Thursday, May 28, 2009

Now Your State Can Print Money Too!

One reason why spending at the state level can rarely get out of control is because states lack the power to print money. In other words, they must rely on taxation or municipal bond offerings to raise money to fund their budgets. Since taxation is unpopular, there is an obvious political limit to increased tax rates. Since private municipal bond investors can only buy so much debt before asking for higher interest rates, there is also a limit to the amount states can raise through borrowing. The federal government figured out how to get around this limit by creating the Federal Reserve System which is a pseudo private bank with the power to create money. The Fed can buy federal government debt from the public with fake money. Therefore, the federal government always has a buyer for its paper.

Now, the states want to get in on the action.

Of course, the states will not ask for the direct power to print money. They have a more clever way.
In a move with only one modern-day precedent, California Gov. Arnold Schwarzenegger and Democratic lawmakers are pressing the Obama administration and members of Congress for federal loan guarantees to help the state out of a desperate, multibillion-dollar jam.

California is not asking for cash, like the tens of billions given to AIG, General Motors or Morgan Stanley. (MS) Instead, the state with the worst credit rating in the nation is asking that Washington act as a sort of co-signer on the state's borrowing, to be backed up with money from the Troubled Asset Relief Program.

California leaders say that would make it easier and cheaper for the state to borrow money on the bond market, reducing the interest rate by as much as half and saving taxpayers hundreds of millions of dollars.

So, here we go. The states are "not asking for cash" - only federal government "guarantees" to get them out of a "jam". Sound familiar? This is exactly the premise of government sponsored agencies (GSAs) like Freddie and Fannie that were to "guarantee" pools of mortgage backed securities. Such guarantees resulted in the massive issuance of mortgages since they could be pooled and sold to GSAs all in an effort to "help" first time home buyers by keeping mortgage rates down (and underwriting standards lower than otherwise). That worked pretty well, right...?

If the federal government offers similar guarantees to state municipal bond offerings, it will effectively remove any constraint to state level spending. States will no longer have to face the politically unpopular choice of raising taxes to generate revenue or, gasp, cut spending. They will be able to borrow ad infinitum since the federal government will stand behind the state debt with its printing presses in tow. Such a mechanism would effectively transfer the power of printing money to the state level with all of its attendant consequences: reckless spending and runaway indebtedness all backed by the United States taxpayer who will shoulder the burden directly through increased federal taxes or by paying more for everything in the form of inflation as the dollars created to pay for this mess work there way into circulation.

Because this idea is unjust - it effectively spreads state level obligations to other states - and because it is economically disastrous - it will encourage states to spend and borrow more thus crowding out private investment and spurring inflation - and because it mitigates the short run need for politicians to face the consequences of their actions - look for it to pass unopposed.

Saturday, May 23, 2009

The Equality of the Dead

A colleague recently pointed out a seeming contradiction.

He observed the fact that the leftist environmentalists, represented by the producer of Story of Stuff, decry "consumerism" and admonish us to conserve, recycle, and sacrifice our material happiness for the sake of their deity, the earth. On the other hand, the other left, represented by the Obama administration, are doing everything in their power to actually increase "consumerism" by inflating the money supply to keep interest rates low to encourage borrowing (a policy which also increases consumption at the expense of saving), defending and propping up Fannie and Freddie to encourage more leverage and borrowing (as this shocking video makes obvious), threatening banks into lending more to consumers, tax credits to encourage first time home buyers to go into debt, new credit card rules that will make it easier for people who can't pay their bills to continue to use them, pursuing "price gouging" witch hunts against gas station owners and oil companies with the alleged goal of keeping gas prices lower, etc.

(Furthermore, their policies which tend to destroy capital formation have the further effect of reducing productivity, which not only reduces the real wages of workers but has the effect of encouraging resources to not be used as efficiently. For example, consider how much a given unit of farmland can produce today compared to a hundred years ago and then consider that any policies which reduce technological progress by reducing productivity impede this process throughout the economy and leads to a much less efficient use of labor, and natural resources.)

In the same way, observe that the greens attack corporations, technology, and capitalism for despoiling the wilderness and encouraging consumption and profits through advertising while at the same time Marxist union workers in Europe are rioting, vandalising, and "bossnapping" in response to layoffs and cutbacks by the same corporations.

Is this a contradiction? How can businesses continue to exist and employ workers while at the same time not making profits, not advertising, and not reshaping the earth? Does one wing of the left desire economic prosperity while one wing opposes it.

This is not a contradiction. What both desire is egalitarianism - just at different levels of absolute misery.

Egalitarianism means belief in the "equality of all men". Properly, "equality" means equality before the law under a system of individual rights. However, egalitarianism means something entirely different. It means that individual should receive equal outcomes regardless of their effort or ability. Quoting Ayn Rand:

They turn the word into an anti-concept: they use it to mean, not political, but metaphysical equality—the equality of personal attributes and virtues, regardless of natural endowment or individual choice, performance and character. It is not man-made institutions, but nature, i.e., reality, that they propose to fight—by means of man-made institutions.

Since nature does not endow all men with equal beauty or equal intelligence, and the faculty of volition leads men to make different choices, the egalitarians propose to abolish the “unfairness” of nature and of volition, and to establish universal equality in fact—in defiance of facts. Since the Law of Identity is impervious to human manipulation, it is the Law of Causality that they struggle to abrogate. Since personal attributes or virtues cannot be “redistributed,” they seek to deprive men of their consequences—of the rewards, the benefits, the achievements created by personal attributes and virtues. It is not equality before the law that they seek, but inequality: the establishment of an inverted social pyramid, with a new aristocracy on top—the aristocracy of non-value.

Note that both the environmentalists and the Obama's seek just this type of egalitarianism. The environmentalists do not value human achievement, progress, and technology. They wish each person to live at the level of a caveman eking out bare subsistence while minimizing his "carbon footprint". Similarly, the Obama's do not value human achievement, progress, or technology either. Their every policy is not designed to protect individual rights, encourage profit seeking, or increase productivity which is required for economic growth. Their motive is to effect an injustice - the injustice of throttling the productive and redistributing their earnings to anyone else who has not earned it.

