2007 November 30 Friday
Some Measures Of Credit Down In US

Some forms of credit are shrinking.

The combined value of two leading sources of credit — outstanding commercial and industrial bank loans, and short-term loans known as commercial paper — peaked at about $3.3 trillion in August, according to data from the Federal Reserve. By mid-November, such credit was down to $3 trillion, a drop of nearly 9 percent.

Not once in the years since the Fed began tracking such numbers in 1973 has this artery of finance constricted so rapidly. Smaller declines preceded three recessions going back to 1975; at other times such declines tended to occur in conjunction with an economic downturn.

Credit contraction increases the odds of a recession.

Mortgage payments are falling behind.

Moody's U.S. Home Equity Index Composite showed that the rate of loans at least 60 days past due or that entered the foreclosure process was 16.53 percent in September.

That's more than double the 7.93 percent rate a year earlier, and more than triple the 4.99 percent level in June 2005. The rate was 15.23 percent in August.

Henry Paulson is trying to keep Humpty Dumpty from falling apart. I hope he succeeds.

Treasury Secretary Henry Paulson is scheduled to make remarks on housing Monday, though it is unclear whether a deal could be in place by then.

Regulators have been grappling all year with how to stem the record wave of foreclosures, caused in large part by rising monthly requirements on subprime adjustable rate mortgages, or ARMs. Regulators and industry officials are focusing in on a plan that would possibly make it much easier to extend starter rates on certain existing ARMs for five to seven years, the people familiar with the matter said.

This would be aimed at borrowers who are living in their homes, not on speculators and investors. And policy makers are trying to figure out a way to do it broadly to expedite the slowed case-by-case loan modification process.

The credit instruments built up to sell packages of mortgages make renegotiation of credit terms really difficult. That pushes more people into default than ought to be necessary. Paulson and some banks are trying to come up with ways to make renegotiation of terms easier to do so that fewer people give up trying to pay their mortgages.

Fed Vice Chairman Donald Kohn says that we need to prevent some people from paying the full costs of bad lending decisions.

"To be sure, lowering interest rates to keep the economy on an even keel when adverse financial market developments occur will reduce the penalty incurred by some people who exercised poor judgment," he said in a speech at the Council on Foreign Relations. "But these people are still bearing the costs of their decisions and we should not hold the economy hostage to teach a small segment of the population a lesson."

There is a moral hazard problem here. If people don't pay the full cost of their mistakes then they will make more mistakes and live more recklessly. On the other hand, we don't want the markets to build up so much fear that a stampede away from risks becomes a vicious cycle where each pull-back reduces economic activity so much that successively more businesses fail and lenders become so risk averse that all lending stops. A depression is one character building experience that I'd just as soon do without.

By Randall Parker 2007 November 30 12:22 AM  Economics Business Cycle
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2007 November 29 Thursday
Just An Average Night Of Car Burnings In France

At Newsweek Tracy McNicoll says the latest round of Muslim riots (not that she uses the "M" word) are no big deal because 138 cars burned in one night is pretty close to average.

Early this morning, global audiences may have read wire reports lamenting a “third night of rioting.” But that is misleading. Indeed, the same police union spokesman who early Tuesday fed headlines by deploring rioters’ “urban guerilla”-style use of firearms said today that “nothing too nasty” happened last night and that no new shots were fired. That 138 cars were burned across France last night is actually nothing extraordinary--that’s about the average for any night. Violence may flare-up again when the teens killed in Sunday’s collision are buried. Or even before that. Or after. But the media covering the riots have the same responsibility police peppered with buckshot do--to keep the violence in perspective.

We don't need to see this as a new step in the decline of a civilization because the current rate of destruction of property by hostile Arab and African Muslims in France is already pretty high. No need to think things are getting worse. So things are great. This is how civilizations decay. Rationalizations.

To maintain a high quality civilization requires an attitude similar to that brought to maintaining a high quality industrial process: zero tolerance of decay. Whatever happened to Western societies that so disabled their ability to hold others to a high standard?

By Randall Parker 2007 November 29 11:03 PM  Civilizations Clash Of
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2007 November 27 Tuesday
Muslim Immigrants Riot To Remind French Of Bad Immigration Policy

The French might want to have an argument or perhaps complain. But right now "It's being-hit-on-the-head lessons in here."

VILLIERS-LE-BEL, France, Nov. 27 — Dodging rocks and projectiles, the police lined the streets of this tense suburb Tuesday where angry youths have vowed to seek revenge for the deaths of two teenagers who died in a weekend collision with a police car.

Police union officials warned that the violence was escalating into urban guerrilla warfare, with shotguns aimed at officers — a rare sight in the last major outbreak of suburban unrest, in 2005.

More than 80 have been injured so far — four of them as a result of gunfire — and the rage was still simmering Tuesday afternoon. Inside the city hall of Villiers-le-Bel, a group of visiting mayors appealed for calm while police officers dodged rocks outside.

But will the natives of France learn from this lesson?

The Muslim kids have turned to rifles as weapons.

Officials in Paris last night warned that rioters in the suburb of Villiers-le-Bel were armed with hunting rifles and air rifles as clashes with police continued to escalate.

More than 70 police officers were injured on Monday night, three of them seriously, in clashes with rioters armed with molotov cocktails and firecrackers. One officer was shot in the shoulder with an air rifle.

An "ethnically diverse population" probably features Muslims from northern Africa and also black Muslims from sub-Saharan Africa.

The government's initial response to the riots was deliberately restrained for fear of fanning the unrest in the suburbs, which have an ethnically diverse population. However, the reaction appeared to change after the violence intensified on Monday night.

The French fear the riots will spread to many other French cities.

Despite the apparent lull, fears remained high that the riots might erupt once again and spread to other poor and troubled suburbs of French cities, just as they did in November 2005. There were car burnings in several cities last night and an attempted arson attack on a library in a poor district of Toulouse, in south-west France. President Nicolas Sarkozy, who was returning from a visit to China last night, will hold an emergency security meeting today.

Last time around Nicolas Sarkozy called the violent males "gangrene" but since then has failed to cure the disease.

The 2005 unrest, also sparked by the deaths of two youths, spread from a nearby suburb of Paris to other cities and continued for three weeks, during which more than 10,000 cars were set ablaze and 300 buildings firebombed.

Mr Sarkozy was heavily criticised at the time after he called for crime-ridden neighbourhoods to be "cleaned with a power hose" and described violent elements as "gangrene" and "rabble".

The demographic situation in France spells eventual disaster.

Six Socialist mayors, including the mayor of Villiers-le-Bel, launched an appeal for calm, asking for parents to keep their children indoors after dark. But they gave warning that the violence could spread.

Forty per cent of Villiers-le-Bel's population of 27,000 are under 25 and 40 per cent of them are unemployed.

Separationism is the answer.

By Randall Parker 2007 November 27 06:39 PM  Immigration Societal Decay
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American and Iraqi People And Elites Disagree On US Troop Withdrawal

Scott Rasmussen reports most Americans want US troops out of Iraq in a year.

Fifty-three percent (53%) of voters say they want U.S. combat troops out of Iraq by the end of 2008. However, a Rasmussen Reports national telephone survey found that just 40% want Congress to cut off funding if the President won’t go along with the plan. Fifty percent (50%) are opposed to Congress using the purse strings in this manner while 10% are not sure.

Lawrence Wright says a majority of Iraqis want American troops out too.

As early as August of 2003, five months after the invasion, a Zogby poll found that two-thirds of Iraqis wanted the U.S. and British forces to leave the country within a year, and more than half said that the Iraqis should be left alone to set up their own government. Two years later, as Iraqis were about to vote in their first democratic election, two-thirds wanted the Coalition troops out either immediately or as soon as the new government was established. (The model that Iraqis most admired was that of the United Arab Emirates, a loose federation of seven tribal states, each overseen by a prince, and ruled by a president who is, essentially, a king.) In 2006, when the Iraqi government was in place, a poll by the University of Maryland found that seventy-one per cent of Iraqis wanted their government to ask the Americans to leave within a year; an even higher number doubted that the U.S. would comply with the request.

A poll released last month (by ABC News, the BBC, and the Japanese broadcaster NHK), half a year after the surge in American forces, found that nearly half of Iraqis favored an immediate withdrawal of U.S. forces, while thirty-four per cent of Iraqis, most of them Kurds, said that the U.S. should remain “until security is restored.” Among Shiites, forty-four per cent favored immediate withdrawal, and among Sunnis the figure reached seventy-two per cent—substantial increases in both cases. More Iraqis than ever—fifty-seven per cent—say that violence against American forces is acceptable, diminishing the prospect of order being restored as long as the occupation continues.

But Iraqi leaders agree with American leaders on a continued US troop presence.

Iraq has announced that it would seek one more year of a UN mandate for the American-led coalition. It would then forge an agreement with Washington for a permanent US presence in the oil-rich nation.

Another democracy that does not carry out the will of the people. George W. Bush sure gets what he wants, doesn't he?

By Randall Parker 2007 November 27 12:25 AM  Mideast Iraq Exit Debate
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2007 November 26 Monday
British Teacher In Sudan Faces 40 Lashes For Teddy Bear Named Mohammed

20 of 23 Sudanese 7 year olds voted to name a teddy bear Mohammed. Oops. Now the British lady who taught them is in jail and the school has been shut down.

A British primary school teacher in Sudan is facing 40 lashes and up to six months in prison after allowing her pupils to name a teddy bear after the prophet Mohammed.

Colleagues of Gillian Gibbons, 54, claim she made an "innocent mistake" by allowing the class of seven year-olds to choose the name. But she has been accused of insulting Islam’s holiest prophet, arrested and imprisoned.

Her mistake was to live and work in a society where you get jailed and whipped for allowing something to happen that some people consider an insult to ther religion. The article reports an angry crowd has gathered. I hope the crowd doesn't storm the jail and deliver vigilante justice Muslim style.

If charged and found guilty of blasphemy she faces punishment under Sharia law.

The moral of this story? Don't live among Muslim savages. Stay away from them. They are a threat to liberties that you take for granted.

Brits who don't seem to get that Muslims are a threat to them are not paying attention:

Four out of 10 British Muslims want sharia law introduced into parts of the country, a survey reveals today.

