My memento of the Bear Stearns collapse

On my way from work to Grand Central, I often walk by Bear Stearns' headquarters. On the evening of last March 18th, the LaRouchers were out in force. I've kept forgetting for a long time to post this picture; click it to enlarge. All I had was my Motorola RAZR, but the picture still turned out very well.



I've previously blogged here and here about encountering LaRouchers. The one thing they did get right is opposing the bailout. But look at their insanity on these completely unrelated signs! Sadly, it isn't just ex-con Lyndon LaRouche and his followers who believe that government must "rebuild" U.S. industries. Plenty of Republicans and Democrats also believe that the government must "do something" to "revitalize" or "stimulate" the economy. They don't even differ much on which industry or industries should get "help."

But LaRouche is about the biggest nutjob of them all. He wants to revert the United States to early 20th century, if not 19th century technology. Railroads? Steel? Water power? It goes without saying, as Bastiat would remind us, that with every dollar the government takes from us to spend on industries we don't support as consumers, the rest of us in the private sector have a dollar less to spend on modern industries we do like: computers, media, airlines, etc. When we have the freedom to save and spend as we see fit, the natural outcome is that the most desired and/or most efficient goods and services will survive.

I'm never surprised at mainstream media reporters' stupidity

Here's a screenshot I took yesterday of Yahoo News:



Really, where's the surprise? It's once again that pesky thing about supply and demand. These are the same AP economic reporters who periodically write about mortgage rates falling, and in the next breath wonder why mortgage applications go up.

Here's a little bit older screenshot I've been meaning to post for a while. Nothing subliminal here, I suppose?

Despite being so rich, Warren Buffett is still ignorant of real economics

Buffett is clearly wealthier than I am, and I'll readily concede a "smarter" investor -- whatever "smarter" means. But he might want to use some of his billions and take some real economics courses. Walter Williams, Don Boudreaux, Russ Roberts at George Mason University, or Burt Folsom at Hillsdale College, could set him straight on free trade. And soon Buffett can take the class "History of [Economic] Thought" at Trinity University, which will be taught by Richard Ebeling. I'm proud to call Dr. Ebeling a friend, and I was saddened when he recently left his position as president of the Foundation for Economic Education to accept his position at Trinity.

Alternatively, Buffett can take sporadic lessons from me at no charge. I've previously written about his mistaken belief that a nation shouldn't import more than it exports. Now he could use a lesson on central banking and what it does. From his recent interview with El País (my translation from the original article's Spanish):

Buffett: It is certain that during the Bush era there has been a gradual reduction of taxes that the greatest fortunes pay, whereas the middle classes pay more and more. And I take advantage of each occasion I have to denounce it. On the subject of the crisis, it's evident that after what happened that we must have more regulation. Even the International Monetary Fund supports that. Perhaps not very short term, but all crisis brings about regulatory changes. I do not believe that they are deep, but without doubt what it has happened to banks and American investment banks will lead to stricter financial regulation.

El País: What has failed so that the mortgages garbage unleashed this storm? Do we attribute the errors to the banks or to bank supervision?

Buffett: The banks exposed themselves too much, they assumed too many risks. So the problem is evidently the banks. They are the guilty ones. It does not need to be put on anyone else.

EP: Crisis or recession?

Buffett: I believe that real problems could have arisen in the case of Bear Stearns' drop. The recession is a technical term defined by the National Bureau of Economic Research: two trimesters of falling GDP. We have not arrived at that, so technically we cannot speak about recession.

EP: If you ask someone who's remained unemployed in Spain like the United States...

Buffett: For the one who loses a job there's surely a recession. But to my surprise, the unemployment rate has not changed too much up to now. It shocks me that with everything that happened in financial markets, real estate markets and other sectors, that unemployment has not risen more. I would not be surprised that unemployment will increase in the next months.

EP: That means the worst is yet to come?

Buffett: The steps that authorities and supervisors have taken hold the possibility that problems of bigger size may arise. I do not believe that the situation will deteriorate in the financial markets. General conditions in the business world will deteriorate, but only for a time.

EP. Are there going to be more victims after Bear Stearns?

Buffett: In March we crossed over the worst moment and in my opinion the Federal Reserve's decision in the case of Bear Stearns was a great step forward. It was a decisive moment for the financial system. A line in the sand to contain the crisis. This incident helped eliminate the problem, or at least it was moderated for other investment banks.

...

Buffett: We have an enormous bubble in the real estate sector. Not in all of the country, but in states like California, Arizona or Florida yes we have a true bubble. And we have it because many of those houses were financed at 95% to 100% by banks that in many cases didn't even know what they were buying. Combined with the financial crisis, the repercussions of all that are going to be very painful.

...

EP: You do not seem very satisfied with what's happened in the Bush era. Between the Democrats: Barack Obama or Hillary Clinton?

Buffett: I would bend over backwards completely with both.

Note: the verb used there is "Me volcaría," and the root "volcar" means a variety of things. But from what Buffett says after, it doesn't sound like he meant the "upset" or "overturned" meanings.

EP: Obama or McCain?

Buffett: Either of the two Democrats before the Republican candidate, although McCain is a good sort, with notable political ideas. I will support 100% the Democratic candidate.

EP: Why?

Buffett: I am closer to their ideas on the tax system, on health care, on abortion rights, the right of the woman to choose if she wants to have a child or not. John McCain is a wonderful man, but he would not agree with me on those. I believe that if McCain wins, it is not going to do anything about the matter.