What fundamentally unites them is the evasion of the law of identity as discussed by Rand in the above quote. Environmentalists wish that man could exist as a non-man who does not need to remake the earth in order to survive. The Obama's wish that the consequences of a non-productive man's non-action would be equal to the consequences of a productive man's actions.

A minor distinction between the environmentalists and Obama is that, as a pragmatist politician, Obama must seem like he is concerned about the economy to get elected. Therefore, his egalitarianism is cloaked in the pseudo-economic theories of Keynes and Marx which have mainstream credibility with the masses as policies that might "work". Practically speaking, all that distinguishes these two factions is the absolute level of misery to which they desire to reduce mankind. The Obama's wish to reduce every man, regardless of his ability, to the level of a K-Mart shopper who can afford shampoo, toothpaste, and anti-depressant medication, while the environmentalists wish to reduce every man to the level of a caveman who subsists on berries and bark. In fact, since the environmentalists wish to depopulate the earth, their version can be regarded as an even higher level of egalitarianism: The equality of the dead.

Saturday, May 16, 2009

Devastating "Story of Stuff" Video Critique at HowTheWorldWorks

In my post analyzing the "The Story of Stuff", an environmentalist-Marxist propaganda film aimed at grade schoolers, I linked to a youtube video that performs a line by line critique of the entire film (HT: Harold). He now has a second part posted as well. I highly recommend this devastating critique.

Incidentally, I noticed that the producer of the critique has his own site at HowTheWorldWorks. He engages in several video debates which he has posted and I highly recommend them. Here is one that I enjoyed. In this post, note the long list of anti-human environmentalist quotes he offers to refute his opponents sarcastic claim that environmentalist are really not the "misanthropic caricature" that anti-environmentalists charge them to be.

As an aside - another interesting aspect to this video is the calm, thorough logic of the producer in presenting his arguments as opposed to the hysterically illogical diatribe of his leftist opponent (which includes the offering of a middle finger at one point!). This phenomena is not a coincidence, a fact which I analyzed in some philosophical detail in this post, also here, and here.

Friday, May 15, 2009

Lockitch: "No Environmental Footprint = No Life"

As a follow up to my post from yesterday in which I argued that environmentalists must regard man as innately evil since our nature requires usage of the earth to survive, here is a brief but excellent video op-ed by Dr. Keith Lockitch of the Ayn Rand Center for Individual Rights.

Lockitch observes the fact that no matter how much anyone actually adopts so-called "green" solutions, no amount of sacrifice is enough to satisfy environmentalists. For example, even when their favored solutions are implemented like solar power or wind farms they complain that the farms despoil the land, or if you switch from disposal to cloth diapers, they complain that it takes water and detergent to clean the cloth, and so on. In other words, Lockitch states:

So long as you are still alive, no amount of green penance can fully erase your guilt...The only way to really leave no footprint would be to die - and that conclusion is not lost on many green ideologues.

He then asks us to "consider this chilling anti-human statement" made by an environmentalist who decries the birth of human life:

From the earth’s point of view, it’s not all that important which kind of diapers you use - the important decision was having the baby.

Think about that for a second! It perfectly captures the the logic of environmentalism, i.e., that human beings are a problem and that less would be more as far as their deity "earth" is concerned. Appropriately, he adds:

Remember that the next time you trustingly adopt a green solution like fluorescent light bulbs, cloth diapers, or wind farms and then find yourself puzzled because you’re still made to feel guilty and asked to sacrifice even more – remember what counts as a final solution for these ideologues

Businesses and individuals must stop kowtowing to the hysterically sanctimonious propaganda of the environmental movement and oppose them philosophically and morally. I agree with his conclusion:

The only rational response to green philosophy is to challenge it at its core. We need to recognize that it’s the essence of human survival to reshape nature for own benefit – that’s not a sin – that’s our highest virtue. It’s time we recognize that environmentalism is a philosophy of guilt and sacrifice – we should reject it in favor of a philosophy that actually values human life.

Human life depends not on adopting "green solutions" - but on opposing them.

Wednesday, May 13, 2009

The "Story of Stuff" is the Stuff of Evil

3 Ring Binder (HT: Gus Van Horn) has an excellent post regarding an environmentalist propaganda film, "Story of Stuff", that is now being shown to grade schoolers. Quoting the post:

The New York Times reports "Story of Stuff" is the next big thing in environmentalist propaganda in the classroom. Of course, they don't report it that way; the Times actually calls it "cheerful" as its simple drawings and friendly presenter are accessible to even the very young. I don't think that the shaking, desolate line-drawn individuals standing on their little piece of destroyed earth – who have no alternative but to work in nasty factories and poison their own babies through their toxic breast milk because you had to have an iPod – is "cheerful" even if the presenter refers to it in scare quotes as the "beauty” of the system.
This film is purely evil in every sense of the word. It is predicated on a willful evasion of the most basic facts of reality and perhaps, more disturbingly, appears designed to appeal to young children who do not have the power to conceptually grasp the material presented, i.e., it is purposefully designed to scare children into adopting the environmentalist religion's anti-human, anti-freedom, anti-technology credo.

A proper discussion of the ideas presented in this film would include advanced concepts and theories in the physical sciences, basic philosophy, ethics, politics, economics, finance, law, and history. To assume such a discussion is appropriate for young children presumes that the material can be inculcated at a pre-conceptual level, i.e., by emotion, which is exactly the purpose of the propaganda. In other words, the belief that discussion of these topics is appropriate implies that these ideas have the same epistemological status as admonitions to not get in cars with strangers or drink poison, i.e., it implies that the ideas presented in the film are unquestionably true.

The fact that the film is factually inaccurate, philosophically false, and contains ideas beyond the conceptual level of children are grounds enough to prohibit this film in public schools. But, there is an even deeper reason why it should be prohibited. This film should be banned from public schools on the same grounds that any religious material is prohibited in government run schools. Just as intelligent design and creationism have properly been prohibited in schools on the grounds that teaching unscientific ideas would constitute a state sanctioned promotion of religion in violation of the First Amendment, this film and all environmentalist propaganda should also be prohibited.