The ICM opinion poll also indicates that a fifth have sympathy with the "feelings and motives" of the suicide bombers who attacked London last July 7, killing 52 people, although 99 per cent thought the bombers were wrong to carry out the atrocity.

Overall, the findings depict a Muslim community becoming more radical and feeling more alienated from mainstream society, even though 91 per cent still say they feel loyal to Britain.

These poll results and others like them are nature's way of telling Westerners not to allow in large numbers of Muslim immigrants.

By Randall Parker 2007 November 26 10:46 PM  Civilizations Clash Of
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2007 November 25 Sunday
Will Violence In Iraq Go Up After Surge?

A New York Times piece reports that the Bush Administration has had to lower its expectations about political progress in Iraq aimed at reconciling the major factions.

WASHINGTON, Nov. 24 — With American military successes outpacing political gains in Iraq, the Bush administration has lowered its expectation of quickly achieving major steps toward unifying the country, including passage of a long-stymied plan to share oil revenues and holding regional elections.

These factions don't want to be reconciled. The Shias don't want to give anything to the Sunnis. The Sunnis don't want to submit to majority rule because majority rule is Shiite rule. The Kurds just want to run their semi-seceded zone as an unofficial Kurdish republic.

Keep in mind: The democratization faith is irrational. Democracy is not a universal balm. Sometimes groups have irreconcilable differences. They can either divorce or one faction can brutalize the other faction into submission. Sometimes dialog is not the road to a happy ending.

The Shiites feel less need to bow to American pressure because of security improvements. I bet the Shiite leaders feel they can simply rule as elected rulers of the majority since the Sunnis are looking defanged.

There have been signs that American influence over Iraqi politics is dwindling after the recent improvements in security — which remain incomplete, as shown by a deadly bombing Friday in Baghdad. While Bush officials once said they aimed to secure “reconciliation” among Iraq’s deeply divided religious, ethnic and sectarian groups, some officials now refer to their goal as “accommodation.”

"Accommodation". I think that's a code word for partial but unofficial partition.

Thomas Ricks of the Washington Post, who has spent a lot of time in Iraq and even wrote a book about it, says the Sunnis and Shias might just be holding back until US troop levels go down.

Kingston, Ontario: Mr. Ricks: Here's a two-part question. Do you think that the success in reducing violence in Iraq is because of a decisive breakthrough against the insurgency, or are the insurgents just biding their time? And do you have the sense that the Americans have any control at all over the political process in Iraq, or are the Iraqi factions just pursuing their own strategies? Thanks.

Thomas E. Ricks: Well, that's the big question. Are the warring sides standing down until Uncle Sam gets out of the way?

The Sunnis have largely stopped fighting while they seek to cut a deal to get a place at the table in post-Saddam Iraq. And the Shiites have stopped fighting the Americans for at least six months, they say -- and why not? With the Sunnis standing down, Uncle Sam would be focusing all his firepower on the Shiites.

But what if the Sunnis get sick of waiting? And what happens when U.S. forces start declining in number next year?

Ricks observes that the current level of violence only looks good because it is compared to what came immediately before the surge. We are currently at a level of violence similar to the 2005 period and that was considered pretty bad at the time. It is like oil prices. If oil goes back down to $70 per barrel some will point to that price and argue that worries about oil demand outstripping supply are unfounded. I guess we should have let Iraq get far worse before surging so that the amount of improvement possible could have been much larger.

Ricks also reports that US commanders in Iraq see the Shiite leaders as the biggest threat to the goals that the US wants to achieve in Iraq.

CAMP LIBERTY, Iraq -- Senior military commanders here now portray the intransigence of Iraq's Shiite-dominated government as the key threat facing the U.S. effort in Iraq, rather than al-Qaeda terrorists, Sunni insurgents or Iranian-backed militias.

In more than a dozen interviews, U.S. military officials expressed growing concern over the Iraqi government's failure to capitalize on sharp declines in attacks against U.S. troops and Iraqi civilians. A window of opportunity has opened for the government to reach out to its former foes, said Army Lt. Gen. Raymond T. Odierno, the commander of day-to-day U.S. military operations in Iraq, but "it's unclear how long that window is going to be open."

Suppose the US unsurges in mid 2008 and the level of violence goes back up again. Then what is the point of staying? I think we should have left a few years ago. I can think of far more useful ways to spend a few billion dollars a week that don't even cost hundreds or thousands of American lives and which don't leave tens of thousans of others with permanent damage to mind or body.

By Randall Parker 2007 November 25 10:11 PM  Mideast Iraq Ethnic Conflict
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2007 November 24 Saturday
Robert Shiller Sees Long Bear Housing Market

Yale economist Robert Shiller, who along with Wellesley College economist Karl Case created a widely respected housing price index, thinks the housing price decline could go on for years.

"Guess what?" said Robert Shiller in an exclusive Reuters interview. "For those of you who thought house prices would find their bottom in 2008 - think again."

According to the Yale economist and co-developer of the S&P/Case-Shiller Home Price Indices, "The bottom is hard to predict. I do not see it imminent and it could be five or 10 years too."

"The housing situation that we got in is unique in history because there was an investor psychology that developed that was stronger than we have ever seen before," Shiller said. "We have seen housing bubbles many times in history, but they have been much more local than this one."

In the United States retiring baby boomers might sell their bigger houses and help depress prices.

"Perhaps we have gotten a little too confident in the global economic growth"

Robert Shiller, professor of Economics, Yale University, in his speech warned that possible speculative bubbles in stock, real estate and oil markets could cause instability in the global economy.

"Perhaps we have gotten a little too confident in the global economic growth. The problem is high oil, stock and real estate prices. There is a question about whether all this can be explained by low interest rates. This is a question that I can't authoritatively answer. But I believe that a substantial part is speculative bubble thinking. We have gotten too confident of the prices in these markets. The unwinding of these markets is the most serious risk facing these markets today," he said.

I worry that China will get hit by a depression due to inefficient capital markets misallocating capital on an enormous scale. Such a depression could pull the United States down with it.

Shiller thinks the various market bubbles could drive the world into a recession.

UAE. The world economy could be heading for a hard landing. This was the warming of Robert Shiller, the Stanley B Resor Professor of Economics at Yale University, in his keynote address during the opening session of the DIFC Economic Forum on Saturday 17 November 2007.

Shiller based his warning based on recent trends in oil prices and the US and international stock and real estate markets. Each of these areas, according to him, reveals speculative pressures indicating financial bubbles. If the pressures and instability continue to build, the global economy could enter another major recession.

But I think he's wrong to paint the price of oil as the result of an economic bubble. Unfortunately, the current price of oil is driven by fundamentals. Rising demand is not getting met by rising supply. Likely future oil production (PDF format) looks like another reason to be bearish on housing prices.

But if you are a renter who can manage to stay employed then bargains might be coming your way.

Really smart money guy Bill Gross sees a really big problem with the real estate debt crisis.

"We haven't faced a downturn like this since the Depression," said Bill Gross, chief investment officer of PIMCO, the world's biggest bond fund. He's not suggesting anything like those terrible times — but, as an expert on the global credit crisis, he speaks with authority.

"Its effect on consumption, its effect on future lending attitudes, could bring us close to the zero line in terms of economic growth," he said. "It does keep me up at night."

This article by AP writer Joe Bel Bruno has a lot of excellent data on the state of the US real estate market and of consumer indebtedness. Look for 3 million jobs to go bye bye, more than in the last recession.

Based on historical models, zero growth in the U.S. gross domestic product would take the current unemployment rate to 6.4 percent. That would wipe out about 3 million jobs from the economy, according to the Washington-based Economic Policy Institute.

By comparison, in the last big downturn between 2001-03 some 2 million jobs were lost, according to the Labor Department.

The huge flood of adjustable rate mortgage rate resets coming up in 2008 and 2009 will push up lots of interest rates from teaser rates to 11% and 12%. Lots of people will be faced with near doublings of monthly mortgage payments and they won't be able to make them. The Collaterized Debt Obligations (CDOs) which mortgages have been bundled into create situations where there's no single creditor with a consolidated interest in rate negotiation. The mortgages have had their interest payments separated off and sold separately from their principle repayments. The securities have been sliced up in other ways with different tiers of creditors with highly conflicting interests that make many mortgages hard to impossible to renegotiate. The rocket scientists on Wall Street have created a lot of rockets that are going to explode.

Though some do not think the ARM resets make the problem much bigger.

Still, Christopher Cagan, the author of the First American study, isn't so alarmed.

The ARM resets will cost an extra $42 billion a year, roughly 0.4% of the nation's gross domestic product he estimates. (Adding some context, he notes that Americans spend much more than $100 billion a year on booze.)

I think 3 big macroeconomic developments are about to collide: 1) The housing market debt and price meltdown; 2) The retirement of the baby boomers; and 3) Peak Oil. Whoever wins the 2008 US Presidential election is going to find it a very hollow victory. Many of the rest of us won't find it much fun either.

Update: Robert Shiller argues in a New York Times piece that housing prices might decline as much as 30%.

WE have to consider the possibility that the housing price downturn will eventually be as big as that of the last truly big decline, from 1925 to 1933, when prices fell by a total of 30 percent.

He argues for a number of regulatory and legal changes to reduce the risks and costs of big housing market failures.

Congress is already on track to eliminate the provision — Section 1322 of Chapter 13 of the bankruptcy law — that prohibits courts from adjusting terms of first mortgages. But there could be more fundamental changes to bankruptcy law than that.

Bankruptcy law is a risk management institution, and such an institution should adopt more modern practices. For example, Andrew Caplin, professor of economics at New York University, has proposed that in personal bankruptcy proceedings, the courts should be allowed the latitude to substitute real estate equity — a share in the ownership of the property, to be realized when it is eventually sold — for first mortgage debt. This could let troubled borrowers stay in their homes, and might be better in terms of efficient risk sharing: it would provide incentives for the mortgage industry and would be friendlier to prospective home buyers who would otherwise face higher mortgage rates to pay for others’ bankruptcies.

