Saturday, September 29, 2007

The Wages of Bureaucracy are Death

Friedrich von Hayek developed a systematic argument against government regulation and government edict. According to Hayek, regulators cannot anticipate consumers' shifting evaluations of goods and services and changes in small facts, knowledge of which is essential to effective management. As a result, a regulated system will lack flexibility, especially when the inflexibility is compounded over a large-scale socialist economy such as the Soviet Union's was. Moreover, innovation is not likely in a system where rewards cannot accrue to innovators because government rules and penalties deflect shifts in demand and distort consumers' valuations of innovation.

Merv of PrairiePundit blogs a tragic episode in the Iraqi War that is covered on Reuters.

According to Reuters, a federal regulation that the Democrats pushed through that emphasizes privacy rights of terrorists may have resulted in the deaths of US military personnel.

"U.S. authorities racing to find three kidnapped American soldiers in Iraq last May labored for nearly 10 hours to get legal authority for wiretaps to help in the hunt, an intelligence official told Congress on Thursday. In order to comply with the law, the government was required to spend valuable time obtaining an emergency authorization ... to engage in collection related to the kidnapping," Ronald Burgess, principle deputy director to McConnell, said in a letter to U.S. Rep. Silvestre Reyes...Some Democrats and civil liberties advocates say a temporary expansion of the eavesdropping authority passed in August threatens the rights of Americans and any permanent law needs more protections...The wiretap began at 7:38 p.m. (2138 GMT). Authorities then had 72 hours to obtain a special court's endorsement of the emergency authority, which was granted, a U.S. official said...

"An al Qaeda-led group in June said it had killed the three soldiers, and showed pictured of ID cards of two of the men..."

It is unknown if the information obtained in the wiretap would have enabled the military to stop the execution. Merv points out that the Democrats and ACLU who are pushing for the bureaucratic rules do not take responsibility for the murders of the three soldiers.

Drought of Fall 07

Usually the Bushkill Creek, which goes by our cabin in West Shokan, NY, is several times higher at this time of year. There has been very little rain since July, and the Ashokan Reservoir, the largest of the New York City Reservoirs, is showing bald spots for the first time since 2002.

Vaclav Havel, Myanmar and Laissez Faire

Glenn Reynolds of Instapundit (courtesy of Larwyn) has posted the following quote from Vaclav Havel:

"The international community's failure to act means watching helplessly as victims of repression in Burma are consigned to their fate."

Reynolds adds:

"I'd feel better about things if he were Secretary-General of the UN."

Reynolds links to Havel's Guardian article:

>"I fear that, with only a few exceptions, most countries have been surprised and caught off guard - once again - by the rapid course that events have taken in Burma. So they seem to be completely unprepared for the crisis and thus at a loss as to what to do.

"How many times and in how many places has this now happened? Worse, however, is the number of countries that find it convenient to avert their eyes and ears from the deathly silence with which this Asian country chooses to present itself to the outside world.

"In Burma, the power of educated Buddhist monks - people who are unarmed and peace loving by their very nature - has risen up against the military regime. That monks are leading the protests is no great surprise to those who have taken a long-term interest in the situation in Burma.

"...Of course, without universal and coordinated international political, economic, and media support for these brave monks, all development in Burma may quickly be put back nearly 20 years.

"On a daily basis, at a great many international and scholarly conferences all over the world, we can hear learned debates about human rights and emotional proclamations in their defense. So how is it possible that the international community remains incapable of responding effectively to dissuade Burma's military rulers from escalating the force that they have begun to unleash in Rangoon and its Buddhist temples?

"For dozens of years, the international community has been arguing over how it should reform the United Nations so that it can better secure civic and human dignity in the face of conflicts such as those now taking place in Burma or Darfur, Sudan. It is not the innocent victims of repression who are losing their dignity, but rather the international community, whose failure to act means watching helplessly as the victims are consigned to their fate.

"The world's dictators, of course, know exactly what to make of the international community's failure of will and inability to coordinate effective measures. How else can they explain it than as a complete confirmation of the status quo and of their own ability to act with impunity?"