As this film demonstrates and as I have argued in dozens of past posts, environmentalism is indeed a religion, i.e., it has all the essential characteristics of any modern day religious movement [1, 2, 3, 4, 5, 6, 7]. The essential distinguishing attribute of religion is belief in the absence of evidence which perfectly characterizes the environmental movement. The hysterical, apocalyptic propaganda of the environmentalists is groundless [1, 2] and not only ignores but actively flouts the basic facts of reality such as the fact that there are more human beings living longer than ever before, that there can be no shortage of "natural resources" as long as there are no price controls on commodities, and their policies to restrict growth, technology, and freedom lead to a negation of human life - not its furtherance.

To further see the religious nature of environmentalism, consider that environmentalists worship a deity, "Mother Earth", or "Gaia" and regard it as an intrinsic value. That is, this movement holds that the earth is valuable apart from human life and must be preserved for its own sake. In other words, the essence of this movement, their rhetoric notwithstanding, is not to save the earth for man but from man as all of their actual actions prove unequivocally. This doctrine has profound consequences.

Man, by his nature, must use the earth to survive, i.e., he must reshape the earth to build fires, build homes, computers, automobiles, antibiotics, etc. However, if the earth is deified and held to be intrinsically valuable, any impingement upon nature must be regarded as inherently destructive of the true "value", i.e., earth and therefore evil. Therefore, logically, the environmentalist must view man, "the builder", as an innately evil creature. This fact could be likened to an environmentalist version of the concept of Original Sin, the view upheld by Christians that man by his nature is sinful. In this context, it is man's "carbon footprint" which serves as his Original Sin. It is therefore not surprising that famous environmentalists have called for the widespread death of human beings and that they routinely restrict human progress in favor of snails, mosquitoes, and swamps. Consider the following
quote by biologist David Graber:

Human happiness, and certainly human fecundity, are not as important as a wild and healthy planet....[The ecosystem has] intrinsic value, more value to me than another human body or a billion of them....Until such time as Homo Sapiens should decide to rejoin nature, some of us can only hope for the right virus to come along. (Los Angeles Times, October 29, 1989, p. 9)
In a speech which I have quoted before, noted author Michael Chrichton eloquently states:

"Today, one of the most powerful religions in the Western World is environmentalism. Environmentalism seems to be the religion of choice for urban atheists. Why do I say it's a religion? Well, just look at the beliefs. If you look carefully, you see that environmentalism is in fact a perfect 21st century remapping of traditional Judeo-Christian beliefs and myths. There's an initial Eden, a paradise, a state of grace and unity with nature, there's a fall from grace into a state of pollution as a result of eating from the tree of knowledge, and as a result of our actions there is a judgment day coming for us all. We are all energy sinners, doomed to die, unless we seek salvation, which is now called sustainability. Sustainability is salvation in the church of the environment. Just as organic food is its communion, that pesticide-free wafer that the right people with the right beliefs, imbibe."

..."With so many past failures, you might think that environmental predictions would become more cautious. But not if it's a religion. Remember, the nut on the sidewalk carrying the placard that predicts the end of the world doesn't quit when the world doesn't end on the day he expects. He just changes his placard, sets a new doomsday date, and goes back to walking the streets. One of the defining features of religion is that your beliefs are not troubled by facts, because they have nothing to do with facts."

Environmentalism relies on pseudo-science [1, 2,] and upholds the the flawed concept of "intrinsic" value, but there is one more salient feature of the environmentalist ideology which is its real lifeblood - the morality of altruism. Just as modern religion calls for self-sacrifice and self-abnegation in service to God, the environmentalist calls for self-sacrifice to its God - the earth. In other words, the environmentalist appropriates the essential ingredient of modern religious ethics but applies it in an allegedly secular framework - the pseudo-scientific framework of the ecologists.

We are admonished to give up a life of mere "consumerism" in service to a higher ideal. Just as priests embody the Catholic Church's virtue of monastic asceticism and the saintly ideals of sacrifice, abstinence, and service to others, the environmentalist calls on each of us "to do his part", to conserve, recycle, restrict, downsize, and simplify (including not eating meat, not sending Valentine's Day bouquets, not using sex toys with chemical plasticizers and not charging I-pods lest you kill polar bears). Just as modern religions warn their adherents of the consequences of their sins on Judgment Day or hold out the ideal of a heavenly afterlife replete with angels and virgins - the environmentalist warns of the consequences of our actions if we do not heed the call to sacrifice; consequences that include boiling to death from a global warming induced hell on earth, increasing natural disasters, and even increased terrorism [1,2] and suicide - all while holding out the supernatural possibility of a Disney-like harmony with nature where man somehow exists and prospers without eating animals or moving a speck of dirt. Quoting Dr. George Reisman:

It is customary for old-fashioned religion to threaten those whose way of life is not to its satisfaction, with the prospect of hell in the afterlife. Substitute for the afterlife, life on earth in centuries to come, and it is possible to see that environmentalism and the rest of the left are now doing essentially the same thing. They hate the American way of life because of its comfort and luxury, which they contemptuously dismiss as “conspicuous consumption.” And to frighten people into abandoning it, they are threatening them with a global-warming version of hell.

Hell is the environmentalists’ ultimate threat... literally to roast and boil the earth.

The effect of this philosophy on the young will be devastating. As I argued previously [1,2]:

Students are being thoroughly immersed in environmentalist propaganda from a young age...

...Just as those indoctrinated into a cult, a religion, or any philosophy which holds that man is evil and that the standard of morality is sacrifice, the budding environmentalist will be racked with guilt, uncertainty, and fear.