We'll begin from the top. Is Buffett really so blinded by ideological bias, like Hillary Clinton, that he won't admit why a rich investor deriving income principally from investments will certainly pay a lower tax rate? It's because the income is derived mostly from investments, since capital gains are taxed at a lower rate than income. Buffett and other liberals want to tax investments the same as income, which is absurd: actually, any capital gains tax is absurd, because someone had to earn income to invest in the first place, hence it's double taxation. Moreover, raising the capital gains tax to equal income taxes will wreck the financial markets by crimping the incentive to invest. No skin off Buffett's nose, though, since he's already made his billions, but it will screw over the millions of Americans who are trying to save for themselves. This is what liberals want, however: if people can't save enough for themselves, if they can't earn enough for themselves (being taxed to death or even being taxed/regulated out of a job), then they must depend on government.

The truth is that those evil "investment managers" may pay an overall lower tax rate than "a teacher," but the former will still pay far more in absolute dollars. And as "honorable" as we're taught to think the teaching profession is, society judges these investment professionals to be worth more, because they're paid more. And why not? They're the ones creating wealth and prosperity, first for others through their jobs, and second for themselves by investing their own money back into the economy. They deserve their pay. "The labourer is worthy of his hire," the Lord reminded us. If a neighbor happens to get rich from his job, and he coerces no one, what is it to the rest of us?

And Buffett's such a hypocrite. If he thinks he's not paying enough in taxes, then he can voluntarily pay more. As President Bush said in the last State of the Union address, "Others have said they would personally be happy to pay higher taxes. I welcome their enthusiasm. I'm pleased to report that the IRS accepts both checks and money orders." Since Buffett can pay higher taxes if he wants, we can surmise it's clearly not about his taxes being fair. It's that he wants to force others into his flawed notion of "fair."

Well, I have a proposal for him: why doesn't he pay my tax bills, if he thinks I'm not paying enough? He wouldn't miss that money, and according to Congress' idiotic, Keynesian-based idea that "consumption spending" is all-important, my spending would be more than his investment income, right? (Actually no, because economic growth is the same whether the same dollars are spent or invested.) If Buffett wants to give all his money away, then why not devote his foundation to tax relief? And God knows "middle-class" Americans will need it, once our taxes are hiked in 2011 -- because Bush's "tax cuts for the rich" will expire, except that the tax cuts will go up for a lot more than just "the rich."

Regarding the housing "crisis," Buffett wants to blame the banks and the banks alone. While lenders do share some measure of blame, as I'll get to below, it's not entirely their fault. Borrowers must shoulder some blame too, because they're the ones who were irresponsible enough to take loans that they couldn't repay. If you take out a loan, you're borrowing someone else's property. The person lent you property and expected it back, plus compensation for not having use of the property. So if a borrower uses government to force the lender to "rewrite" the contract terms to a lower interest rate, or even "forgive" the debt, that's stealing from the lender.

If a borrower takes out a loan that he knows he won't repay, that's fraud. It's irrelevant if the borrower truthfully represented his (in)ability to repay (meaning the bank failed to realize or perhaps "overlooked" it). If a borrower knew he lacks/will lack the means to satisfy the agreed-upon loan payments, then the borrower made a criminal decision to take someone's property and not give it back as promised. We should be prosecuting the hell out of these predatory borrowers, who are committing fraud and grand larceny by walking away from their mortgages (often literally). But most Americans have bleeding hearts, so they sympathize with the supposed "victim" and want to punish lenders instead. It's the same mentality by which juries award multi-million dollar judgments to plaintiffs in ridiculous personal injury lawsuits.

Lenders share some blame for being too eager to make loans, but all loans have a built-in penalty for that: lenders can lose potentially the entire amount of the loan, should the borrower default. Thus there's no need for statute or juries to penalize lenders merely for making bad loans; there should be punishment if lenders commit fraud, but that's never the case in the sob stories plastered all over the news. I've yet to see one case of a ARM where there wasn't a part of the contract stipulating how the interest rate would increase. There always will be a clause defining that, because lenders will want something enforceable in court (well not enforceable anymore, as I'll explain in a little), something clear enough to satisfy the "meeting of the minds" requirement of a valid contract.

I've always wondered, were these borrowers truly so stupid to think they'd get 1.9% forever? "Always read the fine print," the old saying goes, and just because it's small print doesn't mean it's unreadable. When something will last the next 30 years of your life, is it so unreasonable to read the agreement and perhaps consult a lawyer?

But lenders were coerced by Congress, who shoulders even more blame. Congress for two decades, but particularly in the last several years, has used legislative blackmail to "encourage" (i.e. force) lenders into giving loans to low-income people, notwithstanding that these borrowers are precisely the sort who likely couldn't repay. Let's be objective: should lenders give equal numbers of loans to low-income people as they do to higher-income people? Of course not; that risk makes no sense whatsoever. So when banks denied applications of low-income applicants, it wasn't based on race, but on qualifications. Banks are in business to make money, and the only color they care about is your money, not your skin. However, in the lower-income brackets there are more minorities than whites, so that's been perverted into "racism" and "discrimination." As I've mentioned before, Stan Leibowitz gave an excellent history of ACORN and other groups whining before Congress about "discrimination" in lending. Oh, but there should be discrimination, namely between those who can repay the loans and those who can't. "Discrimination" isn't inherently bad: the word means to determine differences. But ever since "the politics of victimhood" started taking root, everyone who wasn't qualified on true merit would cry "Discrimination!" and thus perverted the word's meaning.

The greatest blame is on the Federal Reserve, which made all of this possible with insanely low interest rates for the first half of this decade. As a line in one of my favorite movies goes, "Jesus, you can't make a buck in this market, the country's going to hell faster than when that sonofabitch Roosevelt was in charge. Too much cheap money sloshing around the world. Worst mistake we ever made was letting Nixon get off the gold standard." Nothing ever changes. As Bruce Bartlett told me, "The Fed always overdoes it."