Today, the New York Sun posts an AP report that a UN envoy is "heading to Myanmar" but that there is little hope as protesters suffer government violence. Yesterday, troops opened fire on a crowd, and at least 10 deaths have been reported since Wednesday. America has urged "all civilized nations to press Myanmar's leaders to end the crackdown". In 1988, 3,000 Burmese protesters were slain.

What is the appropriate extent of state action in the face state suppression? Advocates of laissez faire argue that the state has no role to play, and that foreign entanglements should be avoided. When is intervention moral, and when does it become another form of state violence? Can the UN be trusted to play such an interventionist role given the wide range of dictatorships that belong to it? Is there a cost/benefit ratio of severity, such as mass murder, beyond which intervention is triggered? If so, hasn't it been reached in Darfur, as Havel asks, and wasn't it reached in Rwanda, neither of which was sufficient to trigger intervention?

Even if Havel is right, can the US or even the UN be asked to intervene in the terrible events unfolding in Myanmar?

Thirty-six Years Late and Ten Trillion Dollars Short

Goldbug Howard S. Katz blogs that media coverage of the Fed is rife with fraud. There is no difference, notes Katz, between the Fed's reducing interest rates and increasing the money supply, although the Fed wants to claim otherwise:

"You will usually hear that the Federal Reserve is adjusting the Federal funds (not the T-bill) rate. This is another piece of misinformation designed to keep the public’s eye off the ball. The Federal Reserve does not operate in the Federal funds market...."

Katz notes that in order to purchase T-bills, the Fed must increase the money supply, and it does so through printing more monopoly money, i.e., dollars:

"When the Federal Reserve first received this power, the total money supply of the U.S. was twenty billion dollars. This week it was 1363 billion dollars."

Between 1946 and August 1971 countries operated under the Bretton Woods system under which most countries settled their international balances in U.S. dollars but some redeemed dollars for gold. Because of pre-1971 inflation, balance-of-payments deficits reduced gold reserves. Thus, President Nixon announced that the United States would no longer offer gold. According to the Bureau of Labor Statistics, one dollar in 1971 has the same buying power as $5.13 in 2007. In other words, since the ending of the final link to the gold standard 36 years ago, the dollar has declined to 1/5.13 or 19.49% of its value.

Mainstream economists have developed elaborate rationales for this decline, such as "assuming that all wages are indexed, all savings accounts are indexed, the stock market goes up at a constant rate, and loan payments are indexed, then inflation does not matter". If you believe them you lose money.

After 36 years of post-Bretton Woods inflation, The New York Sun notes that the current real estate bubble has burst. Prices have fallen by the most since 1970 and purchases have fallen by 8.3%, the most in seven years. Construction is in its worst slump since 1991. It is true that there is a bright side to the decline of the dollar, namely, we have become to Europe what Europe was to us in the 1960s: a tourist destination. As the Sun also reports, "New York City's travel, real estate, and manufacturing sectors — which profit from the sale of services to foreigners — will likely benefit." Of course, those who need to purchase real estate in the New York area will pay through the nose, as their monopoly dollars need to be brought in wheel barrows and cannot compete with Euros, Yen or Yuan. But who cares, since those of us who are selling now can retire?

To its credit, the Sun ran another front page article about the dollar's decline , "The Dollar's Fall Starts to Worry". The Sun notes that "foreign investors proclaim that a "for sale" sign has been hung on the city". The Sun quotes Axel Merk:

"No country in the world has ever fought itself to prosperity by weakening its currency"

The Sun also quotes chief of the Fed's counterfeiting operations, Ben Bernanke, as saying that there is a "liquidity crisis". With my TIAA CREF money market fund yielding 3.68%, what kind of liquidity crisis is Bernanke describing? Is he insane? I'm having trouble figuring out whether Ben Bernanke is on hallucinogenic drugs; is a crook; or hopes for a high-paying job from schnorrers* like Jim Cramer.

The Sun also notes that Russia, China and the Middle East countries are starting to exchange dollars for the euro. Given the multi-trillion (not billion) extent of foreign holdings, there is a massive potential for further reductions in the dollar.