Just as Catholics are famous for the adult psychological consequences of guilt instilled at an early age, now environmentalist children will suffer the same fate - for the same essential reason. In other words, the Catholic concept of Original Sin holds that man is a sinner by nature which requires life to be spent in perpetual self-punishment (penance) to atone for this wrong doing. Similarly, as cited above, the environmentalist views man's nature as essentially evil which must lead to the same type of psychological effect

Perhaps, rather than asking why this film is essentially religious, a better question is in what sense is this film scientific and in what sense does it have any value whatsoever? It is, in fact, riddled with fallacies and outright contradictions and betrays a complete and utter ignorance of the physical sciences and virtually all of the humanities. [UPDATE: per Harold, see this thorough critique posted at YouTube]

For example, at one point the narrator of the film asserts:

One third of the planet's natural resource space have been consumed - gone - we are cutting and mining and hauling and trashing the place so fast that we're undermining the planets very ability for people to live here
Even her on-screen graphic literally shows a giant pie slice taken out of the earth as if it has vanished. But, how is that physically possible? As I pointed out in a past post (which should have been regarded as comical), matter can not be created or destroyed. This implies, contrary to the filmmakers claims, that the earth can not just vanish. When we dig up aluminum and use it to make a can, the aluminum does not disappear from existence. It's location changes but it does not get destroyed. For example, instead of being in the ground, the can is now in my refrigerator. In fact, to concretize this point, in the post I proposed that we use the aluminum ore mines as garbage dumps which should assuage the environmentalists as they can pretend that nothing happened to the precious ore.

And how exactly is our usage of resources undermining "the planets very ability for people to live here"? Man has been producing and using resources for some time now and the population has grown enormously yet the prices of basic commodities have not risen in real terms and in fact have decreased in many cases. This is an obvious contradiction of her claim. In other words, man's ingenuity and the profit motive see to it that there is never a shortage of anything. If prices rise then the potential for profit increases and it stimulates people to create new methods to extract resources or to find alternatives. If she were right, wouldn't we be running out of "stuff"? Apparently, not because at the end of the film she warns us about the evil corporations plot to brainwash us into buying more goods. But I thought everything was disappearing....

Again, keep in mind, a child would regard this claim as positively frightening. Unable to grasp the above argument, they might actually think that the earth is vanishing beneath them which I imagine could be enough to cause mental distress if not mental illness. (If you think I'm exaggerating see my post
Climate Change Delusion which discussed a 17 year old psychiatric patient in Melbourne who was refusing to drink water because he was convinced that if he drank water, millions would die from drought caused by climate change - a case doctors deemed to be the first known instance of "climate change delusion". I discussed this case and the relationship of psychosis, religion, and environmentalism again here.)

Elsewhere, she claims that "in her area, less than 4% of the forests are left"and that "40% of the waterway have become undrinkable". What exactly does this mean and in what context? "4% of the forests are left" as compared to when and even if that were true, so what? Does she live in an area that contains farms or maybe in Malibu that has been burned to the ground? She states this as if it is prima facie terrifying. First, someone really should tell the lumber market that wood is vanishing since the real price of wood hasn't changed much lately. But, seriously, is anyone really worried there is not enough forest in the United States? If there were a real shortage of trees, the price of wood would skyrocket and PEOPLE WOULD PLANT MORE OF THEM. In fact, I'm pretty sure wood is a "renewable resource".

And what about the "water" argument? Is there a shortage of water? Last time I was at the grocery store, the shelves were stocked with water, soft drinks, teas, and juices, and in fact, I just turned on my faucet and it came out. I'm shocked. Last I heard, we have the technology to clean and purify it (or desalinate it if we use salt water). Again, does water vanish when it goes down the drain? No, I think it goes back into the ground or to a water treatment facility. Also, water has been known to evaporate but then something called rain drops it back on us. Is there any doubt, that as a result of capitalism and the so-called evil "corporations" that more clean water is available to a larger mass of people that at any time in mankind's history? (Ironically, in
this post, I cited environmentalist concerns over water bottles to which they surprisingly seem opposed - but doesn't that imply that we have a lot of water...can anyone seriously argue these people care about people?!)

Consider another typical argument often made by environmentalists - she says that

it's not just that we are using too much stuff but we are using more than our share. We have 5% of the world's population but using 30% of the world's resources and producing 30% of the waste if everybody consumed at U.S. rates we would need 3 to 5 planets. [emphasis mine]
This argument is based on a total evasion of the concept of consumption. In a free market, one can not "consume" without first "producing". In other words, if you go into a restaurant and say "OK, I'm here to consume" do you think they will just give you food for free? Of course, your "demand" is equal to your "supply" meaning that one must first produce something of value and then offer to exchange that value for something else of equal value - a principle known in economics as Say's Law. To say that Americans "consume 30% of the world's resources" is to say that Americans produce 30% of the worlds wealth. Yet, she equates the ratio of the population of America to the population of the world (5%) with "consumption" as if there is some necessary identity between the two.

To see this more clearly, let's say you lived on a desert island with a bunch of people. Let's say that a couple of guys work really hard cutting down trees, planting crops, domesticating livestock, making tools, etc. while the other people just plant a few bananas and make some beads. Now, the guys that produce a lot have a lot to offer and so they would likely trade with one another meaning that one guy might trade his stock of wood for some cattle while the other less productive people would trade one of their beads or bananas for a smaller portion of the wood. Is this not completely fair? Yet, the environmentalist would say "but the 2 guys are only a small percent of the overall population and yet they are 'consuming' a large portion of the 'resources' and creating all the waste." When put in this light, one can see that this is a ridiculous argument that evades the essential nature of production and its relationship to consumption. One must produce value in order to consume. The more one produces then the more one can consume.

This particular environmentalist argument combines a flawed understanding of basic economics with an egalitarian theory of "social justice" once again derived from their religious ethical view of morality. First, they imply that "resources" are finite which simply exist rather than understanding that goods must be produced. In essence, they regard wealth as a big pie to be sliced up amongst the population in such a way that each person gets his "fair" share of the pie which evidently is equal to his ratio of the population. Who determines this and why? They don't say. In fact, this whole theory that greater population will require "3 to 5 more planets" harkens back to
Malthus, who notoriously predicted that we were running out of food - in 1798!

Of course, it should be obvious that the only real threat to the actual supply of timber, water, and any other essential product are the environmentalists themselves who use government coercion to usurp the right to trade and own property, stop progress, and restrict technological advancement. Consider that technology in a capitalist society has resulted in less land usage to produce a greater amount of food. Consider that technology allows us to air condition or heat our homes which can protect us from "climate change". Technology allows us to MOVE if conditions change and to relatively cheaply and easily construct new homes anywhere including within deserts and on mountains and someday on other planets. Consider that technology results in life saving medicines that lead to longer, happier lives.