I don't see how this measure would reduce the interest rates for prospective buyers. The modified mortgages would still end up being a loss to the creditors. Also, giving real estate equity to creditors would be extremely problematic. Someone might not sell for decades. When they do sell they will be less incentivized to maximize sales price since less of the proceeds would go to the seller. Creditors would face legal liabilities as part owners that they would not otherwise face.

Shiller also argues for home equity insurance. Well, he ought to take a hard look at the bond insurance companies that are currently on the verge of bankruptcy because they never expected so many collateralized debt obligation (CDO) bonds to greatly decline in value. Risk can't be reduced unless incentives for risky behavior are reduced. That's where we need changes.

By Randall Parker 2007 November 24 02:25 PM  Economics Housing
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2007 November 22 Thursday
China Favoritism For Domestic Businesses Increases

I still remember when our elites assured us that giving China membership in the World Trade Organization was supposed to open up Chinese markets to our exports. What a naive era that was. Private equity is one of many industries where the Chinese government is working to build an unlevel playing field.

Beijing is encouraging domestic equity funds to supplant global private equity titans such as Carlyle (CYL.UL: Quote, Profile, Research) on Chinese turf, but their small size and lack of experience mean it will be years before they threaten their international rivals.

The government has stepped up its efforts to bolster home-grown private equity by allowing yuan currency fund-raising, erecting hurdles for foreign rivals and encouraging IPOs on domestic markets.

Shouldn't we make our playing field less even for Chinese exporters?

The annual report fo the US-China Economic and Security Review Commission find that the Chinese are engaging in lots of espionage to steal US technology.

Chinese espionage poses "the single greatest risk" to the security of US technology, a panel has told Congress.

China is pursuing new technology "aggressively", it says, legitimately through research and business deals and illegally through industrial espionage.

China has also "embraced destructive warfare techniques", the report says, enabling it to carry out cyber attacks on other countries' infrastructure.

US companies should think twice about hiring Chinese nationals to do technological development. When those Chinese nationals leave to get jobs at Chinese companies any secrets and source code they had access to stands a good chance of going with them.

To read that report from the US-China Economic and Security Review Commission here are your choices (all PDF format): Press Release, 2007 Report to Congress, 2007 Report Introduction, 2007 Report Executive Summary, and 2007 Recommendations to Congress.

China is moving in several directions that are unfavorable (though unsurprising) from a Western perspective. Here is an excerpt from Chairman Carolyn Bartholomew’s opening statement on the release of the 2007 Annual Report to Congress (PDF)

The Commission’s conclusions as presented in this report are a mixture of good news and bad. China has taken a constructive role in reaching agreement among six nations to dismantle North Korea’s nuclear weapons production capacity. China has agreed to send a combat engineering battalion to Sudan to help with the U.N.’s peacekeeping and reconstruction activities there, and is showing signs of interest in strengthening its export control system to limit proliferation. China’s economic policies have helped lift 200 million of its people out of poverty, and its leaders also have begun to acknowledge the widespread environmental degradation of China’s air and water.

But, this past year revealed some disturbing trends in China. Rather than continue down the path towards a more market-based economy, China reversed course. In its 11th Five Year Plan, Beijing listed a dozen industries that it retains under central government control and ownership. These industries include information technology, telecommunications, shipping, civil aviation, and steel. This is problematic for several reasons. For one, these industries are more likely to receive the kinds of subsides, such as export-dependent tax cuts and low interest rate loans, that will continue to make them unfair global competitors. For another, by walling off a large sector of the economy from public ownership, China isn’t fulfilling the expectations of the members of the World Trade Organization who voted to admit China in 2001. China’s actions certainly violate the spirit and principles of the WTO. Free and fair trade depends on a market approach to international commerce, rather than a contest among governments and their closely owned and subsidized industries.

While speaking of subsidies and violations of free market principles, it is worth noting here that China is continuing to manipulate the value of its currency in order to gain an unfair export advantage. Meanwhile, China has not fulfilled its many promises to protect the intellectual property of foreign business software and entertainment companies from rampant piracy, just to cite two industries important to the U.S. economy. Nor has China reduced the many subsidies provided to exporting industries in China. As of this year, both of these issues are subjects of formal complaints before the World Trade Organization, a development that the Commission has advocated in the past.

The Commission has examined China’s energy and environmental policies over the past year as well. China’s lack of energy efficiency and poor enforcement of environmental regulations, are creating devastating environmental effects that threaten China, the United States, and other nations. China’s strategy for acquiring energy resources—a reliance on acquiring oil at the wellhead rather than through the international markets, for example—also concerns the Commissioners. As a result, China continues to invest in countries whose governments perpetuate human rights abuse, such as Sudan, Iran and Burma. China’s energy use patterns have also added substantially to the air pollution over the Western United States.

China's industrialization is driving up the prices of food, oil, coal, iron ore, and other raw materials. China's industrialization is also generating an increasing amount of pollution on an enormous scale. Plus, they are stealing our intellectual property on a similarly enormous scale.

By Randall Parker 2007 November 22 08:01 PM  China
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Saudi Arabia Biggest Source Of Foreign Fighters In Iraq

Saudi Arabia is the bigges source of foreign Muslim fighters in Iraq.

BAGHDAD: Saudi Arabia and Libya, both considered allies by the United States in its fight against terrorism, were the source of about 60 percent of the foreign fighters who came to Iraq in the past year to serve as suicide bombers or to facilitate other attacks, according to senior American military officials.

The data come largely from a trove of documents and computers discovered in September, when American forces raided a tent camp in the desert near Sinjar, close to the Syrian border. The raid's target was an insurgent cell believed to be responsible for smuggling the vast majority of foreign fighters into Iraq.

Fortunately that raid helped cut down the flow of foreign Sunni fighters into Iraq.

The records also underscore how the insurgency in Iraq remains both overwhelmingly Iraqi and Sunni. American officials now estimate that the flow of foreign fighters was 80 to 110 per month during the first half of this year and about 60 per month during the summer. The numbers fell sharply in October to no more than 40, partly as a result of the Sinjar raid, the American officials say.

Saudis accounted for the largest number of fighters listed on the records by far — 305, or 41 percent — American intelligence officers found as they combed through documents and computers in the weeks after the raid. The data show that despite increased efforts by Saudi Arabia to clamp down on would-be terrorists since Sept. 11, 2001, when 15 of the 19 hijackers were Saudi, some Saudi fighters are still getting through.

But only 1.2% of the insurgents held in American detention camps are non-Iraqi. 80% of the detained insurgents are Sunnis.

So what does this tell us? The insurgency is overwhelmingly Sunni. That makes sense. The Shias control the government. The Sunnis oppose Shia rule and they also oppose US support for the Shia government.

This also shows us something we already know but which the Bush Administration tries to officially ignore: Saudi Arabia is home to the fundamentalist form of Sunni Wahhabi Islam that generates the largest number of people actively hostile to the United States. When we buy gasoline we fund our enemies. The article reports that Saudi citizens provide the biggest source of funding for Al Qaeda in Iraq.

This report also shows something else the Bush Administration would just as soon you didn't know: Iran isn't the biggest source of external support for insurgents. Rather, our pseudo-ally Saudi Arabia produces the jihadists.

15 of 19 9/11 attackers were from Saudi Arabia. We could do more to reduce of risk of terrorist attacks by simply keeping Saudis out of the United States than from any other measure. Doing that is a subset of Separationism.

By Randall Parker 2007 November 22 04:15 PM  Mideast Iraq Insurgency
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2007 November 20 Tuesday
Egyptians Not Allowed To Be Bahai Or Convert From Islam

I found the Human Rights Watch - Middle East and Northern Africa page (i.e. all the nasty things Muslim governments do) and it has lots of articles about how Muslim societies are not fun for non-Muslims. Egyptians are only allowed to register as Muslim, Christian, or Jewish. Baha’is officially don't exist in Egypt because in orthodox Islam only followers of Abrahamic religions which preceded Islam are "people of the book" worthy of dhimmi status (and dhimmi status is second class citizenship at best).

(Cairo, November 12, 2007) – Egypt should allow all citizens to use their actual religious identity when required to list religion on government documents, Human Rights Watch and the Egyptian Initiative for Personal Rights (EIPR) said today. The government’s discriminatory practice of restricting identity to three religions, directed at Baha’is and preventing converts from Islam from listing their true belief, violate many rights and cause immense hardship.

In their 98-page report, “Prohibited Identities: State Interference with Religious Freedom,” Human Rights Watch and the EIPR document how Ministry of Interior officials systematically prevent Baha’is and converts from Islam from registering their actual religious belief in national identity documents, birth certificates, and other essential papers. They do this based not on any Egyptian law, but on their interpretation of Islamic law, or Sharia. This denial can have far-reaching consequences for the daily lives of those affected, including choosing a spouse, educating one’s children, or conducting the most basic financial and other transactions.

“Interior Ministry officials apparently believe they have the right to choose someone’s religion when they don’t like the religion that person chooses,” said Joe Stork, deputy director of Human Rights Watch’s Middle East and North Africa division. “The government should end its arbitrary refusal to recognize some people’s religious beliefs. This policy strikes at the core of a person’s identity, and its practical consequences seriously harm their daily lives.”

The Egyptian government also does not allow Muslims who convert to Christianity to change their identity card religion. But at least they recognize Jews and Christians. Does the Egyptian government allow Zoroastrians to register?

In theory the Koran in 22:17 gives Zoroastrians some standing by referring to the Zoroastrians of the Magian Zoroastrian sect.

022.017 YUSUFALI: Those who believe (in the Qur'an), those who follow the Jewish (scriptures), and the Sabians, Christians, Magians, and Polytheists,- Allah will judge between them on the Day of Judgment: for Allah is witness of all things.
PICKTHAL: Lo! those who believe (this revelation), and those who are Jews, and the Sabaeans and the Christians and the Magians and the idolaters - Lo! Allah will decide between them on the Day of Resurrection. Lo! Allah is Witness over all things.
SHAKIR: Surely those who believe and those who are Jews and the Sabeans and the Christians and the Magians and those who associate (others with Allah)-- surely Allah will decide between them on the day of resurrection; surely Allah is a witness over all things.