Given that the Sun is reporting the dollar decline thirty-six years after the end of the gold standard, and after the Fed has circulated ten trillion dollars in monopoly money around the world, it looks like the Sun's front-page article may be thirty-six years late and ten trillion dollars short. Buy gold and commodities, friends.

*To revise Groucho Marx's song "Hooray for Captain Spaulding"in Animal Crackers (the tune was also the theme to Groucho's 1960s TV Show, You Bet Your Life):

My name is Jimmy Cramer
The Economy's Explorer
Did someone call me a schnorrer?
Hooray, hooray, hooray

Hillary Clinton Revives the Major Douglas Social Credit Concept--Republicans Should Advocate Peoples' Equity Plan Instead

The New York Daily News reports that Hillary Clinton has proposed a "baby bond" scheme whereby each newborn baby will receive a $5,000 account from the federal government that they could use for college. Blog impresario Larwyn questions whether the idea can be taken seriously. As with any redistribution scheme, baby bonds would have unforeseen effects. For example, they would raise the federal deficit; and they would raise taxes, making it more difficult for moderate-income families to pay for college. Given the parlous state of the US dollar, excessive federal spending and $150 billion in state and federal subsidies to higher education, not to mention persistent college tuition cost inflation, it is difficult to follow how such an idea can be taken seriously. It does not bode well for our country's future that a potential president was incompetent enough to even float this idea.

Hillary's baby bond plan is a throwback to the nonsensical theory of social credit advocated in the 1920s by Major Douglas and described in Wikipedia. Major Douglas's theory of social credit starts with the fallacious belief that prices ought to be linked to the costs of production. Common sense tells us that value does not relate to production costs. The fact that I spent a lot fixing up a house in New Orleans, Louisiana doesn't necessarily mean that the house is worth a lot. Production theories of value have been discredited by Carl Menger and many others who show that value is derived from the utility that consumers place on merchandise, i.e., supply and demand.

The key social credit recommendation, a guaranteed income for
all regardless of whether they work, was a larger scale idea than Hillary's who limits the guaranteed income to only $5,000 to new-born babies, but the concept is parallel.

The social credit concept is just another version of welfare, income redistribution or social security. A simpler way to do this would be to simply cut everyone's income tax by $5,000. Why limit it to to babies? The Republicans ought to counter with a "peoples'" or "taxpayers'" equity plan--an across-the-board $5,000 tax credit to all taxpayers.

Since you can't keep socialists down, the social credit fallacy soon turned into a rationale for anti-Semitism. As Wikipedia notes:

"Some prominent groups and individuals, most notably the poet Ezra Pound and the leaders of the Australian League of Rights, have subscribed to Social Credit as an economic theory, believing that it demonstrated the guilt of "Jewish bankers," who supposedly control the world's economy[citation needed]. Social Credit lays the blame for many economic woes at the feet of private banks, most especially those that practice fractional-reserve banking."

In case you're interested, Wikipedia describes social credit's implications:

"-a 'National Credit Office' to calculate on a statistical basis the amount of credit that should be circulating in the economy;
-a price adjustment mechanism that reflects the real cost of production (aggregate consumption in the same period of time);
-a 'National Dividend' to give a basic guaranteed income to all regardless of whether or not they have a job"

Obviously, a national divided will not come from any "credit surplus" (and it will not be free, as Hillary seems to believe). Nor would any central office have the ability to calculate the amount of credit that should be circulating. Nor should prices be related to the cost of production. All of these ideas lead to widespread poverty, as would Hillary Clinton's election.

While banking and the paper money system are statist institutions that ought to be abolished, a simple way to do so is a gold or other standard such as a fixed monetary rule.

Thursday, September 27, 2007

New School, Hillary Clinton and Chinese Interests

Rumors are abounding that left-wing New School University (whose most famous division is the New School for Social Research) in lower Manhattan has been a conduit for Department of Defense funding and as well may have provided a link via Norman Hsu between the Democrats, especially Hillary Clinton, and the Chinese government. Blog impresario Larwyn has sent me some interesting links.