If environmentalists were truly concerned with mankind's happiness, wouldn't they study the system that has brought about the greatest prosperity, longevity, and human happiness in mankind's history? Wouldn't they regard capitalism and the principle of individual rights upon which it is based as a bastion of civilization and human happiness? If they were truly concerned about human life, wouldn't they uphold this system and seek to advance it everywhere on earth so that more could enjoy its benefits? If they were truly concerned with alternative energy or "green" technologies wouldn't they become engineers or scientists and seek capital from investors to pursue research and development of products which they could trade on a free market if anyone wanted them?

Don't be fooled - the environmentalists are concerned about human beings - but it is not our happiness that concerns them.

[UPDATE: per Harold, see this thorough
critique posted at YouTube]

Tuesday, May 12, 2009

Shock: Fed Oversight?

This is truly shocking. A must see.

My colleague who sent this to me adds:

Per the Fed’s website: "The Office of Inspector General (OIG) conducts independent and objective audits, inspections, evaluations, investigations, and other reviews related to programs and operations of the Board of Governors of the Federal Reserve System (Board). OIG efforts promote integrity, economy, efficiency, and effectiveness; help prevent and detect fraud, waste, and abuse; and strengthen accountability to the Congress and the public. The OIG’s work assists the Board in managing risk and in achieving its overall mission to foster the stability, integrity, and efficiency of the nation’s monetary, financial, and payment systems so as to promote optimal macroeconomic performance."

Monday, May 11, 2009

Chrysler's Debt Holders Meet Karl Marx

In several past posts [1,2,3], I discussed the Obama Administration's fascist tactics related to their recent handling of Chrysler's secured debt holders. These debt holders, relying on the rule of law and hundreds of years of jurisprudence, expected to be repaid first in any sort of bankruptcy proceeding. When they realized that Obama is trying to thwart the rule of law, several dissident bond holders mounted a lawsuit aimed at stopping this process, however, they have now thrown in the towel. Thomas Bowden from ARC discusses the case here. [update: Alex Epstein discusses what should have happened here if we did not live in "Bailout Nation"]. In an article titled “U.S. Played Rough With Chrysler’s Creditors”, the WSJ recounts the recent events surrounding this travesty.

The results of these hardball tactics were on display Friday, as the last resisters of a deal to slash the value of Chrysler debt abandoned their effort to fight it in bankruptcy court. That raised the chances for a relatives swift transit through Chapter 11, producing a new Chrysler that is 55%-owned by a trust for union retirees, 35% by Fiat SpA-a company that hasn’t even been a Chrysler creditor-and not at all by the senior secured lenders.
The more fundamental concern related to this series of events is that such government tactics represent a major broadside on the rule of law and a further dramatic step on the road to outright fascism. What is fascism and what distinguishes it from socialism?:
The main characteristic of socialism (and of communism) is public ownership of the means of production, and, therefore, the abolition of private property. The right to property is the right of use and disposal. Under fascism, men retain the semblance or pretense of private property, but the government holds total power over its use and disposal . . .

Under fascism, citizens retain the responsibilities of owning property, without freedom to act and without any of the advantages of ownership. Under socialism, government officials acquire all the advantages of ownership, without any of the responsibilities, since they do not hold title to the property, but merely the right to use it—at least until the next purge. In either case, the government officials hold the economic, political and legal power of life or death over the citizens . . .

Needless to say, under either system, the inequalities of income and standard of living are greater than anything possible under a free economy—and a man’s position is determined, not by his productive ability and achievement, but by political pull and force.
If continued, this disturbing trend will end in chaos, economic stagnation, and oppression as capital flees the country or never enters it in the first place. What incentive would any investor have to invest in "secured debt" when the government can and will change the rules at any time? Even if Obama mitigates this type of intervention going forward, the cost of capital will likely rise as investors demand a larger premium (interest rate) to compensate them for the risk that the government will not protect the rule of law. America, rather than a bastion of safety under a stable system of laws, will begin to resemble a third world emerging market - a state of affairs for which we will all pay the price. Unfortunately, this trend is far from ending. In fact, it is just beginning as the PPIP (Public-Private Investment Program) makes clear.

To flesh out the more fundamental premises behind these programs, consider a statement in the WSJ article:

The White House ‘s role in restructuring Chrysler has sent a shudder through the community of lawyers and lenders in the field of bankruptcy and corporate workouts. Critics complain that the administration has violated a bedrock principle of American capitalism and unfairly demonized financial firms that are vital to the functioning of the economy and its eventual recovery.

Administration officials reply that the Chrysler crisis required bold action. While Chryslers suppliers, dealers and unionized workers are critical to its survival-and so is Fiat, which will contribute high-efficieny engines and foreign distribution-the creditors were expendable.

“You don’t need banks and bondholders to make cars,” said one administration official. [emphasis mine]

What!? So, according to the Obama administration, capital is not required to build factories, car engines, or dealerships?! Of course, this is a statement that contradicts the most obvious facts of reality. What is the root of such a claim made not by an uneducated ignoramus but presumably by a highly educated member of Obama's administration? The root of this claim can be found in virtually every college classroom, the same college classrooms funded and supported by the very businessmen who decry the real life consequences of the lessons taught in those classrooms.

The root of this claim is Karl Marx’s Labor Theory of Value.

In essence, Marx’s theory holds that the price of a good consists solely of the physical work required to make the good. Under this doctrine, if a good sells for more than the sum total of the wages paid to workers who allegedly are entirely responsible for its production, this excess (or profit) is held to be exploitative to the workers. This theory is the bedrock foundation of Marxian exploitation theory and of the entire philosophy of Marxism. Under this theory, capitalists serve only to exploit the workers by siphoning off revenue which rightly belongs to the worker. Thus, “you don’t need banks and bondholders to make cars.”

Of course, it is a fact that labor is one of the determinants of a good’s value, a fact recognized by classical economics. However, the idea that a good’s value consists entirely of the physical labor required to produce it is absolutely false. For a full refutation of this argument, I recommend Dr. George Reisman’s, Capitalism: A Treatise on Economics which can be found in its entirety here. Quoting Reisman:
The Marxian exploitation theory has been and continues to be among the most influential economic doctrines in the word. Despite the global collapse of socialism, it continues to be the prevailing theory of wages. Its truth in the explanation of the determination of wage rates is taken for granted both by the overwhelming majority of intellectuals and by the great mass of ordinary citizens in all countries of the world...