We're not just finally feeling the effects, we have been for the last few years. We haven't seen this kind of inflation, and true inflation since we're talking purely about the money supply, since the early 1980s. And each time the Fed says it will "inject liquidity" and auction off more bonds, I cringe. It may have its financial uses, but the Fed is continually devaluing the dollar when it should let the financial markets correct themselves. The Fed made money so easily available and directly caused a credit crisis, of which the housing bubble is the most visible part. Lenders had every incentive to borrow as much as the Fed would create, since not partaking meant watching competitors help themselves and make profits. And the vast amounts available the borrow enabled borrowers to bid higher and higher offers on houses, driving up prices artificially. The Fed showed banks the carrot, giving banks the means to finance "no money down" mortgages, and Congress held the stick, namely the threat of investigations and regulations.

One of the most absurd explanations for the crisis is that it's the deregulation of the separation of commercial and investment banks; this two-paragraph concept was expanded into an entire book that my uncle briefly told me about. The repeal of the Glass-Steagle Act did encourage bank mergers, and eventually that banks would underwrite securities based on collateral-based loans like mortgages, but this wouldn't have been possible if the Federal Reserve hadn't made available such immense quantities of loanable funds.

Now people actually believe the Fed can alleviate the crisis by throwing more money at it, when it was the cheap money that caused the problems in the first place? A company can alleviate financial problems and stave off bankruptcy by diluting shares to raise capital. But if it constantly does so often that it becomes policy, investors will trust the company less and less. Why should the Fed be any different when it continually dilutes the money supply?

Buffett would have clarified the general nature of the problem, that it's not just housing, if he knew anything about real economics. He's a great investor, as I said, but did that, or his nickname "The Oracle of Omaha," or now being the world's richest man go to his head, that he goes by his own economic definitions? In this interview, he says the U.S. isn't in a recession, per NBER's definition. Yet he recently told Der Spiegel that "I believe that we are already in a recession. Perhaps not in the sense as defined by economists....But people are already feeling the effects of a recession." So which is it?

I'm actually not surprised that unemployment is so low. By our own historical standards, we're average, and our unemployment statistics in France or Germany would be considered an economic boom. The dollar is in bad shape, and that is a big problem, but overall the U.S. economy is far more resilient than Buffett or the other doomsayers think. Housing isn't the majority of the economy, despite its rippling effects, as are the major banks. Bear Stearns earned $9.2 billion and $5.9 billion in gross revenue in fiscal years 2006 and 2007, respectively. Its operations, including its $1.2 billion dollar headquarters in midtown Manhattan, could have completely vanished off the planet, its 14000 employees could have all stopped working, and it still would make hardly a dent in the $14 trillion American economy.

I tried explaining that a little while back to a pseudo-capitalist who said Bear Stearns was "too big to fail." Nonsense. A free market, with no bailout, would have sorted it out just fine: other companies would have bought out the pieces, and the employees would have naturally gravitated to other jobs, and this Schumpeterian "creative destruction" would have made things all the more efficient. But so many, Buffett included, are fans of the Bear Stearns bailout. Did he really have that big a long position in BSC? Or is he just another pseudo-capitalist who wants the "free market" and "competition" only when it suits him?

Then we have his Democratic bias, showing he's just a limousine liberal at heart. No surprise there. The money he's giving away will do many good things, but that's not enough. He has to force people into his own politics, using the weapon of government.

When will conservatives get a clue?

Q: How do you know when a conservative is saying something stupid?

A: His lips are moving.

Now, many of my friends are conservative, and some do "get it" as far as economic freedom (just not social freedom), but sadly they're a minority. Liberals aren't the only ones who fail to grasp basic principles of economics and business. Conservatives, regardless of any claims to believe in "markets" or "capitalism," are often just as ignorant.

For example, "see-dubya" griped about poor "airline service," specifically that many no longer offer "free" food:

What really chaps your hide about that isn't the five dollars so much as it is that something that you think ought to be free suddenly sets you back some change.

What a fool! Provided meals are hardly "free" -- they're part of the ticket price. I find Cathay Pacific's provided meals aren't too bad and much better than on other airlines, and snacks are "complimentary" throughout the flight, but I'm not naive enough to think I haven't somehow paid for the better food. Conversely, see-dubya is like many modern consumers, having fallen for the fallacy of his self-worded "ought to be" service (a form of liberals' "entitled" mentality). Didn't he ever learn that if you want service, you'll have to pay for it?

Airlines can't force him to be a customer, so he doesn't have to be one if there's no included meal. He can always bring his own food, buy something at the terminal before boarding, or go with something like SkyMeals. Perhaps he goes without. Whichever he does, his complaint still isn't severe enough to deter him from airplane travel. The lack of a meal, really, deters few who travel longer distances: bringing your own food, or relying on any provided snacks, is a small price to pay for the convenience of speed. The first airlines to cut meals correctly determined that passengers tend to prioritize the combination of fares and schedules above "free" meals. That's why they lost fewer customers by eliminating "free" meals and keeping prices the same than had they raised prices to cover the cost of the meals.

Most people know that most airlines are struggling to cut costs, but most people don't realize that meals can be significant savings. It isn't just the materials and putting them together, but also refrigeration and transportation. Then on board, a sandwich costing several dollars is the price that the particular airline decided will maximize profit. Like in other industries, there's no standard markup: the bean counters attempted to construct a curve (just like Laffer's) of how many people would buy food at a certain price. Increase the price, and you'll get more revenue up to a point, after which revenue will decrease. The airline can't just bring enough food for each passenger, because not everyone will buy.