So are you allowed to be a Zoroastrian in Egypt? Or are Zoroastrians not allowed to exist there?

The Koran puts Christians and Jews in a submissive position as At-Tawba 29 (9:29) shows with a requirement to pay a special Jizya tax.

YUSUFALI: Fight those who believe not in Allah nor the Last Day, nor hold that forbidden which hath been forbidden by Allah and His Messenger, nor acknowledge the religion of Truth, (even if they are) of the People of the Book, until they pay the Jizya with willing submission, and feel themselves subdued.
PICKTHAL: Fight against such of those who have been given the Scripture as believe not in Allah nor the Last Day, and forbid not that which Allah hath forbidden by His messenger, and follow not the Religion of Truth, until they pay the tribute readily, being brought low.
SHAKIR: Fight those who do not believe in Allah, nor in the latter day, nor do they prohibit what Allah and His Messenger have prohibited, nor follow the religion of truth, out of those who have been given the Book, until they pay the tax in acknowledgment of superiority and they are in a state of subjection.

That tax probably played a big role in reducing the numbers of Christians and Jews in lands which Muslims conquered. First, the tax was an incentive to convert to Islam. Conversion ended the tax. Second, the tax reduced the amount of money available for food and housing and therefore reduced surviving offspring in an era when calorie malnutrition was the biggest killer.

If Egyptians are allowed to be Jews then they have an advantage over Jordanians...

By Randall Parker 2007 November 20 10:29 PM  Civilizations Clash Of
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Saudi Woman To Get 200 Lashes For Getting Raped

In Saudi Arabia gang rapists get 6 to 9 years while a woman victim gets 200 lashes and 6 months in jail.

SAUDI Arabia yesterday defended a court's decision to sentence a woman who was gang-raped to 200 lashes.

The 19-year-old Shiite woman and an unrelated male companion were abducted and raped by seven men in 2006.

Ruling according to Saudi Arabia's strict reading of Islamic law, a court originally sentenced the woman to 90 lashes and the rapists to jail terms of between ten months and five years. It blamed the woman for being alone with an unrelated man.

But last week, the Supreme Judicial Council increased the sentence on the woman to 200 lashes and six months in prison and ordered the rapists to serve between two and nine years in jail.

We buy oil from this Islamic theocracy. This is the country where the bulk of the 9/11 attackers came from.

If I understand this correctly, the men originally had sentences half as long as the 6 to 9 years!

In its decision doubling her sentence last week, the Saudi General Court also roughly doubled prison sentences for the seven men convicted of raping her, Saudi media said.

Another report (the one below) put the original sentences for the rapists at 1 to 5 years.

She's being punished for trying to complain to the public about her original sentence.

The court also harassed her lawyer, banning him from the case and confiscating his professional license.

An official at the General Court of Qatif, which handed down the sentence on November 14, said the court had increased the woman's sentence because of "her attempt to aggravate and influence the judiciary through the media." The court sentenced the rape victim to six months in prison and 200 lashes, more than double its October 2006 sentence after its earlier verdict was reviewed by Saudi Arabia's highest court, the Supreme Council of the Judiciary.

She says the judges were insulting and took a dim view of her daring to leave her house by herself.

"At the first session, [the judges] said to me, 'what kind of relationship did you have with this individual? Why did you leave the house? Do you know these men?' They asked me to describe the situation. They used to yell at me. They were insulting. The judge refused to allow my husband in the room with me. One judge told me I was a liar because I didn't remember the dates well. They kept saying, 'Why did you leave the house? Why didn't you tell your husband [where you were going]?'"

We really should keep Islam out of the West. We should also try much harder to develop substitutes for oil.

Update: A Saudi court forced a married couple to divorce for tribal reasons.

(New York, July 17, 2007) – After a Saudi court forced a married couple to divorce in response to a lawsuit brought by the wife’s brothers, officials placed the woman and her young son in detention and are threatening to detain her husband, Human Rights Watch said today.

Human Rights Watch called on the Saudi authorities to unconditionally release Fatima `Azzaz and her son, and to end the harassment of her husband, Mansur Timani.

In August 2005, a court in the northern city of Juf forcibly divorced the lawfully married couple in absentia. The court ruled that Timani’s tribal lineage was socially inadequate for him to marry `Azzaz, essentially declaring that the marriage could harm the reputation of `Azzaz’s family since Timani is of a lower social class. The Riyadh Court of Appeals in January upheld the verdict, ending judicial appeals. Human Rights Watch called on King Abdullah to refer the case to the Supreme Council for the Judiciary to correct the unjust decision.

Is this sort of ruling based on Islam? Or just on tribal practices?

By Randall Parker 2007 November 20 09:29 PM  Civilizations Clash Of
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2007 November 18 Sunday
William Saletan Considers Heretical Views On Race

Writing in Slate William Saletan commits the outrageous sin of heresy against the left-liberal secular religion (at least as that secular religion has been defined in the last half century).

Last month, James Watson, the legendary biologist, was condemned and forced into retirement after claiming that African intelligence wasn't "the same as ours." "Racist, vicious and unsupported by science," said the Federation of American Scientists. "Utterly unsupported by scientific evidence," declared the U.S. government's supervisor of genetic research. The New York Times told readers that when Watson implied "that black Africans are less intelligent than whites, he hadn't a scientific leg to stand on."

I wish these assurances were true. They aren't. Tests do show an IQ deficit, not just for Africans relative to Europeans, but for Europeans relative to Asians. Economic and cultural theories have failed to explain most of the pattern, and there's strong preliminary evidence that part of it is genetic. It's time to prepare for the possibility that equality of intelligence, in the sense of racial averages on tests, will turn out not to be true.

The latter link is to Jason Malloy's highly excellent Gene Expression blog post about the entirely unfair and anti-scientific liberal media attacks on James Watson: James Watson Tells the Inconvenient Truth: Faces the Consequences. Jason points to relevant psychometric and genetic research on racial differences. Saletan read Malloy's post and apparently even read a substantial amount of the supporting material that Malloy points to (much of it familiar to long term readers of ParaPundit).

The article is amazing. Saletan doesn't say that the measured differences in intelligence are genetically based. But he admits the science does not rule it out. To publically take the real science of human differences in cognitive abilities that seriously makes Saletan something of a novelty in liberal media. Is he going to get crucified? Or has he left enough room to defend himself from the inquisition while still drawing attention to the real evidence?

Curiously, this turn of events began as a result of the attack on Watson. Jason wrote his article in defense of what Watson said about Africa. That led to a New York Times piece by Amy Harmon quoting Jason and blogger Half Sigma in an article entitled In DNA Era, New Worries About Prejudice.

New genetic information, some liberal critics say, could become the latest rallying point for a conservative political camp that objects to social policies like affirmative action, as happened with “The Bell Curve,” the controversial 1994 book that examined the relationship between race and I.Q.

Yet even some self-described liberals argue that accepting that there may be genetic differences between races is important in preparing to address them politically.

“Let’s say the genetic data says we’ll have to spend two times as much for every black child to close the achievement gap,” said Jason Malloy, 28, an artist in Madison, Wis., who wrote a defense of Dr. Watson for the widely read science blog Gene Expression. Society, he said, would need to consider how individuals “can be given educational and occupational opportunities that work best for their unique talents and limitations.”

Liberals have hung the defense of political equality on genetic equality in ability. This has been a big strategic mistake on their part since even within races people obviously vary greatly in ability and genetic differences play a large role in creating differences in ability. Research on selective pressures that have created differences in brain genes is not hard to find. Genes which code for the brain are not immune to selective pressures caused by differences in local environments. People who hold otherwise are effectively embracing a form of neo-Cartesian dualism where the spiritual side of the mind includes brain genes that are held above the influence of local selective pressures in the physical plane. Really, they don't want to think of their position this way. But that is what it amounts to.

Steve Sailer highlighted some comments Jason made about how liberals hung their entire argument for equality on genetic equality and what a huge mistake that was. Their character assassinations of the realists did not really further the cause of defending free societies. There was never any need to deceive citizens to get them to treat others as possessing of rights. Some of their motives for deceiving selves and others weren't even most effectively achieved by the deception. Though the Marxists involved in the inquisition probably benefited their (still doomed) cause by their role in suppressing psychometric research.

See Steve's articles on Watson's comments: James D. Watson—A Modern Galileo and James D. Watson: Broken By The PC Inquisition, Betrayed By The Righteous Right.

Also see Half Sigma's posts NY Times article: time to celebrate?, Race differences in intelligence: does genetic proof already exist?, DTNBP1 gene and racial IQ differences, and Response to comments on race and intelligence.

By Randall Parker 2007 November 18 10:27 PM  Human Nature
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Goldman Sachs Warns On $2 Trillion Credit Hit

My guess: recession in 2008. As financiers worry the entire credit market could freeze up Goldman Sachs chief economist Jan Hatzius, in a note entitled "Leveraged Losses: Why Mortgage Defaults Matter’", argues that housing loan losses might range of $200 billion to $400 billion and that an amplifying effect of those losses might reduce financing by $2 trillion dollars.

The sub-prime mortgage crisis in the US could lead to the opening up of a $2 trillion (£978bn) black hole as banks and financiers stop lending money because of mounting losses, the leading Wall Street bank Goldman Sachs warned yesterday.

The bank's chief economist, Jan Hatzius, who is regarded as an expert on the domestic housing market, warned that losses on outstanding loans could balloon to $400bn as borrowers struggled to repay debts. That figure is well ahead of the $50bn or so losses already announced by major banks including Citigroup and Merrill Lynch, and well ahead of the Federal Reserve's own estimates. In July the Fed chairman, Ben Bernanke, estimated that losses on loans could be up to $100bn.

Why a recession? Consumers are experiencing declining home values, rising oil prices, and some are experiencing a big reduction in credit availability. Plus, many have mortgages with interest rates which are going up and increasing their monthly payments. Worse, the trend in world oil production (the second graph is really bad news) suggests we can't expect any relief on oil prices and gasoline prices.

The bright news? Technology continues to raise productivity and the declining dollar is increasing export demand. Want job security? Get into an industry (if it exists) that exports energy. If such an industry doesn't exist then come up with a discovery that produces exportable energy. Then you can make money off selling to the Chinese.