Doug Ross @ Journal asks whether "the New School has been a conduit between China and the Clintons?" He states that Bob Kerrey (not to be confused with John), the New School's president, has obtained DOD grants and speculates that Hillary was involved in procuring the grants. Doug Ross @ Journal also states that "the New School also has deep ties to Bernard Schwartz, former head of Loral, who allegedly instigated donations by the Chinese military to the DNC in exchange for the right to sensitive missile technologies". Moreover, he alleges that the New School gave Norman Hsu, a fundraiser for Hillary Clinton who was associated with earlier corruption scandals, a job, and that the New School has eight $100,000 fundraisers for Hillary Clinton on its board.

Doug Ross @ Journal cites the website, which alleges that Norman Hsu, who has "known connections to the Chinese nationals who were involved in the Clinton scandal of 96" has had "dealings with the Chinese mafia". states that although Hsu was bankrupt, he made large contributions to the Hillary Clinton's campaign. adds:

"Bernard L. Schwartz, who worked for the Chinese shell company that the Clintons gave the ballistic missile technology to after Bill Clinton's re-election put Norman Hsu on the Board of Trustees of the New School....Hillary Clinton ear-marked 750,000 dollars to the new school recently as a pork barrel project."

Ross notes that Kerrey had been involved in funding the National Geospatial Intelligence Agency's (real, not a 007 script) declassification project and subsquently became an "expert" in satellites.

Merv of PrairiePundit notes:

>"the Hsu scandal also is reverberating in a heartland Senate race that could be crucial to Democrats’ hopes to expand their congressional majority. If former Nebraska Sen. Bob Kerrey decides to run for the Senate, it’s clear that he will have to address his connections with Hsu, whom he recruited to serve on the board of the New School under his presidency...Bob Kerrey was not only a receiver of contributions [to the New School]...he actively recruited [Hsu] to the New School...
when Hsu was known as a prominent Democratic donor in New York fundraising circles...In addition to serving on the school’s Board of Trustees, he donated money intended for a school scholarship"

I have long opined that universities are concerned with money first; ideology is secondary at most. It seems that after his time as New School's president, Bob Kerry has some 'splainin' to do!

The Essential Problem with Liberalism is Incompetence

>" posts an excellent article by George Will on Real Clear Politics:

>"In June, the Times was in high dudgeon -- it knows no other degree of dudgeon -- about the Supreme Court's refusal to affirm a far-reaching government power to suppress political speech. The court ruled that a small group of Wisconsin residents had been improperly refused the right to run an issue advocacy ad urging the state's two senators not to filibuster the president's judicial nominees....

>"...Less than three months after the Times excoriated the court for weakening restrictions on issue ads, the paper made a huge and patently illegal contribution to's issue advocacy ad. The American Conservative Union, under Chairman David Keene, immediately filed a complaint with the Federal Election Commission, noting that the purchaser of the ad, Political Action, is a registered multi candidate political committee regulated by the mare's-nest of federal laws and rules the multiplication of which has so gladdened the Times...

>"The Times, a media corporation that is a fountain of detailed editorial instructions about how the rest of the world should conduct its business, seems confused about how it conducts its own. The Times now says the appropriate rate for's full-page ad should have been $142,000, a far cry from $65,000, which is what the group paid. So the discount of $77,000 constitutes a large soft-money contribution to a federally regulated political committee. The Times' horror of such contributions was expressed in its enthusiasm for McCain-Feingold."

The problem with liberalism is advocacy of government solutions that require a degree of competence that does not exist. The Times imagines itself to be competent enough to understand how government programs are to be executed. In fact, the Times has trouble managing itself. What comfort level do we have that any of the programs that the Times advocates, such as national health insurance, will be better managed than the Times manages itself?

Tuesday, September 25, 2007

Escalating Health Costs and Health Care Vouchers

The New York Sun reports that health care costs in New York and nationally are expected to rise by 8.7 percent, or roughly $700. The national cost per person is $7,982, while in New York it is $8,719 (the difference is probably due to the cost of parking in New York City). The Sun quotes the management consulting firm of Hewitt Associates to the effect that nationally employees will pay 21% of the cost, or $2,008 and employers will pay 79% of the cost.