Because I am a rational person who understands that I'm not being "forced," my "hide" doesn't "chap" at all at what many airlines are doing. American Airlines will soon start charging economy passengers $15 for the first checked bag, unless you bought the full-price fare, but nobody's being forced into it. What it really is is a $15 across-the-board increase for economy passengers who buy discounted tickets, but with a $15 discount for bringing only carry-on baggage. Take the difference between 50 and 15 pounds, multiply it by a few hundred people, and that saves fuel.

What gets me is that if people are so angry about it, why are they still going to fly American? And why should this create "chaos" at ticket counters? If people want to argue, they should (but probably won't) be reminded that they don't have a "right" to fly. It's not even a contractual right, because buying a ticket didn't mean an included charge of checked luggage. Again, people are not being forced and can go to a different airline. And frankly, I don't think much of someone's writing skills if he uses "frankly" more than once in an article. It's frankly annoying how often people say "frankly" when other words will do.

This explanation is rather simple and nothing new; you don't need an economics or business degree to understand it. The solution, as in the case for everything, is simple: let the free market work, or more properly stated, free the market. But so many conservatives just don't fathom that.

Then take the two dimwits I met a few nights ago at the Young Republicans social. I'm a member of the independent New York Young Republican Club, not because I'm a conservative, but because of the friends I've made there and the occasional great speakers at the monthly events. Twenty bucks a year isn't much, but there's an additional cost, a very high one, of meeting the occasional schmuck. Now, these two epitomize everything wrong with Republicans and conservatives today. Our argument was primarily one of free speech, which they clearly don't understand -- or cherish.

One of them is from Queens and is running for City Council (just when you thought its collective IQ couldn't get any lower!). He believes that elected officials should be respected always, because of the office. I counter, why? Just because enough my neighbors elect some sonofabitch (nowadays for the typical purpose of taxing me to benefit them) doesn't mean I should express or harbor the slightest bit of respect for him, let alone the morons who used "popular vote" to make him lord over me. Because of the power they wield over the non-consenting, office-holders should be accustomed to no respect whatsoever.

Freedom of speech is fundamental and sacred. If I want to call Barack Obama a "boy," it doesn't matter whether I use it as a slur, or as a disparaging observation of his naive foreign policy. My usage happens to be the latter, which I was explaining to a new acquaintance when the aforementioned two invited themselves into the conversation and aggravated what had been pleasant. But even if my usage were the former, that's still protected speech. It's "debated" today, but it still is, regardless of what the "offended" or courts decide. A minority, majority or government can declare something right or wrong, but that doesn't make it so.

The other played the geography card: "I'm from the South, where that has a very bad meaning." Notwithstanding Miami is hardly the hotbed of racism he'd like to imply, being from there doesn't make him automatically correct or an authority; it wouldn't matter even if he were from Birmingham. The other even tried to disparage me with, "I can tell you haven't lived here very long." Notwithstanding my eight years in the NYC metro area are completely irrelevant, does he say that because my supposed "racism" means I couldn't possibly be from this "multi-ethnic" city? Then how does his logic explain Al Sharpton and Charles Barron? Or perhaps my skin tone and accent don't happen to fit his concept of "New Yorker"?

Like many conservatives, they confuse what is right with what is proper. It wasn't the point whether it's appropriate to call someone an insult (whether or not it's "racist" in connotation); I was telling the other person that it's a right to say it. Furthermore, "boy" is so appropriate for Obama, who has a child's understanding of foreign policy in wanting to disarm the United States' nuclear weapons (complete with "negotiating with Russia"!) and proposing peace talks with terrorist nations. But the two twits who barged in are so concerned with not offending anyone and winning popular support -- as if that's been helping Republicans in elections! It's no secret that Republicans gravitating to the "political center," talking like Democrats, will still lose to Democrats.

I tried to reason with them (big mistake). Why are they so concerned about winning debates and elections? Those are based solely on popular support. What if the masses are wrong? The majority of Americans today are so ignorant that the rest of us, those who believe in freedom, should shudder every time we consider that they can vote on our lives. Why should I be so focused on diluting or even ignoring my principles so that others will approve of what I say? I'd rather focus on being right, on being true to myself. Henry Clay is sometimes mocked for saying, "I'd rather be right than President," because he ran four times. His statement is a principled one, however. Ron Paul campaigned this time, though he must have known he didn't have a chance, but he didn't once change his message to win more support. He wanted to win support because he was right.

Egads, the two's stupidity exceeds mere ignorance of freedom of speech. The candidate made an incorrect definition of libertarian and then proceeded to tell me I'm not one: "A libertarian is a fiscal conservative and a social...moderate." Yes, he did pause there, I think because he just couldn't bring himself to say "liberal," as some have described libertarians. It's still a wrong definition.

A real libertarian believes in individual liberty: the rights to life, liberty and property, limited only by the same freedom of others (somewhat imprecisely contained in "Your freedom to swing your fist ends at my nose"). Liberty includes freedom of speech, which I champion it no matter how offensive it may be. In fact, I personally hold that the best use of speech is to offend: only state-worshippers should fear that freedom. The God I worship took on a human body, then was eventually arrested by the Sanhedrin and executed by the Romans. Why? Because Jesus said an awful lot that threatened the religious hypocrites (such as in Matthew 23), and calling himself a "king" amounted to treason, though Jesus was never truly harming anyone. Should Jesus have refrained from condemning the scribes and Pharisees, so that he'd appeal to them and win their support? According to these two conservatives' argument, yes.

Candidate-boy even said Ron Paul would never support me. He's flatly wrong. Ron Paul might disagree with what someone says, but as has been wrongfully attributed to Voltaire, Paul would defend a person's right to say it. Ron Paul would say that he doesn't care what someone else says, because he has no authority over the person's speech, so therefore the other person is responsible only for himself. On that I can safely assume what another person would say, but what about these two Republicans who presume to correct me on my own political philosophy? Conservatives do themselves a great disservice when they display such ignorance, but it's becoming less and less surprising.