The losses by financial companies get amplified in the larger economy because they cut back much more in lending.

And leveraged investors react to losses by actively cutting back lending to keep capital ratios from falling -- A bank targeting a constant capital ratio of 10 percent, for example, would need to shrink its balance by $10 for every $1 in losses.

So then total losses of $400 billion would possibly shrink available credit by $4 trillion. Though in theory the Federal Reserve could inflate the US economy out of the dampening effects such a loss caused. What I want to know: How much of the exposure to these losses is for foreign investors?

A week ago some major banks put together a fund to help stabilize credit markets. Will it help?

The country’s three biggest banks have reached agreement on the structure of a backup fund of at least $75 billion to help stabilize credit markets, a person involved in the discussions said yesterday, ending nearly two months of complicated negotiations against a worsening economic backdrop.

Officials from Bank of America, Citigroup and JPMorgan Chase reached agreement late Friday, settling on a more simplified structure than had been proposed, said this person, granted anonymity because he was not authorized to talk for the group.

BusinessWeek says the decline in housing prices should cut consumer spending.

The question, though, is just how much consumers will restrain their free-spending ways. Research by economist Carroll suggests that every $1 decline in house prices lops about 9 cents off of spending. The current value of residential housing is about $21 trillion, according to the Federal Reserve. So if home prices fall by 10%, as many people expect, that would lead to roughly a $200 billion hit to spending over the next couple of years. A 15% tumble in home prices would produce a $300 billion pullback in spending, or about 3% of personal income.

That accords well with calculations by BEA economists. They figure that households took out $340 billion in cash from mortgage and home-equity financing in 2006. That source of funding could largely disappear over the next couple of years.

Still, always look on the bright side of life. New York Times columnist David Leonhardt argues that the news about stocks, housing prices, and oil prices all are really good news for many people.

So unless you’re about to retire or sell stock for some other reason, you shouldn’t get too upset about the market’s fall. As long as you are planning on more buying than selling over the next decade or two, a market correction is your friend.

It’s also likely to improve the nation’s long-term economic prospects. The bull market of 1990s, combined with the housing boom, fooled many people into thinking they didn’t need to save money. They evidently figured that their existing assets would continue to soar in value and could serve as their nest egg. Last year, Americans saved only 0.4 percent of their disposable income, down from 7 percent in 1990.

This decline in personal savings has set the stage for all kinds of problems. The biggest may be that less savings, by definition, equals a smaller pool of capital available for overall investment. Less investment — be it in medical technology or software — will mean slower economic growth and lower standards of living down the road.

Cheaper housing prices are good news for people who don't own a house. Cheaper stock prices are great news for people who need to buy lots of stocks in the future to save for their retirement. I personally want to see the stock market lose half its value so that I can buy cheaply. So I agree.

The high oil prices are a very useful signal that we need to move away from using oil. In fact, high oil prices are causing a boom in venture capital funding of cleaner energy alternatives. That is great news.

By Randall Parker 2007 November 18 06:08 PM  Economics Business Cycle
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2007 November 17 Saturday
Financial System Could Come To Grinding Halt?

A guy at Morgan Stanley thinks we are at very high risk of an enormous financial melt down as a result of fall-out from the sub-prime mortgage debacle. This really does not sound good.

There's a greater than 50 percent probability that the financial system ``will come to a grinding halt'' because of losses from mortgages, Gregory Peters, head of credit strategy at Morgan Stanley, said.

I really do not want to live through a worldwide depression. I don't feel the need to wash off my sins in extreme poverty, to suffer, to atone with a "Grapes Of Wrath" sort of existence. I'm not bored and in need of the excitement of a huge disaster. I don't get off on fantasies of doom and gloom.

The problem involves "structured investment vehicles" (SIVs). It sounds pretty bad.

``You have the SIVs, you have the conduits, you have the money-market funds, you have future losses still in the dealer's balance sheet in the banks,'' Peters said in an interview in New York. ``That's all toppling at once.''

The risk of systemic shock from the current subprime meltdown is quite large in the near term, Peters said. ``It's an overarching concern that we have,'' he said.

How long is this "near term" of which he speaks? If we make it past Christmas without a Black Friday (or Black Tuesday?) are we then out of the woods?

Anyone know how to watch this one? What particular indicators to watch? Came across any particularly telling statistics about things financial?

Click through and on the right click to watch the 8 minute interview of Gregory Peters. His fear is that securitization of debt has basically frozen up. So then how quickly does that start cutting spending by businesses or consumers? Will this cause a huge credit crunch and therefore a deep recession?

Will bond buyers go away because they will no longer trust the ratings of bonds assigned by credit ratings agencies?

Update: So how did we get into this mess? A massive market failure. James Surowiecki argues in a New Yorker piece that we are in this difficult financial situation because money managers were presented with incentives to take too much risk.

The havoc on Wall Street following the collapse of the subprime-mortgage market boils down to a simple truth: for years, lots of very smart people took lots of very foolish risks, betting borrowed billions on dubious mortgage derivatives, and eventually the odds caught up with them. But behind that simple truth is a more surprising one: the financial whizzes made bad decisions in part because that’s what they were paid to do.

Fund managers are much more rewarded for success than they are punished for failures.

Fund managers get bonuses at the end of each year, and they keep those performance fees even if the fund eventually goes south. So if a billion-dollar hedge fund rises twenty per cent in its first year and falls twenty per cent in its second, its investors will have lost money, while the fund’s manager might earn forty million dollars in performance fees. Hedge funds do have a rule that’s meant to deal with this problem: when a fund loses money, it yields no performance bonus until investors get back to even. The catch is that nothing prevents a hedge-fund manager from simply shutting down after a bad year and walking away with the fees he’s already accrued.

Even CEOs are incentivized to take too much risk.

To a shareholder, the difference between a stock that’s at thirty dollars and a stock that’s at twenty means a lot. But to a C.E.O. who has a pile of options with a strike price of thirty-one dollars, the difference means much less. As a result, that C.E.O. is likely to embrace projects that promise big rewards, even if they also entail a significant chance of failure.

That piece is worth reading in full.

Tyler Cowen responds to Surowiecki by saying we are taking the wrong kinds of risk.

With hedge funds, are we now above or below the optimal amount of risk? The answer of course is "we are taking the wrong kinds of risk." We are finding more and more ways to (implicitly) write naked puts in highly leveraged forms. Yes this has brought us new products but it all seems to be new mortgage products. Could those products possibly justify the financial carnage we have seen? That is the critical question but I suspect the answer is "no," that in this sphere we stepped beyond the bound of optimal risk-taking.

That financial carnage is so huge that the Federal Reserve is trying to prevent a total melt down and some guy from Morgan Stanley warns us that our credit markets are at high risk of entirely freezing up. I'd say these financial products haven't so sped up economic growth that they could possibly outweigh the costs of the added risks. Plus. as Tyler points out money has been misallocated to the wrong kinds of risks. Money lost in subprime lending could otherwise have funded venture capital start-ups or capital expansions of industrial corporations.

Update II: What is the mechanism by which the credit markets could freeze up? One part of it: Massive downgrades of debt. Hundreds of billions of dollars of bonds could (actually are) get downgraded from AAA or AA to junk levels of ratings. Worse yet, the ratings agencies that gave so many collateralized debt obligations (CDOs) AA and AAA in the first place are losing credibility with potential bond buyers. If you want to buy high grade debt and you find that AAA handed out to new debt last year means something between squat and zilch why trust what Fitch or Moody's claims is AAA this year?

The scope of this crisis is breathtaking. If you haven't been paying attention to it I strongly urge you take the time to do so now. Stoneleigh at The Oil Drum has a pretty good round-up of articles about debt downgrades and the possible collapse of private mortgage insurers. If this chokes off new mortgage availability the price slump we've seen so far in housing will seem pretty mild in comparison to what is coming. Take away sources of new mortgages and housing prices will plunge and that plunge will make mortgage companies even less willing and less able to loan. The vicious spiral could take the US economy down into a real depression. So the stakes in this financial crisis are enormous. Can the financial people in the US government and Wall Street figure a way out of this mess that avoids a huge downturn in real estate?

The financial guys do not sound confident.

The US mortgage crisis is “deeper” and “scarier” than anyone expected, Tony James, president of Blackstone, said on Monday, as shares in the US private equity group fell on news that its revenues had fallen sharply below expectations in the third quarter.

...

“The mortgage black hole is, I think, worse than anyone saw. Deeper, darker, scarier. [The banks] are now looking at new reserves and my sense . . . is they don’t have a clear picture of how this will play out and confidence is low.”

Is there a way to somehow firewall the effects of this crisis?

By Randall Parker 2007 November 17 10:20 PM  Economics Business Cycle
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Tyler Cowen On The Opportunity Costs Of Iraq Invasion

George Mason University economist Tyler Cowen, and co-author of the Marginal Revolution web log, has an excellent op-ed in the Washington Post arguing that the opportunity costs of the Iraq war are huge.

Set aside the question of what we could have accomplished at home with the energy and resources we've devoted to Iraq and concentrate just on national security. Here, the hidden cost of the war, above all, is that the United States has lost much of its ability to halt nuclear proliferation.

Tyler argues that failure in one intervention leads Americans to oppose future interventions for years and for foreign governments to feel more emboldened and less constrained by what decision makers in Washington DC might do. I emphatically agree.

The waste of the Iraq war has diverted money away from efforts that have the potential to deliver real improvements in our security. Tyler doesn't mention it but efforts to keep out illegal aliens - some of the 9/11 attackers were here illegally - would buy us a real increase in security by reducing terrorist risk and conventional crime.

1. We still haven't secured our ports against nuclear terrorism. The $1 trillion we've probably spent on the war could have funded the annual budget of the Department of Homeland Security 28 times over.

Tyler argues that there has been no return on investment from the Iraq war. Some of the war's supporters would dispute this. But benefits of the invasion seem really hard to find. Some of the war's supporters expect some eventual benefit. But, again, I do not see this happening. At best, for even more expenditures we might eventually cause Iraq to develop in directions that we could at least pretend to claim we controlled. The goal then is to make us look efficacious by seeing the war through to some sort of conclusion where we can leave while claiming victory.