I have previously blogged that the sum of current Medicaid; Medicare; tax expenditures on corporate plans; and state and federal employees' insurance would pay about 69% of the cost of health insurance for every person, including the uninsured, in the US. Thus, if instead of sponsoring inefficient plans like Medicaid and Medicare, and by combining all the federal and state governments' spending on all plans, including tax expenditures, Congress could create health care vouchers which Americans could use to purchase health insurance from private companies. In fact, the percentage would be higher than 69% of cost because of the large amount of waste and corruption in Medicaid and probably in the other government plans as well. This would require ending the corporate tax deduction for health insurance and replacing it with a blanket tax credit that would apply to all Americans. Those whose taxes are less than $8,719 would receive reverse income tax to cover the cost of health care. Taking government out of health care to a greater extent (by ending Medicaid, Medicare and government employee plans) would be a step toward deregulation of health care. If this were combined with increased incentives for globalization (receiving expensive operations in foreign countries like India where they cost 90 percent less) and limits on heroic end of life care which is in the area of 1/3 of all costs but does not produce life-extending outcomes (insurance for which could be purchased privately if wanted) and unnecessary operations, current government spending would likely cover health costs for all Americans, at as good a level as they receive now and probably better than other nations'.

The problem is not one that ought to involve spending money, but rather one that ought to overcome government bureaucrats, public health officials and health providers, all of whom have juicy "stakes" in arguing for more bureaucracy, more spending and ineffective care.

President Bollinger's Criticism of Ahmadinejad Is Not Evidence of Academic Freedom at Columbia U

My wife's pal, Mary Anne, was going to visit us in Manhattan last night but couldn't because the streets were too jammed. At the invitation of Columbia's President Lee Bollinger, Iran's President Ahmadinejad was in town. As a result, Mary Anne couldn't find a taxi. It's been so long since she ventured into a subway that she forgot that she could take the cross-town shuttle. So she cancelled her visit. Unfortunately, President Ahmadinejad was not asked to cancel his.

I have previously blogged about President Bollinger's failure to protect Jim Gilchrist when student-thugs stopped Gilchrist from speaking at Columbia. President Bollinger has not invited any high profile conservatives or libertarians to Columbia, rather following Columbia's long tradition of paying special attention to the children of German romanticism, to include Nazis in the 1930s and Ahamdinejad now, and ignoring or suppressing the children of Adam Smith and Thomas Jefferson.

Having invited President Ahmadinejad and having been subjected to criticism for doing so, President Bollinger aimed to show the world how robust academic debate at Columbia can be. He lanced President Ahmadinejad. The Chronicle of Higher Education (paid access)notes that President Bollinger called President Ahmadinejad "fanatical". President Ahmadinejad replied that President Bollinger had violated the rules of hospitality. President Ahmadinejad is apparently a supporter of academic collegiality, at least when he's not exterminating dissidents.

The New York Sun's reaction to President Bollinger's introduction was mixed. On the one hand, the Sun regrets that Columbia gave goose-stepping German romantics, common among Columbia's faculty, an opportunity to applaud at Ahmadinejad's holocaust denial. The quack academics' support "will be a gift to him that keeps on giving". The Sun argued that President Bollinger aimed to use Ahmadinejad's presence as a "teaching moment" especially in light of the widespread anti-Semitism among the Columbia faculty. President Bollinger strongly criticized President Ahmadinejad's holocaust denial conference and expressed "revulsion" for what President Ahmadinejad stands. According to the Sun, President Bollinger put Columbia' anti-Semitic Middle Eastern Studies department on the spot.

President Bollinger also criticized the incarceration of Kian Tajbakhsh, an Iranian-American employee of the left-wing Open Society Institute. President Bollinger also announced that Columbia was offering Tajbakhsh a teaching job.

President Bollinger's response to President Ahmadinejad raises several questions. First, why so much attention from the president of Columbia to the crackpot ideas of President Ahmadinejad? Such attention would be unnecessary were Columbia University committed to academic freedom. Were conservatives, libertarians and a range of views given free rein at Columbia, which suffers from the dominance of goose-stepping neo-German-romantics, then President Ahmadinejad wouldn't require the university president's attention. Second, from the standpoint of intellectual import, President Ahmadinejad deserves less, not more, attention from President Bollinger than does Jim Gilchrist. Third, there were a number of Ahmadinejad supporters in the audience, obviously a fringe, ideologically-obsessed segment of the public. Given this skewness, is Columbia University an institution that can be taken seriously?