All right, pig-lovers, justify this asshole's behavior

This is why I hate cops, every last one of them. While I was at work, my mother was driving herself and her sister around. A big semi was completely stopped in the middle of the road. My mom and aunt gave it a few minutes, but it didn't move at all. Now, my mother can be a bit careless in driving, which perennially worries me, but she's not aggressive enough to go around a stopped vehicle.

She dared to honk her horn. That was it. She had the unmitigated impudence to apply momentary pressure to the center of her steering wheel, using that time-honored device that, gee, for decades we all thought was for that very purpose!

Not so, according to the state trooper who suddenly appeared. I'm guessing he had his car in front of the semi, where my mom couldn't see him. Maybe the truck driver had been pulled over for a traffic infraction, which would mean the trooper was stupid to keep the truck in the middle of the road, instead of having the driver pull onto the shoulder. Maybe the truck was having mechanical problems and/or was stuck.

Now if the truck had mechanical problems, wouldn't you think an "officer of the law" would be nice enough to take a couple of minutes and direct my mother around? Not so. The asshole came to the driver's side window and started yelling for my mom to roll it down. He didn't give her a ticket, but the fucker kept screaming at her and even threatened, "I can make you wait here all day if I want to!"

My challenge to all of you who worship authority, who kowtow to someone just because he flashes a badge, who dismiss police shooting civilians with "Well the guy had it coming," is to justify this pig's actions. I dare anyone to tell me that he was so brave to pick on a woman in her 60s, who simply beeped at someone obstructing the flow of traffic.

My mother was shaking all that time. Her sister, being more sophisticated, knew what was happening. My mother thought to write down the pig's badge number, but she was so frightened. My aunt later told her that dropping the matter was the right thing. Ordinarily I want people to stand up for themselves, damn it, but since it was my mom, I regretfully agree that it was best to let things go. God knows the pig would have invented some excuse to give her a ticket, or busted a rear taillight if he had to create an infraction, or made something up to haul her in and impound her car.

My aunt knows all about what the pigs do, thankfully not from personal experience. Her husband, a lawyer, has been (was?) unsuccessfully representing an elderly Chinese couple who are suing the NYPigD over a botched bust. Some months ago now, the pigs were looking to bust a prostitution ring, except they busted down the door of the wrong apartment (surprise surprise). The warrant even specified the correct apartment number, but the pigs still barged into the wrong Queens apartment! They immediately pushed the elderly couple down to the floor, shoved guns into their faces, and handcuffed them. This is something the two expected in their former home of communist China, but not here! As far as I know, my uncle still can't proceed with the lawsuit. The plaintiffs have discovered the "blue wall of silence": my uncle can't even get the arresting officers' names, or a copy of the arrest report. It didn't matter that a judge subsequently ordered that the subpoena be enforced; the pigs simply ignore it, and there's no one accountable.

It isn't nicknamed Taxachusetts lightly

Russ Roberts explains the "Willie Sutton" theory behind Massachusetts wanting to tax universities with large endowments.

Of course, there is overlap. Sometimes, politicians buy love and votes by correcting market failures. Or by at least trying to correct market failures. But too often, they're just using the language of market failure to act like Willie Sutton. If you worry, as I do, about this latter tendency, the road to a better life is to limit the power of government by changing the constraints that politicians face, rather than trying to elect wiser, kinder people. The biggest determinant of the quality of public policy is the quality of the constraints on politicians not the quality of the politicians.

"Power corrupts, and absolute power corrupts absolutely." We've all heard that before, but how many voters fail to realize that if power is limitless, it doesn't matter how "good" a person is elected? A saint will become corrupted, just as surely as "expenses rise to meet income" for most people. So for the latter, restrain spending first -- and this applies for spendthrift households, and spendthrift government that thinks it'll just raise taxes. For the former, restrain politicians' powers. You could elect Satan to office, but if his office's powers are minimal, then also minimal is what he can do to you.

T.R. Raymond, welcome to the 19th century

Your morons for today:

High gas prices drive farmer to switch to mules

MCMINNVILLE, Tenn. (AP) — High gas prices have driven a Warren County farmer and his sons to hitch a tractor rake to a pair of mules to gather hay from their fields. T.R. Raymond bought Dolly and Molly at the Dixon mule sale last year. Son Danny Raymond trained them and also modified the tractor rake so the mules could pull it.

T.R. Raymond says the mules are slower than a petroleum-powered tractor, but there are benefits.

"This fuel's so high, you can't afford it," he said. "We can feed these mules cheaper than we can buy fuel. That's the truth."

And Danny Raymond says he just likes using the mules around the farm.

"We've been using them quite a bit," he said.

Brother Robert Raymond added, "It's the way of the future."

I'm not saying the mules aren't better for the Raymonds' purposes, which apparently is just collecting hay, but do you hear his damn fool brother who thinks this is the "future"? And you thought the jackass was the one pulling the rake. I wouldn't be this critical if he hadn't made such an absurd comment. So what he's saying is that the future of mankind is regressing to famine and want, though we've had two centuries of the Industrial Revolution (the single reason the ordinary man could finally produce enough so he finally had a chance against nature). The future is that developed nations will devolve one hundred years, back to worrying about animal excretion contaminating our agriculture?

Again, I'm not arguing the mules aren't better for what the Raymonds need. Fundamentally, it's their right to spend their time as they see fit, and they've decided they don't mind spending more of their time plowing. I just hope it's purely on their dime, but odds are it won't be. I wouldn't doubt they'll someday soon get a nice fat check from the federal government, paid for by the rest of us. If it's not from the upcoming bloated "farm bill" presently debated, it'll be a special "farmers assistance in the face of high fuel prices" fund.

