laws and the inherent properties of the basic building blocks of that structure and the environment they exist in, is very powerful.  And it’s very sensible.

I’ve encountered two very different types of mindsets that restrict the applicability of these ideas to what I’ll call “favored spaces” of understanding.  I believe both groups are wrong to do so.

  1. The first group, less common amongst the intelligentsia, is that human institutions and endeavors such as free markets are self-organizing, but that natural ones are not.  Members of this group are inclined toward small-government conservatism and libertarianism.  At the same time, they’re mostly Christians or other religious.  They look at the stunning simplicity and beauty of a complex natural world, and conclude that only a Great Being could have put it in such a spectacular ordering as what they are admiring.  That Great Being, of course, is God.
  2. The second group is somewhat the opposite.  These are academics and professional thinkers of a variety of trades.  They look out into the world and see evolutionary and emergent processes at work.  They see a world without a director, or at least without need of one.  At the same time, they turn to fields of human endeavor, and are perfectly content to deny these principles.  Free markets cannot self-organize, individual liberties must be restricted to maintain a social order and prevent chaos.  They look at the monumental institutions of mankind, and conclude that only a Great Being could maintain and advance such a spectacular ordering of human endeavor.  That Great Being, of course, is Them.

So why am I talking about all this?  I recently read an article in the Boston Globe, Too Complex to Exist:

It may be true, in fact, that complex networks such as financial systems face an inescapable trade-off – between size and efficiency on one hand, and global stability on the other. Once they have been assembled, in other words, globally interconnected and integrated financial networks just may be too complex to prevent crises like the current one from reoccurring.

Rather than waiting until the next cascade is imminent, and then following the usual modus operandi of propping up the handful of firms that seem to pose the greatest threat, it may be time for a new approach: preventing the system from becoming overly complex in the first place.

I’ve had similar notions of my own, that these big, complex, and efficient systems are growing far too complex to be managed from above, that due to their complexity they cannot be effectively regulated by the government.  But where I differ is in the conclusion I draw from it.  I don’t want to shout, “Stop!  Your achievements are too complex for me to orchestrate!  Slow down!  Do less!”  I would rather accept something that used to be very hard for me to accept: that we don’t need a small elite overseeing our work and lives, that we don’t need to be managed as part of a coherent and comprehensible system of engineered order, designed to maximize a collective quality of life.

Maybe the proponents of Intelligent Design can’t prove their holy grail theory, that nature was put into order by a Great Being.  Maybe they should stop trying to make that leap, from the structure of the eye to the existence of a Great Being designer.  Maybe there are other things they could be doing.

Maybe trying to be prepared for every outside risk is ludicrous.  Maybe it can’t be governed away.  Maybe we simply can’t do it.  Maybe that’s not what we should be trying to do at all.  Maybe we’re not Great Beings.

On a routine basis, regulators could review the largest and most connected firms in each industry, and ask themselves essentially the same question that crisis situations already force them to answer: “Would the sudden failure of this company generate intolerable knock-on effects for the wider economy?” If the answer is “yes,” the firm could be required to downsize, or shed business lines in an orderly manner until regulators are satisfied that it no longer poses a serious systemic risk.

“This is no longer a nation of independent individuals”

Posted in USSA by dingodonkey on August 17, 2009

I think it was Glenn Beck who first introduced me to the film Network.  But it was Bill O’Reilly exploding at the Banking Queen that gave me my own Mad as Hell moment and convinced me the film was frighteningly topical. For those who haven’t seen it, this film is set in a fictional 1970s depression, during which an angry news anchor at wit’s end, Howard Beale, takes to the airwaves to preach his message of raw and righteous anger and discontent to the people.  And so the Mad Prophet of the Airwaves is born.

After watching it a few times, I’ve picked up on two scenes in particular that have really captured the shifting mood of the nation since the SHTF last fall. The first is about releasing the pent-up anger we all felt at the time: I’m as mad as hell, and I’m not going to take it anymore!!

I don’t have to tell you things are bad. Everybody knows things are bad. It’s a depression. Everybody’s out of work or scared of losing their job. The dollar buys a nickel’s worth; banks are going bust; shopkeepers keep a gun under the counter; punks are running wild in the street, and there’s nobody anywhere who seems to know what to do, and there’s no end to it.

We know the air is unfit to breathe and our food is unfit to eat. And we sit watching our TVs while some local newscaster tells us that today we had fifteen homicides and sixty-three violent crimes, as if that’s the way it’s supposed to be!

We all know things are bad — worse than bad — they’re crazy.

It’s like everything everywhere is going crazy, so we don’t go out any more. We sit in the house, and slowly the world we’re living in is getting smaller, and all we say is, “Please, at least leave us alone in our living rooms. Let me have my toaster and my TV and my steel-belted radials, and I won’t say anything. Just leave us alone.”

Well, I’m not going to leave you alone.

I want you to get mad!

I don’t want you to protest. I don’t want you to riot. I don’t want you to write to your Congressman, because I wouldn’t know what to tell you to write. I don’t know what to do about the depression and the inflation and the Russians and the crime in the street.

All I know is that first, you’ve got to get mad.

You’ve gotta say, “I’m a human being, goddammit! My life has value!”

So, I want you to get up now. I want all of you to get up out of your chairs. I want you to get up right now and go to the window, open it, and stick your head out and yell, “I’m as mad as hell, and I’m not going to take this anymore!!”

But since then, that anger has worn off, and so it would with Beale in the film.  A people can’t stay outraged and furious for very long — our oppressors know this, and it gives them patience.  They know that we will eventually grow weary, and cease to passionately defend our life, liberty, honor, and property.  We will cease to defend our individual humanity:

[A]t the bottom of all our terrified souls we know that democracy is a dying giant, a sick, sick dying, decaying political concept writhing in its final pain.

I don’t mean that the United States is finished as a world power. The United States is the richest, the most powerful, the most advanced country in the world — light years ahead of any other country.

And I don’t mean the communists are going to take over the world, because the communists are deader than we are.

What is finished is the idea that this great country is dedicated to the freedom and flourishing of every individual in it.

It’s the individual that’s finished.

It’s the single, solitary human being that’s finished.

It’s every single one of you out there that’s finished.

Because this is no longer a nation of independent individuals. It’s a nation of some two-hundred-odd million transistorized, deodorized, whiter-than-white, steel-belted bodies, totally unnecessary as human beings and as replaceable as piston rods.

Our overlords are rushing along, seizing upon our ennui to fast-track our transition to collectivism.  These bastards are usurping our sovereignty and trampling over our God-given right to our own individual personhood.  Such systems always fail, often spectacularly, because no force on earth can succeed in destroying what God continually gives to each and every one of us: humanity.

But until that day, we’re finished.  Grab your ankles, America, because we’re not just in for a recession, or even a depression.  No, what awaits us is shaping up to be something far more agonizing– total collapse.  Buy guns.  Not to fight off the government — because you can’t — but to fight off the mobs.  Convert a large portion of your savings to physical gold and silver.  Learn to be self-sufficient.  Prepare while you still can.