Courtesy of Larwyn, quite a few bloggers have nailed this issue nicely. In Slate, Anne Appelbaum argues

"the novelty of Ahmadinejad's appearance at Columbia lies in the fact that he wanted to make that speech at all. Though a blustering Columbia dean foolishly told Fox News that "if he were willing to engage in a debate and a discussion," the university would happily invite Adolf Hitler to speak, too, it's impossible, in fact, to imagine the Führer accepting."

Hitler was really pre-television, while Ahmadinejad is post-World Wide Web. Perhaps Ahamdinejad's media strategy has more in common with Abraham Lincoln's. Lincoln nailed the presidential nomination when he came to New York to speak at Cooper Union. Whom or what country is President Ahmadinejad aiming to nail?

Arthur Herman in the New York Post calls Columbia's invitation to Ahmadinejad "abject, squalid and shameless", after a cowardly resolution by Oxford University's debating union in 1933 that it would not fight Hitler. Herman points out that Columbia bans ROTC but not President Ahamdinejad. While President Bollinger argues that a university is a forum for argument, Ahmadinjead is not a theorist, but a real-world murderer. Herman is in effect suggesting that the best people to argue the question of drug illegalization are not drug dealers and users, but people who have studied the problem academically. Or the right people to argue the case against the death penalty are not convicted murderers, and there is little or no free speech added to an invitation for a serial killer to speak on campus. The left views President Ahmadinejad as emblematic of an anti-capitalist struggle, and so implicitly applauds the incarceration of journalists, the holocaust denial and the thinly veiled threats of nuclear aggression.

Merv of PrairiePundit calls President Bollinger's invitation to President Ahmadinejad "corruption of academic culture" and "brainless activisim, not academic freedom". He notes that "professors seek publicity, not freedom". Prairiepundit mocks the "punk activism poisoning Ivy League faculties". Merv, quoting David Limbaugh, points out that the First Amendment does not oblige Columbia to invite President Ahmadinjead. He notes that "Contrary to the left's claims, there is nothing we can learn from Ahmadinejad that we don't already know -- at least not in this forum."

In contrast, Jules Crittenden raves about President Bollinger's speech. He notes:

"Among the many parts I liked, is this part where in plain terms he calls Iran the enemy in Iraq, and asks A’jad why he’s supporting terrorists who kill American troops. How come everyone else seems to have such a hard time saying that?"

Rick Moran of American Thinker quotes Caroline Glick of the Jerusalem Post calling Columbia's invitation to Ahmadinejad a disagrace:

"THE PROBLEM with Columbia's action, the reason that there can be no moral justification for the university's decision, is because by inviting Ahmadinejad to campus, Columbia has made the pros and cons of genocide a legitimate subject for debate. By asking Ahmadinejad challenging questions, Bollinger has reduced the right of the Jewish people to live to a question of preferences."

Moran goes on to quote several neo-German Romanticists such as Ezra Klein, who asks "When did America become so weak, so insecure, that we mistrust our capacity to converse with potentially hostile world leaders?" Perhaps an invitation to a university is unnecessary for conversation, though. And as Merv of Prairiepundit points out, we already know what President Ahmadinejad thinks. Perhaps Klein's neo-German-romantic appetite for holocaust denial was whetted during the Iranian holcaust denial conference last year. Or perhaps Klein want to see more evidence. Professor Julian Cole adds:

"Taking potshots at a bantam cock of a populist like Ahmadinejad is actually a way of expressing another, deeper anxiety: fear of Iran's rising position as a regional power and its challenge to the American and Israeli status quo."

Well, yeah. Hitler was a "bantam cock of a populist" too, Professor Cole. Shouldn't Neville Chamberlain have been afraid him? Or was Chamberlain right to follow an appeasement strategy?

Finally, Dinocrat quotes the lies about President Ahmadinejad's speech in the Iranian news agency, IRNA:

"…The audience on repeated occasion applauded Ahmadinejad..."