According to the exploitation theory, capitalism is a system of virtual slavery, serving the narrow interests of a comparative handful of "exploiters" - the businessmen and capitalists - who, driven by insatiable greed and power-lust, exist as parasites upon the labor of the masses. This view of capitalism has not been the least big shaken by the steady rise in the standard of living of the average person that has taken place in the capitalist countries since the beginning of the Industrial Revolution. the rise in the standard of living is not attributed to capitalism, but precisely to the infringements that have been made upon capitalism. Thus, people attribute economic progress to labor unions and social legislation, and to what they consider to be improved personal ethics on the part of employers...

As I have indicated, the exploitation theory has been and continues to be a guiding force in the thoughts and actions not only of the various Communist and socialist parties around the word, but also in those of the great majority of people who regard themselves as anticommunists and antisocialists. It is believed to be correct by almost everyone, not as a description of present-day conditions, to be sure, but as a description of the workings of laissez-faire capitalism-of capitalism free of all government intervention into the economic system...
Dr. Reisman offers a full refutation of Marx's theory along with an exposition of the classical labor theory of value. See particularly:

Chapter 11, Part C 4: The Labor Theory of Value of Classical Economics
Chapter 11, Part C 5: The “Iron Law of Wages” of Classical Economics
Chapter 11, Part C 5: Marxian Distortions of Classical Economics; The Final Demolition of the Exploitation Theory
Chapter 14, Part A: The Productivity Theory of Wages, The Marxian Exploitation Theory

Why is it that Marx's ideas continue to dominate academia despite economic theory and the facts of reality which overwhelmingly refute it? Is there an even deeper cause that explains Marxism's appeal? Marxism has gained currency because its fundamental premises resonate with the prevailing ethos of our culture: the morality of altruism.

The morality of altruism regards anyone who pursues their self-interest as evil. This is why Marxism, which regards capitalism to be "driven by insatiable greed and power-lust", is palatable to modern intellectuals. Marxist economic theory much like the science of global warming provides a pseudo-scientific veneer to the socialist agenda - an agenda which seeks to subjugate the individual in the name of egalitarian social justice. Only a philosophy which boldy and proudly upholds the right of the individual to exist for his own sake, i.e., a philosophy which upholds rational self-interest, can defeat Marxism.

For those who do believe that banks and bondholders are "necessary" to make just about anything and to those who grasp that the foundation of civilization: individual rights and the rule of law are necessary if man is to survive and prosper, it would serve them well to understand what modern universities are and are not teaching, and demand “value” for their money.

Friday, May 8, 2009

Plato's Beauty Pageant

This article reports on a recent "beauty pageant" that took place in Saudi Arabia:

Sukaina al-Zayer is an unlikely beauty queen hopeful. She covers her face and body in black robes and an Islamic veil, so no one can tell what she looks like. She also admits she's a little on the plump side.

But at Saudi Arabia's only beauty pageant, the judges don't care about a perfect figure or face. What they're looking for in the quest for "Miss Beautiful Morals" is the contestant who shows the most devotion and respect for her parents.

"The idea of the pageant is to measure the contestants' commitment to Islamic morals... It's an alternative to the calls for decadence in the other beauty contests that only take into account a woman's body and looks," said pageant founder Khadra al-Mubarak.

"The winner won't necessarily be pretty," she added. "We care about the beauty of the soul and the morals."

To me, what is interesting about this pageant is that it represents a concretization not just of religion but the more fundamental philosophy upon which modern religion is based: Platonism.

In my post, Meet Cass Sunstein - Your Choice Architect, I discussed the influence of Platonism on his evil ideology. Here, in a completely different context, we see the influence of Plato again. It is not coincidental that his philosophy appears in evil contexts. Why is this so?

According to Plato, actual things are just imperfect reflections of ideal forms that can only be accessed by the enlightened.

According to Socrates [Plato's representative], physical objects and physical events are "shadows" of their ideal or perfect forms, and exist only to the extent that they instantiate the perfect versions of themselves. Just as shadows are temporary, inconsequential epiphenomena produced by physical objects, physical objects are themselves fleeting phenomena caused by more substantial causes, the ideals of which they are mere instances. For example, Socrates thinks that perfect justice exists (although it is not clear where) and his own trial would be a cheap copy of it.

The allegory of the cave (often said by scholars to represent Plato's own epistemology and metaphysics) is intimately connected to his political ideology (often said to also be Plato's own), that only people who have climbed out of the cave and cast their eyes on a vision of goodness are fit to rule. Socrates claims that the enlightened men of society must be forced from their divine contemplations and compelled to run the city according to their lofty insights. Thus is born the idea of the "philosopher-king", the wise person who accepts the power thrust upon him by the people who are wise enough to choose a good master. This is the main thesis of Socrates in the Republic, that the most wisdom the masses can muster is the wise choice of a ruler.

Plato's philosophy leads to a rejection of this world, i.e., reality, in favor of an idealized or perfect world as conveyed to the masses by enlightened Philosopher Kings (like the Pope, the Ayatollah, or Cass Sunstein). It is obvious that such a philosophy is the essence of religion. In fact, Platonism was hugely influential on early Christian theologians. For a detailed accounting of the early Christian church and the influence of Greek philosophy I highly recommend, The Closing of the Western Mind, by Charles Freeman. For example, Freeman discusses Clement of Alexandria [c.150-c.215]:

Clement was in effect drawing on Middle Platonism, which stressed the power of "the Good" or "the One" to act in the world through the Platonic Forms. Platonism was ideally suited to providing the intellectual backbone of Christianity in that Platonists, particularly Middle Platonists, were dealing with the concept of an unseen, immaterial world in which "the Good," or God, could be described as absolute while at the same time being able to have a creative and loving role. Middle Platonists had developed the idea of the human soul from earlier Greek philosophy. They saw the soul as distinct from the human body and able to exist independently of it and to make its own relationship with a providential God, who, in his turn, might reach out to it living and creatively through the Forms, or "thoughts of God," as they were now described by Christian theologians.
To Plato, everything in the world is an imperfect reflection of the ideal, so logically, this doctrine leads to a disdainful, contemptuous view of reality and of man's nature. Consider the Christian doctrine of Original Sin which regards man as inherently sinful by virtue of having obtained knowledge and the capacity to be human in the Garden of Eden. Note that the essence of religion is faith or belief in the absence of evidence, which is considered a virtue. Note that religion urges the rejection of this world in favor of a heavenly after life; it promotes the worship of an unknowable God; it demands the rejection of sexual pleasure, and in the case of the beauty pageant (and in Islam generally) the literal cover up of physical feminine beauty.