If the future of American farming is the Raymonds' example, then American farmers will clearly plow and harvest less. Therefore, food prices will go up even more, and the U.S. will have less food for ourselves as well as for exporting to the rest of the world. Remember that the U.S. is the world's biggest food exporter, no matter what those idiotic Larouchers think. So surging food prices and global starvation are what the brother thinks is the "future"?

For those whose livelihood depends on harvesting as much as possible, animal power is not the "future." It's been and always will be industrialization. Why do people fear it? Go out to the Philippines' provinces to observe the cost-effectiveness of "cheap" animal labor, the very kind that the Raymonds seem to cherish now. I can't imagine a single Filipino farmer alive who has just a carabao or two, which he uses to work fields often in desperate hope this season will be enough to feed his family, and wishes he had a John Deere. If he can work more land, there's a certain point where his extra earnings will pay for the tractor, and anything else is higher income. When he has more income, his family can live in a better house with running water and a sanitation system. His children can finish school, instead of dropping out at 7 years old to work alongside the parents. That is the future.

Last October, on the four-hour drive from Caticlan to Iloilo (opposite points on Panay Island), I remarked on some farmers we passed by, and my mother-in-law and I talked about the difference between Philippine and American agriculture. In some ways the scenery was reminiscent of parts of Sonoma County, where my best friend lives, but I knew the fields were hardly the same. The typical Filipino farmer toils in the heat of the sun, then carries the harvest by hand. The typical American farmer can drive not just mere machinery, but air-conditioned machinery. In the Philippines, half of the population (some say 40%) works in agriculture. It's not enough to feed the country: the Philippines for a long time has had to import sugar, and as a nation it's become the world's biggest importer of rice. In the United States, only about one percent of workers are in agriculture. Think about it: a mere one out of every hundred American workers is enough not just to feed the country, but the rest of the world too. That's the difference between industrialization we have here, and the "animal power" the Raymonds extol.

The two most evil buildings in the Philippines

As you go down Roxas Boulevard, you'll see the main Department of Finance building next to the main headquarters of the Bangko Sentral ng Pilipinas. The latter, as you probably guessed, is the country's central bank.

The central bankers steal from the people by continually devaluing money (especially what's been saved for the future), and by deciding that import and expert prices should be higher or lower. It doesn't matter whether it's the Pinoy who labors in the fields all his life, the family running a little store or restaurant, or the foreigner businessman who's bringing in dollars/yuan/yen/etc. investment: the Bangko Sentral is unequivocally proclaiming that only its governors, a handful of people among 85 million others, know what the peso's true value is. On top of that, though its role is officially about monetary stability, the Bangko Sentral also decides how much economic growth is "too much" or "too little," usually based on a "target" they set. It isn't even a target for the inflation they produce, but a target for economic growth, even though the absurd Phillips Curve has been debunked for years. There is no greater evil that central bankers do, in any country, than to decide they know best whether people should be working or not. Don't fool yourself: that's exactly what they do when they want less or more economic growth. "Less" growth is their decision to throw people out of work and reduce the earnings of the rest. "More" growth is their benevolent decision to let more people work, and all workers perhaps earn more.

The other group has a simpler job, but one no less destructive or despicable. They just look at the shambles of people's lives and steal a portion of what's left, whether through income taxes or the VAT.

And in principle, what both groups do is no different than what happens here. We're just prosperous enough in the U.S. that enough Americans are stupid enough to be "content" with their lives.

Places to stay (and not to stay) in the Phillipines

For being a truly cosmopolitan city with its own international airport, Davao is still incredibly cheap. When I first met my in-laws last October, I took us to Jack's Ridge, perhaps the most popular resort and nighttime destination with city limits. Dinner for seven came to about $38. Fast food prices reflect how much cheaper labor and land costs are. A burger, fries and soda will run about $2.50 at McDonald's or Jollibee, and what we'd consider a "medium" supreme pizza is about $6 at Greenwich.

Before, we've stayed at Villa Margarita, not too bad a hotel with a "junior suite" (larger room with chairs and a table) running about $60 a night, which is starting to get pricey for Davao. Villa Margarita's rooms aren't too bad and quite clean, but this time we tried the Regency Inn, about five minutes from the hospital where my sister-in-law was admitted. The rooms aren't quite as refined, and the bathrooms are clean although need a little scrubbing/polishing on the metal, but in the end, you can't beat a pretty decent room for only $32 a night. The staff was exceptionally friendly, and free Wi-Fi in the lobby is a nice amenity you don't always find in more upscale Manila hotels.

Manila is more expensive, but still cheap by typical U.S. prices. When in town, we've always stayed at the Manila Pavilion, where a very nice "deluxe" room is about $150 a night. The last time, we were told the rooms had just undergone renovations, but I really didn't notice, because the rooms before were in excellent condition. There are better, more luxurious hotels in Manila, and sometimes for not much more, but those are in the Makati business/entertainment district (which is to Manila like Manhattan is to New York City) and very far from the airport. The Pavilion is only 30 minutes away from the international terminal, which in heavy traffic might be 45 minutes. Makati is busy enough that you don't want to risk being stuck for a couple of hours among these insane Manila drivers. When I was little and, my American ex-pat father occasionally took a few hours to drive home across Manila.

This time we tried the Bayview Park Hotel, at the busy corner of Roxas Boulevard and United Nations Avenue. From the seventh floor, rooms do have a view of Manila Bay, although only technically so. The hotel is currently undergoing outer renovations and has scaffolding and a black nylon mesh over much of the outside. If this "superior" room (no extra furniture, $90 per night) is any indication, the hotel could use some room renovations too. Minor scratches and blemishes on furniture can be dismissed, but not worn edges on the nightstand, or gouges in the adjoining room door. The lobby and hallways are nice and very immaculate, although when first reaching our floor, I was not impressed when we had to navigate around a fold-up guest bed just outside a room. I could understand if staff were preparing it, but it was just "left there" with nobody in sight.