5. Above all, governing Iraq has, so far, been a fruitless investment. According to 2006 figures, U.S. war spending came out to $3,749 per Iraqi -- almost as much as the per capita income of Egypt. That staggering sum hasn't bought a lot of leadership from Iraq, or much of a democratic model for its Arab neighbors.

The US war effort costs more per Iraqi than the per capita GDP of dozens of countries. In fact, we are spending more per Iraqi than countries 125 (Saint Vincent and Grenadines) through 194 (Malawi at $600 per capita) in a table of countries ranked by per capita GDP using Purchasing Power Parity (PPP).

That measure really understates the size of the war cost. Many of the economic costs show up in future years with care for disabled veterans, decreased work by disabled veterans, interest on money borrowed to fight the war, replacement of worn out equipment, and other costs that come due in the future.

We have weakened ourselves and reduced our influence by invading Iraq.

Following your lead, Iraq hawks argued that, in a post-9/11 world, we needed to take out rogue regimes lest they give nuclear or biological weapons to al-Qaeda-linked terrorist groups. But each time the United States tries to do so and fails to restore order, it incurs a high -- albeit unseen -- opportunity cost in the future. Falling short makes it harder to take out, threaten or pressure a dangerous regime next time around.

By Randall Parker 2007 November 17 01:52 PM  Mideast Iraq Costs
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China Raising Regulatory Trade Barriers

Their huge trade surpluses aren't big enough for them.

WASHINGTON, Nov. 15 — Few American industries have had more success in selling goods to China than makers of medical devices like X-rays, pacemakers and patient monitors. Which is why a recent Chinese decree was so troubling.

The directive, issued in June, called for burdensome new safety inspections for foreign-made medical devices — but not for those made in China. The Bush administration is crying foul.

Even more worrisome to the administration is that the directive seems part of a recent pattern in which Chinese officials issue new regulations aimed at favoring Chinese industries over foreign competitors, despite efforts by Treasury Secretary Henry M. Paulson Jr. to ease economic tensions.

Some months back I predicted that the declining dollar would, by lowering the Chinese currency against the Euro, stoke up European opposition to Chinese trade surpluses. This decline in the Chinese currency happened because the Chinese currency is pegged to the dollar and the dollar declined due to the huge US trade deficits. How twisted is that? European officials are showing increasing impatience with Chinese trade surpluses.

PARIS: Admitting that dialogue and cooperation with Beijing have failed to secure concessions for Europe, the European Union's top trade official has called for more aggressive action - in line with the United States - to hit back at Beijing.

In a document filled with hard-hitting criticism of what he terms the "Chinese juggernaut," Peter Mandelson, the European trade commissioner, said the EU should align policy more closely with Washington and be more ready to take cases against China to the World Trade Organization.

The Chinese trade deficit with Europe is rising at about $22 million per hour.

According to the European Commission, the EU trade deficit with China rose by one-fifth last year and is rising at €15 million an hour, a higher rate than that of the United States.

Beijing is now Europe's largest source of manufactured imports. But the bloc, with 27 countries and a population of around 470 million people, exports less to China than to Switzerland. Non-tariff barriers and regulatory discrimination cost European companies an estimated €20 billion a year.

Remember when Americans were told that Congress had to approve China's entry into the World Trade Organization in order to open Chinese markets to American goods? Huge numbers of lobbyists pushed for this. They sure suckered us.

China's trade surplus is up a shocking 59% this year so far.

China's trade surplus for the first 10 months jumped a massive 59 percent to $212.4 billion, according to figures released by the General Administration of Customs. The annual surplus already has surpassed the full-year record of $177.5 billion set in 2006.

October's trade gap rose to $27 billion, up 13.6 percent from the same month last year, according to the customs data. The previous monthly record high was $26.9 billion in June.

The Chinese trade surplus with the United States rose.

China's trade surplus with the United States rose 12 percent to $15.7 billion on total two-way trade of $26.7 billion, according to the customs agency.

The Chinese surplus with Europe rose much more rapidly. Why? The US dollar decline against the Euro translates into a Chinese yuan decline against the Euro because the Chinese fix the value of their currency against the US dollar. So Chinese goods have become cheaper as the US dollar has declined.

The surplus with Europe, China's biggest trading partner, rose nearly 50 percent to $13.9 billion on total trade of $31.4 billion, the agency reported.

The Europeans aren't going to be as tolerant of a big trade deficit with China the way US policy makers have been. US policy makers and economists are excessively enthralled with the supposedly (but not really) free market. It is hard to see how a fixed currency exchange rate or systematic intellectual property theft or regulatory biases against non-Chinese companies add up to something that can be called a free market.

By Randall Parker 2007 November 17 12:51 PM  China
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Will Oil Production Decline Bankrupt Mexican Government?

Michael Orme sees Mexico as falling apart.

Mexico as a nation-state is under threat, and with it the US's third largest source of oil. The Federal government does not have the forces to smoke out, let alone counter the drug barons who virtually control such provinces as Sinaloa, Nuevo Leon and Sonora. Nor can they tackle the rebels and privateers who have been disrupting the country's oil infrastructure. There has been a mass exodus from the police and the army in the wake of the assassinations of hundreds of public officials. Indeed, by some definitions, Mexico is no longer a functioning nation state.

I do not know the extent to which drug barons control areas of Mexico. I tend to be skeptical of more severe versions of such claims in large part because drug barons do not need extensive control. They just need enough power to get law enforcement agencies to leave them alone. Does that require a degree of control that causes everything else to malfunction? Or does Mexico malfunction for other reasons such as a low skilled workforce, a lack of a civic culture, and other factors?

However, Orme points to another reason to expect worsening conditions in Mexico that strikes me as more plausible. Mexico's government relies very heavily on the national oil company Pemex for tax revenue.

Moreover, Mexico as a state lacks diverse and predictable sources of tax revenues. It is reckoned that over 70% of Mexican businesses and individuals cheat the system, leaving the government to rely heavily on the State-owned oil company, PEMEX to act as a de facto tax collector. These PEMEX activities account for 40% of government revenues. And therein lies an increasingly serious problem.

Mexico's oil production is going to continue to decline. Though some of the revenue loss is probably being offset by higher oil prices. The tax revenue of Mexico rises with oil prices. That article mentions the Mexican legislature has just granted a tax cut to Pemex, the Mexican national oil company. But Vicente Fox vetoed that bill. Why? Probably because he thinks the national government can't get by without that Pemex tax revenue Yet Pemex needs to retain more money to develop oil fields in order to slow and delay production declines.

So why is the company starved for cash? Its proven reserves are dwindling, and last year fell 7.7 percent. Its main oil field, Cantarell, is about to reach its peak production and will begin to decline next year. Without big investment and new oil discoveries soon, Pemex's total production, now hovering above 3.3 million barrels a day, could begin to decline by the end of the decade, analysts say.

Despite lofty prices for oil, Pemex has seen little of the roughly $9 billion windfall above its expected revenue. It is heavily taxed - the government relies on it to finance about one-third of the national budget.

And events this month have shown an uneven will to give Pemex the means to find and pump new oil. President Vicente Fox, a long-time supporter of legislation to lower the heavy taxes Pemex pays, surprised the country by vetoing a bill that would have allowed Pemex to pay $2.4 billion less next year.

Think about what that portends for the future. Mexico's government is going to continue its dependence on Pemex revenue even while it starves Pemex. Eventually the money going from Pemex is going to start declining. Mexico will enter a severe financial crisis. In theory it can raise the tax revenue elsewhere. But it will need to enact types of taxes that the affluent can't escape via bribery. Can Mexico's political system manage to do this?

Cantarell's long term outlook is a massive decline. Just in 2007 Canterell production will decline 15%.

Production at the field is down 130,000 barrels a day from January, within Pemex's forecast that yields will decline around 15 percent this year.

The Organization for Economic Cooperation and Development (OECD) Latin American Economic Outlook 2008 report draws attention to low Mexican tax revenue and low quality of spending of that revenue.

The OECD urges Brazil and Mexico to improve the efficiency of public spending. Both Brazil, which collects tax revenues equivalent to around 35% of its GDP, and Mexico, where tax revenues amount to only 15% of GDP, score badly in such areas as access to basic services like clean water and electricity.

The corruption that keeps down Mexican tax collections starves funding for Mexican schools. The average of 9th grade education in Mexico probably keeps Mexico's economy below where it could be. Though Mexico can't hope to rise to US living standards given a national average IQ of 87. As of 1999 Mexico spent only about 3% of GDP on education and compulsory education was raised to 9th grade from 6th grade only in 1993! Mexico's human capital development is severely lagging.

Given the problems in Mexico (corruption, massive organized crime groups, private militias, poverty, population growth) we need to build a non-pathetic border barrier fence along the US border with Mexico. Yes, we really can isolate ourselves from some of the world's problems and should make the effort to do so.

By Randall Parker 2007 November 17 11:43 AM  Mexico
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2007 November 15 Thursday
Shias In Iraqi Government Not Reaching Out To Sunnis

The decrease in bombs isn't leading to political reconciliation. The Shias fear the Sunnis will regain power in a more peaceful Iraq.

CAMP LIBERTY, Iraq -- Senior military commanders here now portray the intransigence of Iraq's Shiite-dominated government as the key threat facing the U.S. effort in Iraq, rather than al-Qaeda terrorists, Sunni insurgents or Iranian-backed militias.

In more than a dozen interviews, U.S. military officials expressed growing concern over the Iraqi government's failure to capitalize on sharp declines in attacks against U.S. troops and Iraqi civilians. A window of opportunity has opened for the government to reach out to its former foes, said Army Lt. Gen. Raymond T. Odierno, the commander of day-to-day U.S. military operations in Iraq, but "it's unclear how long that window is going to be open."

Missing an opportunity? That's so not how the Shia leaders see it. Writing in Asia Times Syrian political analyst Sami Moubayed reports that the Shias fear that Sunnis are going to join the military in large numbers to get control of it.

