DECEMBER 30, 2008
It is difficult to discuss Caroline Kennedy these days without also discussing Sara Palin Not Ready for SNL. I have done this myself. But it is a joke to do this even by way of being favorable toward Palin. Palin is someone who draws crowds like few politicians can. This is called "charisma". Liberal noteworthies who have met her, (like Alec Baldwin and Lorne Michael on SNL), have commented on the strength of her personality. She single handedly opposed a local power structure, almost like an up and coming mob boss, and just took over. Caroline Kennedy does not even understand the most basic requirements of a politician. Isn't this as obvious as it can get? We can only guess why she is doing this at all. My hunch is she is as much a believer in the myth of Camelot as the media (or what is left of it from that time). She actually believes, almost without arrogance, (with innocence even), that there is a place in the Senate for her because of her ancestry. The party wants her because there is money in them Kennedy Hills---plus she is a guaranteed vote. But to seriously compare Palin with Kennedy is absurd. There is not an inkling of comparability between the two women.
(posted at 9:55 am by Mike Rulle)
First we have Killer asteroids to destroy us. But if they do not get us, perhaps the Yellowstone Caldera will. There has been "unusual earthquake swarms" happening in Yellowstone of late Yellowstone Earthquakes Under Supervolcano Caldera. Unfortunately, were this to really occur, it would be as far from funny as hell on earth.
(posted at 9:50 am by Mike Rulle)
The impact of leverage certainly is demonstrated by the collapse of the housing market. While the entire housing stock is back to 2005 values (according to the latest OFHEO housing report--purchase only index) and only 10-12% from its high, it created a huge calamity. Interestingly, the average mortgage level as a percent of home values is only 55%. So how did a 10% drop create so many defaults? Because a relatively small group of home owners and speculators (and as I will never tire of saying, almost all in California, Vegas, Phoenix and Florida) leveraged to the maximum at or near the peak of the housing market which their activity itself caused. One lesson to learn is never underestimate the power of the mundane to wreak havoc.
(posted at 9:41 am by Mike Rulle)
A subtle thought by Arnold Kling as he comments on Louis E. Carabini's "Inclined to Liberty"."In general, though, I think of all people as status-seeking. Ultimately, the business executive and the politician may be after the same thing. Sometimes, the status-seeker in business does harm to others. Sometimes, the status-seeker in politics does good. Overall, I think that the business system works better than the political system at transforming status-seeking behavior into conduct that improves general welfare and preserves liberty. The challenge is to convey that in a persuasive way." It is a very traditional view of mankind as self interested "actors", yet still with the ability to advance society. I prefer "the business system" over the "political system" as well, even as both need to exist. The business system simply has more competition in it, and therefore we get better results over the long run. It is interesting that this is not more obvious to more people to the degree it should be. Hence, as Kling puts it, the "challenge" of those who believe this to be more "persuasive".
(posted at 9:32 am by Mike Rulle)
Sometimes I think this website should just send you to Kling's website. He discusses a web TV show hosted by Reason Magazine. The topic is Bailout Rage which many feel toward the Government, such as this author too. It has been a transfer of wealth from the "prudent to the profligate". Worse, it has provided an opportunity for those who believe in "big Government" (has not that term become a euphemism for Socialism?) to rail against the private sector's imperfections. Could there have conceivably been a more chaotic response (putting aside whether it actually caused much of it) by the Government than that of the last 3 months? As has been stated before, it also has created the horrible precedent of virtual unchecked power of the Executive Branch of Government, the Federal Reserve system included. How do we back away from this and "privatize" again? With Obama coming in, do not expect it for some time. If he were to unwind it by some miracle, my political support would shift to him in a nanosecond. But I won't hold my breath.
(posted at 9:21 am by Mike Rulle)
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I commented on the Economics Liberty website yesterday in a discussion on "Moral Hazard" and the impact that had on the current financial crisis versus a "failure of regulation". Clearly both had an impact. Here is my comment on Mark Thoma on the Risk Premium
"One
can imagine that investment banks and rating agencies did not engage in
high risk activity because they thought they would ultimately be bailed
out if they failed. I also agree that regulation failed because of
inability to understand how similar risks had different rules applied
to them (for example, CDS versus the underlying instrument). Also, the now obvious absurdity of relying on "terminal value" to
assess risk has been ruthlessly exposed. I recall working on M&A
assignments as a young associate on Wall Street. We would spend days
and weeks getting the details of the cash flows and balance sheets
correct to determine value. Then we would randomly assign some multiple
to the company at the end of the analysis period 5 or 10 years hence.This "terminal value" determined 80-90% of the present value--all
the detailed analysis being shown as almost immaterial. The rating
agencies and CDO producers also did detailed cash flow analysis---but
at the "end of the day" they relied on "terminal values" to justify
their ratings. They thought they were safe because home prices had
never declined. Still, government driven Moral Hazard played an enormous role. Who
in their right mind would have bought a Fannie or Freddie bond, were it
not for the assumed Treasury Guarantee the markets have always believed
in? It was impossible to even come close to understanding their
financial statements. This in turn let those GSE's engage in the most
reckless of leveraged activities. Additionally, they had enormous free
reign to bypass the income statement with those ridiculous "hedge
accounting" rules. Whatever impact the GSE's had in causing this crisis
would have been non-existent had their been no implicit guarantee on
their debt. Debt buyers did not care what the GSEs did. This is almost
a text book definition of Moral Hazard."
(posted at 8:30 am by Mike Rulle)
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