The noise is a real problem. Rooms aren't very sound-insulated from each other. Last night I could hear the Japanese next door chattering and watching TV, muffled, but it was still distracting. The main problem, however, is noise from the street. Roxas is a main thoroughfare in Manila, so even if you're on the seventh floor, rush hour (more like rush four hours) will be your 5 a.m. wakeup call, like it or not. Motorcycles are common in the Philippines (less expensive than cars and more fuel efficient), so you'll hear their loud exhaust in tandem with incessant car honking. This lasts until very late at night.

When we first checked into the Bayview a couple of days ago, my fiancee decided we'll book for only one night, then extend if we like it. That's why she's the wiser of the two of us. We checked out after one night and took a taxi over to the Pavilion, just a few blocks down United Nations Avenue. Street noise is considerably less, and I find the staff friendlier. Rooms do cost more, but they're much nicer, and the Pavilion has a wonderful breakfast buffet that's included with rooms. The Bayview has a coffee shop but no included breakfast, and its coffee shop is mahal enough that you're not paying much less than at the Pavilion.

Joseph Estrada: as stupid as he is corrupt

I recently read on the cover of a major Philippines newspaper (I think the Sun) that Joseph Estrada, the former Philippine president convicted of corruption (and pardoned by current President Gloria Arroyo), is encouraging young Filipino graduates to stay in the country and "rebuild" it, rather than going abroad where they can earn more money. Estrada is one to talk about sacrificing for the sake of one's country – his presidency's corruption rivaled that of Ferdinand and Imelda Marcos. His entire lifestyle was based on what the country could do for him, and it was so egregious that he was facing a possible death sentence.

But even disregarding his hypocrisy, his suggestion is a ludicrous one. The Philippines, like many poor countries, does better when its people are left free to go abroad and earn more money in Western and wealthier Asian countries. Every so often, I read about the shortage (technically a scarcity) of doctors and nurses in the Philippines, because the lucky ones sometimes escape (and that word is no exaggeration) to better lives in other countries. While this may cause an initial "brain drain," it works out economically: domestic wages for medical personnel will necessarily rise, but because the medical personnel who go abroad will earn more and send money home, Filipinos overall will have the money to pay the higher wages. Isn't it amazing how everything sorts itself out for the best if we let people act with freedom according to their own desires?

One of my Pinoy friends once insisted that Filipinos' remittances are important primarily because of the boost to the country's currency reserves. That Keynesian thinking is utter absurdity. Remittances are important because they bring home money for family members who stay behind (which my friend of all people should know, since he spends several months at a time in the U.S., earning money so he can send it "home"). Concern about "reserves" is believing that the government is more important than the people.

Let's say a father and mother have a small farm that barely feeds the family. Should they be so selfish as to want the children to stay on the farm for the rest of their lives, to be poor like their parents for the sake of the "family business"? Or should the parents instead be happy that their children can have the opportunity for better lives, and possibly send money home to help the parents? Perhaps the children would like to stay, depending on how they personally value continuing the family tradition. It should be their choice to stay or go, and no parent should have a say.

Unfortunately, paternalist governments all over the world decide that they know what's best for us, or at least they claim to know. Even if they could afford the costs of travel, it's incredibly hard for Filipinos to get government permission to leave the country, and for good reason – that is, for good reason if you're the "elite" who rule. The rich and powerful of the Philippines control the government, so they control the approval process for people to leave the country. They don't want a lot of Filipinos leaving, because it's how they can maintain a cheap labor pool who will cook their food, clean their houses and babysit their children. When you have a nation of over 80 million people squeezed into a land area roughly the size of Arizona, and people cannot leave, then the price of labor will continually be bid down. My mother and aunt have tried for years to get just tourist visas for their brothers and sisters, so they can at least have a nice visit here, and every time the applications were refused by the Philippine embassy. And this was before post-9/11 security crackdowns!

Liberals talk about how "big business" and money controls the U.S., to which I reply, "Nonsense!" U.S. politics is actually very democratic, which I say to be a bad thing. No matter how noble it seems, democracy exposes how much a people covet each other's possessions: democracy is fundamentally about electing a guy who steals the least from you, and who will give you what is stolen from your neighbors. While Philippine politics might be thought of as democratic, it hardly is, although it has its own equally bad results. Elections are extraordinarily corrupt, with commonplace vote buying, voter intimidation and outright election violence. When my brother-in-law was campaigning for vice mayor last year, the incumbent mayor was ambushed and nearly shot. This is how the ruling class in the Philippines maintained political control after the U.S. "freed" the country from the Spanish, supposedly so Filipinos could start governing themselves.

Estrada is not alone in telling young Filipinos to stay home. But considering his background, I'd attribute his call to sheer stupidity, compared to the "elite" who have well-intentioned reasons for misleading Filipinos into giving up better opportunities for a misguided sense of patriotism.

A tale of two thieves

In his unmitigatedly warped notion of "benevolence," George W. Bush signed legislation "to boost availability of student loans." It sounds great, but after you read how it's being done, it's a great deal for students, a great deal for Bush and bureaucrats who will brag about how much they're "helping" people, and a raw deal for the rest of us who pay taxes.

"The measure is intended to inject liquidity into the student loan market by allowing the U.S. Department of Education to buy federally guaranteed student loans that lenders haven't been able to sell to investors." Investors don't want to buy the loans because they're crap investments, relative to what else is available. It tells us something about this "non-crisis economic crisis" (the one the mainstream media wishes the U.S. were in) that, even though these student loans have the guarantee of repayment by the federal government should any borrowing students later default, most investors would still prefer investing in normal markets like stock exchanges!