Another important feature of Platonism mentioned in the Freeman quote is the separation of the body from the soul. Note the explicit recognition of this dichotomy by the pageant founder: "The winner won't necessarily be pretty," she added. "We care about the beauty of the soul and the morals." Again quoting Freeman (p. 146):

In contrast to Aristotle, who had talked of the soul as the essence of a human body, using the analogy that a body without a soul would be like an axe that cannot cut, Plato had stressed the independence of the soul from the body and its continuing existence from one body to another.
This doctrine was hugely influential on early Christian theologians such as Origen who argued:

that the soul was preexistent to the body in which it came to live and could move on to others after the death of a body (transmigration), but gradually the belief was consolidated that each body had its individual soul given to it at conception and that soul continued to exist eternally after the death of the body, something Aristotle could never have imagined. It could enjoy the happiness of heaven or the suffering of punishment in hell for eternity.
Origen stressed that the process of learning "true reality" requires devotion and commitment, an attribute of paramount importance to the pageant contestants:
Origen drew on the Platonic idea of a long, disciplined period of training before it was possible to achieve knowledge of the true reality - in their case God. The first step, the desire to commit oneself to the long path ahead, was the most important. This created the possibility of being "transformed, " a key concept for Origen. Those who selected themselves for "transformation" were the equivalents of Plato's Guardians, and like the Guardians their selection distinguished them from the those less committed to recovery.
Note how this philosophy naturally leads to the false alternative between "morals" and "physical beauty". Under this doctrine, in contrast to the Forms or God, physical beauty is regarded as fleeting and imperfect. Accordingly, to the Platonist, it is much more important to devote or commit one's life to the soul which is eternal. Therefore, the choice offered by this false alternative is "morals", i.e., sacrifice and the dictates of dogmatic authority or "beauty", i.e., the physical realm detached from morality.

Today, we see this all around us. It is implied in the false alternative between "religion", represented by the Religious Right in America or the fundamentalist Muslim fanatics in the Middle East, and subjectivism, represented by modern cultures' glorification of physical power and brute materialism detached from the concept of morality. It is implied by Cass Sunstein's distinction between the "consumer" who imbibes "infotainment" and the "citizen" who aspires to higher ideals. It is implied by the pageant founder when she declares:
The idea of the pageant is to measure the contestants' commitment to Islamic morals... It's an alternative to the calls for decadence in the other beauty contests that only take into account a woman's body and looks."
In reality, if morality is derived objectively, i.e., through reason using man's life as the standard of good and evil, then it becomes obvious that one can and ought to be moral and beautiful. In other words, there is no necessary dichotomy between the achievement of rational egoistic values and physical beauty. Under this philosophy, the philosophy of Objectivism, the idea of morals without beauty or beauty without morals or a beauty pageant where the contestants cover their bodies, can be seen as the ridiculous and disastrous false alternative that it is.

Wednesday, May 6, 2009

Good News II: Cliff Asness is "Unafraid in Greenwich"

It's heartening to see more financial professionals speaking out against the Obama administration's fascist tactics related to their treatment of Chrysler's debt holders. Another prominent hedge fund manager, Cliff Asness, who runs AQR Capital, "has distributed an opinion letter discussing the most relevant topic over the past few days that has gotten no MSM attention". In his letter titled "Unafraid in Greenwich Connecticut" which can be found here, he writes:
Let’s be clear, it is the job and obligation of all investment managers, including hedge fund managers, to get their clients the most return they can. They are allowed to be charitable with their own money, and many are spectacularly so, but if they give away their clients’ money to share in the “sacrifice”, they are stealing.

...This is America. We have a free enterprise system that has worked spectacularly for us for two hundred plus years. When it fails it fixes itself. Most importantly, it is not an owned lackey of the oval office to be scolded for disobedience by the President.
After citing fears in the investment industry of retaliation by the government against those who speak out, Asness fittingly ends his letter with the following sorry statement on freedom in America:
I am ready for my “personalized” tax rate now.

"Carbon Neutral" Team Neutralized By Lack of Carbon; Rescued By Carbon Positive Team

According to the BBC:
An expedition team which set sail from Plymouth on a 5,000-mile carbon emission-free trip to Greenland have been rescued by an oil tanker.
Fill in your own joke here.

Tuesday, May 5, 2009

Reminder: Stop Confirmation of Cass Sunstein

Below is the text of the letter I sent to my Senators via this site or this site. This is incredibly easy to do and will make a difference. Take the time to oppose the confirmation of Cass Sunstein (see my detailed post here). Feel free to use the text below:
President Barack Obama has nominated Cass Sunstein, to head the White House Office of Information and Regulatory Affairs.

As a proponent of "choice architecture", Mr. Sunstein's views on the role of government are completely antithetical to the principle of individual rights upon which this nation was founded. For instance, Mr. Sunstein's support for a "fairness doctrine" on the internet and "civility checks" on emails are but two ominous examples of his support for unlimited and arbitary government power over the lives of individuals.

I urge you in the strongest possible way to vote NO on Cass Sunstein’s confirmation.

Some Good News: Chrysler Lenders Fight Back

In my recent Breakdown of the Rule of Law post, I discussed the Obama administrations fascist attempts at violating the rights of Chrysler's secured lenders. A colleague sent me the following link with some good news:
If the Obama administration expected the senior creditors of Chrysler to fold their tents under political pressure, they may have gotten a rude shock today. Thomas Lauria, who accused the White House of threatening the creditors withn humiliation at the hands of the White House press corps, has filed a motion to halt the administration’s machinations on behalf of the UAW in the Chrysler bankruptcy. Lauria and his allies claim that the Obama administration has violated the Constitution in their bid to devalue the senior creditors’ holdings on behalf of junior creditors, and have some precedent to support the allegation.
If more had the courage of Lauria to fight the government on principle, Obama and his ilk might find that whole pesky Constitution thing to be a fairly weighty barrier to his agenda. Beth has a video interview with Lauria here.