One reason could be a last-minute decision by Shi'ite leaders to get Shi'ite young men into the armed forces - regardless of their political affiliations - to prevent these posts from being filled by Sunnis under pressure from US Defense Secretary Robert Gates. Gates, operating under the principle of former US ambassador to Iraq Zalmay Khalilzad, has insisted on bringing Sunnis back into senior government and military posts.

One the one hand, militias are being absorbed into the army. On the other hand, 1,500 Iraqis are returning to Iraq per day (according to the London-based al-Hayat) from Syria. That too is troubling the prime minister and Muqtada since most of those returning in large numbers are Sunnis. This comes after Syria decided to implement restrictions on visas to control the 1.5 million-plus Iraqi community in Syria. If al-Hayat is correct and this pace continues, in nearly four years all Iraqis will be out of Syria and back in the civil war arena in Baghdad.

Moktada al Sadr's Mahdi Army are joining the Iraqi military in large numbers as a way to make the Iraqi military even more Shia than it already is.

Maliki and Muqtada fear a rebirth of Iraqi Sunnis at the expense of Shi'ites. This explains 18,000 Shi'ites being formally authorized to hold arms by joining the Iraqi army. This explains why Maliki is becoming bolder in turning his back on the Accordance Front. Recently, he received a list of 16 names earmarked to replace those of the Accordance Front in government, put forward by the Iraqi Awakening Council in Ramadi. Most prominent on the list was Sheikh Hamid al-Hayes, ex-Anbar Awakening president and current head of Iraq Awakening.

Sadr on the inside is going to work against granting the Sunnis much political power. Sadr wants the Sunnis to submit to Shia rule.

The US might have temporarily reduced the return from fighting in the streets. But the Sunnis still haven't reconciled themselves to Shia rule. Plus, the Shias (accurately I think) see the Sunnis as more dangerous to Shia rule when the Sunnis are inside the government. So why should the Shias try to reach out to the Sunnis as top US officers would like to see them do? That reaching out would put Sunnis closer to the levers of governmental control.

By the way, the second article above reports a huge surge of Sunni Iraqis returning to Iraq from Syria. At the same time this is happening liberal writers such as Fred Kaplan and Daniel Byman at Slate are arguing we need to let in a huge flood of Iraqi Muslim refugees. I say we also all sign up for "Getting hit on the head lessons" in advance so that we get into the spirit of it.

By Randall Parker 2007 November 15 11:16 PM  Mideast Iraq Ethnic Conflict
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Some Colleges Charge No Tuition

BusinessWeek has an interesting article about a small number of colleges which charge no tuition.

They range from an urban college like the Cooper Union in New York's East Village to Deep Springs College, a remote, all-male school deep in the California desert. Many are specialized institutions, often focusing on engineering, such as the F.W. Olin College of Engineering in Needham, Mass.; or on music, like the Curtis Institute in Pennsylvania. A handful—the College of the Ozarks or Berea College in Kentucky—have mandatory work-study programs. Perhaps the most well-known of them is the U.S. Military Academy in West Point, N.Y., which offers free college tuition in exchange for five years of service after graduation.

Students who attend these schools walk away from college with little to no loans, debt, and financial worries after they graduate. In most cases, the only fee students need to pay is room and board, a cost separate from college tuition.

Cooper Union College in New York City has a $600 million endowment it uses to pay full tuition costs of students. This puts Cooper Union in an interesting position: It is its own biggest customer. Therefore it has an incentive to keep its own costs down. I would be very interested to see how its costs compare to the costs of similar sized colleges that offer similar courses of study.

Higher education costs so much in large part because it is so labor intensive. This suggests the most obvious way to cut costs: reduce labor needs. How? Stop delivering most courses live. Use high quality video recordings instead. Also, use online tests. Make the delivery of instruction and the testing of students totally automated.

Check out a slide show of tuition-free colleges. This seems like an attractive option for those who want to study engineering. Some of the engineering schools in the slide show have fairly high admissions standards.

By Randall Parker 2007 November 15 10:25 PM  Education
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2007 November 13 Tuesday
Employment Of Natives Declines In Britain

Immigrants are pushing natives out of the British labor market.

In 1996, the last full year of Conservative government, the official projection for net immigration was 65,000 a year.

This September, the Office of National Statistics revised its projection from 145,000 a year to 190,000.

Gross immigration since 1997 has been 4.4 million, net immigration 1.6 million.

Most new jobs now go to immigrants.

It also admitted that 52 per cent of the new jobs in this period have gone to immigrants and that the number of British citizens in work is falling.

I can understand the free market capitalist motive to wage war on native workers. But when did the British Labour Party become the tool of class warfare against the working class?

By Randall Parker 2007 November 13 11:01 PM  Immigration Labor Market
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Number Of Poorest In South Africa Doubles

The end of apartheid sped up the rate of change in South Africa.

The number of South Africans living on less than $1 a day has more than doubled in a decade since shortly after the end of apartheid.

The South African Institute of Race Relations survey said 4.2m people were living on $1 a day in 2005.

This is up from 1.9m in 1996, two years after the first all-race elections.

White flight is draining South Africa of skilled managers and technical workers. Poor people who previously would have been managed by more able bosses are managed by less skilled bosses when they have a job. Crime is causing a lot of damage for those who stay. More resources get spent on security, shifting money away from more productive uses. Plus, lots of transactions aren't even attempted because the risks are too great. Want to leave home and go shopping? Well, the risks of getting robbed or beaten or killed reduce the willingness to go shopping or make sales calls or repair visits.

The criminals are so brazen that some even attack nuclear facilities.

A brazen attack by four gunmen on the Pelindaba nuclear facility has left a senior emergency officer seriously injured.

Anton Gerber, Necsa emergency services operational officer spoke to the Pretoria News from his hospital bed hours after the attack.

He was shot in the chest when the gunmen stormed the facility's emergency response control room in the early hours of Thursday morning.

Criminals stage organized assaults.

INITIAL reports that criminals had gained access to South Africa’s high-security Pelindaba nuclear facility west of Pretoria were alarming in their own right.

But today’s bombshell revelation by authorities that the incident was a planned and co-ordinated “military-style” attack aimed at seizing the institution’s computers is cause for grave concern.

Rob Wilson writes to South African newspaper The Star about direct experience with crime.

I was held up at gunpoint leaving work one evening last month and was relieved of my laptop and passport.

I am a senior executive in a professional consultancy business. Besides the personal trauma, the direct loss of foreign earnings to South Africa has been calculated as being R2-million, excluding my personal costs. This happens many times, every day.

Since the incident, three of my direct colleagues or their families have been attacked, robbed and assaulted.

In one incident, a colleague's wife had her rings bitten off her finger; in another, two elderly people were tied up with wire and beaten.

In the third, the wife was hijacked, her body found in the burnt-out car in the veld.

The leading candidate to succeed Thabo Mbeki as president is under suspicion for bribery.

Jacob Zuma, the leading contender to be South Africa’s next president, was dealt a blow when the Supreme Court cleared the way for him to be prosecuted for corruption.

Mr Zuma, the deputy leader of the ruling African National Congress (ANC), was sacked as deputy president in 2005 after his financial adviser, Schabir Schaik, was convicted of fraud and bribery in connection with an arms deal.

The current president of South Africa, Thabo Mbeki, is trying to block the corruption investigation that might reach the likely next president.

Britain's Serious Fraud Office is investigating BAE over the £75m it alone paid in "commissions", some of which made it into the pocket of the then defence minister, Joe Modise, and one of his senior advisors, Fana Hlongwane, who is believed to have received about £3m according to an SFO request to the South Africans for assistance.

That help has not been forthcoming. Instead, Mbeki has quashed investigations by the South African parliament, the auditor general and the director of public prosecutions into the links between senior ANC officials, the party and the arms companies.

If South Africa had contracted with Russian arms makers then the Russian government would have made sure that corruption investigations never would have started up in Russia about bribes in arms deals. Will the South African leaders learn to deal with suppliers from more corrupt societies in the future?

By Randall Parker 2007 November 13 10:38 PM  Civilizations Decay
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2007 November 12 Monday
Three Quarters Of Americans Oppose Illegal Alien Drivers Licenses

Scott Rasmussen finds that Americans overwhelmingly oppose granting drivers licenses to illegal aliens.

Seventy-seven percent (77%) of American adults are opposed to making drivers licenses available to people who are in the country illegally. A Rasmussen Reports national telephone survey found that just 16% take the opposite view and believe that undocumented immigrants should be allowed to get a license.

On immigration our rulers of course disagree with our masses and our rulers try very hard to ignore the wishes of the public to crack down on illegal immigration.

SAN JUAN, P.R., Nov. 9 — Reeling from relentless criticism of his plan to issue New York driver’s licenses to illegal immigrants, Gov. Eliot Spitzer indicated on Friday that he had not ruled out shelving the idea.

The governor’s aides have grown increasingly concerned that reaction to the plan is preventing Mr. Spitzer from advancing or even discussing other matters. It has also become an issue for Senator Hillary Rodham Clinton’s presidential campaign and has caused anxiety among other Democrats.

The Democrats have a bad economy, the Iraq war, declining housing prices, and rising gas prices in their favor. But they seem determined to remind the public what the public dislikes about the Democratic party. They just can't help being what they are and doing it in public.

By Randall Parker 2007 November 12 11:33 PM  Immigration Elites Versus Masses
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1 Year Of Toyota Profits More Than GM Market Cap

General Motors used to be the mightiest American corporation. Those days are long gone. Toyota could buy all of General Motors with just 1 year of Toyota profits.

At yesterday’s results announcement in Tokyo, finance chief Takeshi Suzuki said that Toyota now expects to make operating profits of $20.2 billion this financial year, $440 million higher than earlier stated and a figure still considered conservative by analysts. By the end of Wednesday trading, which saw GM’s stock price plunge 6% to $33.95, the market valued the world’s biggest automaker at just $19.21 billion.

That market capitalization is less than half a single quarter's sales.

Globally, G.M.’s automotive operations earned $122 million. Total revenue was a record $43.1 billion.

By Randall Parker 2007 November 12 11:15 PM  Economics Transportation
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Democrats Say Iraq War Costs Higher

This is called shooting fish in a barrel.