But this still won't stop Bush and Congress from using our money to buy the loans, touting more of this "injecting liquidity" bullshit that we've heard too much about from the Federal Reserve. The federal government will buy these loans, using money coerced from the rest of us via taxation. If the students default, the federal government will then assume the payments to the loans' owner -- itself. And we won't even see a dime, because the repayments will simply go to the U.S. Treasury.

Such accounting practices in the private sector are called fraud. Bernie Ebbers received a 25-year prison sentence for what amounted to "merely" a few billion dollars. What, then, should politicians deserve when they do this all throughout a budget of $3 trillion dollars?

My Congressman, John Hall (former member of the band Orleans who found religion socialism and went into politics), sent me an e-mail with a subject line, "How to Combat Medicare Fraud Workshops this Friday." New York State spends nearly $48 billion each year on Medicaid, and it's been estimated that a tenth of it is "fraudulent," but the pure fact is that it's all theft. It is not theirs to give by any true sense of moral principle. If David Paterson, Joe Bruno and Sheldon Silver want to be charitable, or George W. Bush, John McCain, Barack Obama, Hillary and Nancy Pelosi and Harry Reid, let them give of their own money and encourage -- not force -- the rest of us to give. South of us, John Corzine would rather tax New Jersey residents every which way he can to fund state programs, instead of giving from his own extreme wealth. You see, when a liberal like Corzine criticizes "excessive executive compensation,"

That article at Empire Center talks about "market-driven reforms," when such a thing is impossible when government is behind it. As I tried explaining last year to my friend JK when talking about Medicare Part D, there is no "market" when government is involved, because government by definition will coerce at least one person into doing something he normally wouldn't do in a truly free market atmosphere. People can talk about "choice" all they want with some new "reform" in a social program, but ultimately it's "choice" at somebody else's expense.

This article talks a bit more about NYS Medicare fraud, and talking about how the New York State Legislature "agreed to only about $700 million in savings" for 2006. That's nonsense. When politicians talk about "savings," it doesn't mean they actually reduced the size of a program, but that they reduced the previously planned growth. The spending still increased. How long could you or I run our households this way when facing a financial crunch? "Honey, we have to cut back. Now, I had previously projected a $700 monthly increase in our car budget if we got that new car. But look, if we get that less expensive new car, it will cost us only $500 more per month. That saves us $200 per month!!!"

Such "logic" seems absurd, but that's how government operates. We normal folk must work for our wages, because we cannot use compel those who hire us or otherwise trade for our goods and services. But because government can take people's property by force, it need not worry about being "worthy" of what it takes. It simply takes, and ultimately it takes from you upon pain of death -- your death. I was starting to read "Your Money or Your Life: Why We Must Abolish the Income Tax" by Sheldon Richman, with a wonderful introduction by Dr. Richard Ebeling. Sheldon and Richard are true lovers of liberty, and I am proud to call them friends.

[Correction: I was blogging on vacation and didn't have the book with me. It was actually Walter Williams who wrote the following in his foreword, not Richard in his introduction.] Williams explains far more eloquently what I've said before, that all taxation is coercion, and so if government takes from you anyway, it's theft. But what do you do if you refuse, believing sincerely that you will not submit to thievery? Well, then the government will "fine" you, which is merely a declaration that if you don't surrender your property, you must give up more. If you resist enough, you must give up your freedom by going to prison. What if you will defend yourself, as is your God-given right against oppressors? Then the government will send in "police" and take you by force, killing you if necessary, all because it says you don't really own what you think you own, because a majority of your neighbors banded together and elected some "government":

Give us what we demand, cried out the multitude, lest we seize it by force.

And the merchant replied, Depart in peace while ye yet can, for ye have no right to my possessions save with my consent, and as I have done no wrong to any man, none of ye have any authority to seize any of my possessions.

Behold, cried out his neighbors with one voice, that we have declared ourselves a government, and as such we have given ourselves the authority.

The merchant replied, Ye have no authority, for one cannot give authority unto oneself.

That matters not, they replied and began to grumble, for we are a greater number than thee and thy family, and because of our greater numbers, we have decided that thou shalt pay us tribute.

Then did his neighbors, armed with swords and staves, seize a goodly portion of the merchant's possessions. The merchant did not consent in his heart, but for the sake of his wife and children, he did not resist in his actions.

Anyway, I'm blogging from Davao, the largest city in the world in terms of area. My fiancee and I were visiting her family here, and this afternoon we're going to Manila. We stayed in Davao longer than planned, because we couldn't get tickets to Bohol. This being "summer vacation" time in the Philippines, all the flights were fully booked. It's probably just as well, because Mindanao and the Visayas have been quite cloudy, and the beaches wouldn't have been as enjoyable.

Yesterday we went to "Paradise Island," a resort on Samal Island, just a few minutes off the coast of Davao. It's beach isn't one of beautiful white sand like Boracay's, and in some places a little pangit with the tide out, but it's a wonderful little getaway if you're in this part of Mindanao. Mr. Tungol, our host, was extraordinarily gracious. He was always checking on us and the other guests, ensuring our comfort. He also brought over the four-piece band to serenade us, inviting me to join in, which I couldn't resist when they did a Sinatra/Bennett/Elvis medley. Victor Heiser, an American doctor who spent a lot of time in the Philippines in the early 20th century, wrote that he believed you could give musical instruments at random to Filipinos and hear sweet music at once. Perhaps an exaggeration, but it was truly amazing to hear what bongo drums, two guitars, a bass and three voices could produce.