Oppose "Hate Crimes" Bill As An Attack On Free Speech

In several past posts, I have argued that free speech is under attack. Politically, it is being attacked from several angles. The "campaign finance laws" are being used to criminalize political speech which I analyzed here. "Indecency" laws are a weapon being used by the thought police which I wrote about here. Perhaps, the most insidious front on the war against free speech is the so called "hate speech" movement. For example, here I wrote about a case in Canada where a magazine was being prosecuted under "hate speech" codes for criticizing Islam.

Now, according to http://www.congress.org/:

By a vote 249-175, the House last week passed H.R. 1913, a bill making it easier for law enforcement authorities to prosecute hate crimes.

Civil rights groups and liberal clergy members from all 50 states are fanning out across Capitol Hill this week to lobby for the legislation in an attempt to counter the notion, advanced by socially Clergy Lobbies for Passage of Hate Crimes Bill conservative groups, that religious leaders are uniformly opposed to the measure.

Although a majority of Senators are almost certainly in favor of the legislation, the question is whether supporters can win the 60 votes needed to overcome a filibuster that conservatives may launch to kill the bill. President Barack Obama has said he will sign the measure into law if it lands on his desk.Should Congress pass the hate crimes bill?
You still have a chance to make your voice heard. Go to http://www.congress.org/ and write your representatives opposing this bill.

For more intellectual ammunition, here is another excellent op-ed by Robert Tracinski. He writes:

Under such a system, anything goes. The entire criminal justice apparatus can be used as a political tool by whatever faction happens to be in power. Crimes can be whitewashed if done for the "correct" political motives, while extra punishment can be meted out to those with "incorrect" motives.

Where will this end? If a man convicted of an actual criminal act can be sentenced to additional years in prison simply for his ideas--then, in logic, why can't someone be punished solely for his ideas? Even if he has not committed a single action against another person, why can't he be tried simply for being a "purveyor of hate"? Indeed, this development is already foreshadowed by campus "speech codes," which bar statements deemed "offensive" to protected groups.

The first official step on this deadly path--the creation of a special category of "hate crimes"--should be resoundingly rejected. It is an attempt to import into America's legal system a class of crimes formerly reserved only to dictatorships: political crimes. Instead, we should insist on the one principle that forms the foundation for the protection of all rights, i.e., that the purpose of law is to punish criminals for initiating force against others--not for holding bad ideas.

Sunday, May 3, 2009

The Breakdown of the Rule of Law

Beth at Wealth Is Not The Problem, wrote a succinct summary of the recent deal between Chrysler and the government demonstrating how it represent a complete overthrow of the rule of law. She concludes:

Private property rights and the rule of law are two essential bastions of liberty and civilization. Our chief executive is trampling on both. He justifies it in the name of averting an economic disaster. But the real disaster is the long term effect his policies will have on our future liberty and prosperity. You can not save the economy, or anything else of real value, by destroying the very foundations of civilized society.
George Reisman also wrote about this deal in his post Injustice as Routine saying:

A further aspect of this same injustice is the government’s naked overriding of Chrysler’s contractual obligations to its bondholders in order to place the U.A.W. and its pension fund ahead of more senior debtors in the Chrysler bankruptcy. Those bondholders who stood up for their contractual rights were denounced by President Obama for refusing to make “sacrifices,” i.e., of their contractual rights. Many of them then gave in, fearful no doubt as to how the government might use its vast array of arbitrary powers against them if they refused, e.g., how the IRS would treat their income tax returns, how the EPA, SEC, FTC, et al. would treat their application for permissions of this or that kind.

Thrutch, in his post regarding this story, Fascism Comes to America, says:

The brazenness of these attacks -- and the very muted protest they elicit -- suggest that full-blown fascism is a very likely possibility in the not too distant future.

I strongly suggest you make your voice heard before it's no longer possible.

Do you think they are exaggerating? Consider this ABC news report via Drudge. According to the report:
A leading bankruptcy attorney representing hedge funds and money managers told ABC News Saturday that Steve Rattner, the leader of the Obama administration's Auto Industry Task Force, threatened one of the firms, an investment bank, that if it continued to oppose the administration's Chrysler bankruptcy plan, the White House would use the White House press corps to destroy its reputation.
The White House denied the charges:

The White House and a spokesperson for the investment bank in question challenged the accuracy of the story.

"The charge is completely untrue," said White House deputy press secretary Bill Burton, "and there's obviously no evidence to suggest that this happened in any way."

However, despite the denial note the following:

President Obama singled out Lauria's clients for criticism when he announced the Chrysler plan on Thursday.

"While many stakeholders made sacrifices and worked constructively, I have to tell you some did not," the president said. "In particular, a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout. They were hoping that everybody else would make sacrifices, and they would have to make none."

President Obama also said of Lauria's clients, "I don't stand with them. I stand with Chrysler's employees and their families and communities. I stand with Chrysler's management, its dealers, and its suppliers. I stand with the millions of Americans who own and want to buy Chrysler cars. I don't stand with those who held out when everybody else is making sacrifices."

So the alleged chief executive, charged with upholding the Constitution of the United States, brazenly declares that he does not "stand" with individuals who assert their proper rights under the terms of a contract but instead stands with everyone and anyone who does not have a contractual claim. Why? Because, under the morality of altruism, sacrifice is the good and those who have legitimate claims under the contract have the most to lose. To the extent that they refuse to sacrifice - they are evil. This is why individual rights, the rule of law, and capitalism are incompatible with the morality of altruism. Logically, altruism must lead to injustice. The report ends with this frightening comment:

Lauria said the president saying he doesn't stand with his clients "kind of sounds like 'You're fair game.' In whatever sense. People are scared. They have gotten death treats. Some have been told people are going to come to their houses. God forbid if some nut did something, I'm just wondering how the president would feel."

Obama would feel what any fascist dictator feels when his thugs do his bidding - he would feel nothing.