The economic costs to the United States of the wars in Iraq and Afghanistan so far total approximately $1.5 trillion, according to a new study by congressional Democrats that estimates the conflicts' "hidden costs"-- including higher oil prices, the expense of treating wounded veterans and interest payments on the money borrowed to pay for the wars.

That amount is nearly double the $804 billion the White House has spent or requested to wage these wars through 2008, according to the Democratic staff of Congress's Joint Economic Committee. Its report, titled "The Hidden Costs of the Iraq War," estimates that the wars in Iraq and Afghanistan have thus far cost the average U.S. family of four more than $20,000.

Yes, of course the war costs more than the amount of money appropriated on it so far. We are borrowing the money to spend it. Plus, we have tens of thousands and many hundreds of soldiers coming home with physical and mental disabilities. A lot more soldiers are getting brain damaged than are getting diagnosed for it. The costs for all that get tallied up over decades and the costs are quite high.

People who are soldiers are people who are not workers. There are opportunity costs.

The report argues that war funding is diverting billions of dollars away from "productive investment" by American businesses in the United States. It also says that the conflicts are pulling reservists and National Guardsmen away from their jobs, resulting in economic disruptions for U.S. employers that the report estimates at $1 billion to $2 billion.

The war does not provide a net benefit to American security. If our leaders really really wanted to do something to reduce the threat of terrorists there's a far easier thing to do: Keep out the Muslims.

By Randall Parker 2007 November 12 10:50 PM  Mideast Iraq Costs
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Turkish Threats Stoking Kurdish Nationalism

Starting a war causes all sorts of unintended consequences. The Turkish response to Kurdish terrorists is stoking Kurdish nationalism.

YUKSEKOVA, Turkey — Turkish threats to attack Iraq, which may be heightened by a kidnapping over the weekend, are having the unintended effect of fostering closer ties between Kurdish communities in the two countries.

Will the Turkish Kurds leave Turkey for a Kurdistan which will secede from Iraq? What justification can be offered for forcing Kurds to live under Turkish and Arab rule?

Ankara's stance is "pushing Kurds together and deepening the rift between Kurds and Turks," said Sezgin Tanrikulu, bar association head in Diyarbakir, the southeastern Turkey's largest city. "Wounds are being created that will not be easy to heal."

Five years ago, Turkish Kurds had little but contempt for Iraqi Kurdish leaders Jalal Talabani and Massoud Barzani. Kurds in teahouses across southeastern Turkey dismissed them as "backward tribesmen interested in nothing but dollars from Washington."

Today, that contempt has entirely evaporated. Instead of insults, many Turkish Kurds prefix mentions of Mr. Talabani and Mr. Barzani with the word "brej" — a Kurdish expression of respect.

The Kurds within Iraq have been fleeing the Arab areas and are becoming more heavily concentrated in the Kurdish north. The central government in Baghdad is a net negative in their lives. They'd be better off with independence. Will they get it?

By Randall Parker 2007 November 12 04:57 PM  Mideast Iraq Costs
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2007 November 11 Sunday
When Will Oil Demand Destruction Kick In?

Oil prices are approaching a point where total demand might start dropping.

Société Générale's "Oil Burden" index, which measures oil price impact on global gross domestic product and has a base of 100 set in 1975, sat at just 75 at the end of last year - when average prices were $30 below current levels. While the company hasn't crunched the index numbers at current prices, "We have a feeling we are now approaching the 100 [index] level," he said. He noted that energy costs are now eating about 4 per cent of U.S. disposable income - similar to levels at the heights of the 1970s oil crises.

He suggested $120 a barrel could represent the level at which oil's damage would be on par with the 1970s. But others feel the threshold could be even higher - because the emerging-market economies that have been driving demand growth seem less bothered by high prices than their developed-world counterparts.

In the early 1980s world oil demand shrank as all the projects and changes in lifestyle made to reduce the burden of high oil prices began to take effect. Shifts toward more fuel efficient cars, changes in industrial processes, and the installation of more insulation all cut demand. At some point the collective decisions of many participants in the world economy will lead to demand reduction. But at what price of oil?

Developed countries (the United States especially) will cut back their oil demand sooner than the developing Asian countries will. Part of that difference is due to more rapid Asian economic development. Faster development means a faster rise in the demand for energy.

This means that US demand will start declining first. Yet in spite of that US demand decline total demand might not drop when US demand drops. So prices might keep going up. US demand destruction will just free up oil for use by China and India. Lifestyle changes and industrial restructuring in the US in the 1980s lowered the price of oil for the US and the US economy benefited from that price decline. But this time around the US restructuring and investment in energy saving capital equipment will not deliver an energy price decrease.

Just how far oil prices rise will depend on how soon and how rapidly demand destruction occurs. The price of oil has gotten high enough to wake up people. Car buying habits have shifted in the direction of smaller ones. Entrepreneurs, venture capitalists, and managers of big corporations are looking for ideas on how to save on energy costs and how to develop products that will let others cut costs.

The rising energy prices are going to cause a big burst of policy making in national governments. Corporations will line up for and against the many proposals. An interesting article in the Wall Street Journal about Dow Chemical's positions on energy policy highlight the many interests which drive corporate decisions on energy policy.

Sometimes, because Dow is so sprawling, its stake in an energy-policy fight isn't clear even to the company. Consider a pending House proposal to require electric utilities to generate 15% of their power from renewable sources by 2020.

It sounds good to Mr. Ellebracht, the R&D chief in the unit developing solar technology. In fact, it sounds doubly good: The proposal would let utilities meet the rule partly by raising energy efficiency -- and Mr. Ellebracht's unit makes insulation, too.

But the idea worries two other Dow fiefs. The people who operate power plants at Dow chemical factories fret that a mandate on use of energy from renewable sources might require Dow itself to buy costly renewable power. And the people who buy natural gas as a factory raw material worry that the mandate might actually raise gas prices.

All of this corporate calculation on which policy proposals to support will become largely irrelevant if we break out of the world oil production plateau with a downward turn in oil production. Government policies will have little effect as compared to declining oil production.

Which way oil production is going to break - up or down - is probably the biggest economic question we face right now. It is even more important than the rise of Asia or the retirement of the baby boomers. A downward break will throw us into something akin to an economic depression.

By Randall Parker 2007 November 11 08:50 PM  Economics Energy
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2007 November 10 Saturday
Christian Conservative Leaders Critical Of Islam

Gary Bauer wants to make Islamofascism into a political issue in the 2008 election.

'The war against Islamofascism is in many respects a 'values issue,''' Bauer wrote. ''That may seem like an odd statement at first glance, but, as I have often said, losing Western Civilization to this vicious enemy would be immoral.''

I'm disappointed that Gary Bauer would use the term "Islamofascism". Islam predates Fascism by over a thousand years. Islam doesn't need concatenation with a 20th century political ideology in order to be properly understood. In fact, attempts to equate a branch of Islam with fascist confuses the issue. The term "Islamofascism" tends to imply something other than Islam itself is the cause of terrorism and the clash of civilizations. That conclusion seems dubious to me. The Jihadists are Muslim fundamentalists. They seek to resurrect the use of all the tactics which Muhammad used in his initial spread of Islam. They are textual literalists.

Some Christian conservatives do see at least a portion of Islam as an enemy of Christianity.

'From one perspective, branding ''radical Islam'' as a family values issue is yet another example of the broadening of the evangelical agenda. But next November, it also could energize one of the Republican Party's key voting blocs, much like anti-gay marriage measures did in 2004.

''It's the ultimate life issue,'' said Rick Scarborough, president of the Texas-based conservative Christian group Vision America. ''If radical Islam succeeds in its ultimate goals, Christianity ceases to exist.''

Note the term "radical Islam". How about "fundamentalist Islam"? Aren't the Jihadists really returning to the roots of Islam where it was spread by military force?

But regardless of how they label the (mostly demographic) threat from Islam what do the Christian conservatives propose to actually do about it? This article mentions nothing constructive coming from them.

So what kind of solutions do Christian conservative leaders propose for battling what they see as a real threat?

One is staying in Iraq. More than 40 conservative leaders, most of them social conservatives, signed a declaration in September warning against the "catastrophic" consequences of withdrawing from Iraq. The statement said the war "must be seen in the broader context of Islamo-fascism's war on America and Western Civilization."

The biggest threat for the West from Islam is demographic. We can only lose that battle of the womb if we let Muslims move to our countries. Keep the Muslims out and the threat is minimal. Therefore, if social conservative or Christian conservative leaders want to sign a declaration that is constructive they would sign one that calls for the end of Muslim immigration into the West.

Back in December 2001 Billy Graham's son Franklin labelled Islam itself as the problem.

Evangelist Franklin Graham has been drawing fire for controversial comments he made about Islam, which he said is "wicked, violent and not of the same God." Graham, son of evangelist Billy Graham, reportedly made the comments in October, said NBC News. The younger Graham said Islam is not "this wonderful, peaceful religion. When you read the Qur'an and you read the verses from the Qur'an, it instructs the killing of the infidel for those who are non-Muslim."

Franklin Graham then toned down his rhetoric in response to a lot of criticism. Still, at least briefly he was honest.

Back in late 2001 and 2002 a lot of conservative Christian leaders were more frank in their appraisals of Islam.

Ted Haggard, president of the National Association of Evangelicals, and pastor of New Life Church in Colorado Springs, said to the 40 leaders attending today, ''Since we are in a global community, no doubt about it, we must temper our speech and we must communicate primarily through actions.''

It has been more than a year since major evangelical leaders, like the Rev. Franklin Graham, the Rev. Jerry Falwell and the Rev. Jerry Vines, past president of the Southern Baptist Convention, began publicly branding Islam, or Islam's prophet Muhammad, as inherently evil and violent.

Mr. Graham, son of the evangelist Billy Graham and head of a global missions agency, Samaritan's Purse, said last year that Islam was ''a very evil and wicked religion.'' Mr. Vines described Muhammad as ''a demon-possessed pedophile.''

Will these Christian leaders start advocating policies that provide us with real protection against Muslims?

By Randall Parker 2007 November 10 10:52 PM  Civilizations Clash Of
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Muslim Groups In LA Do Not Want To Be Mapped By Police

The LAPD wants to watch Muslims in LA more carefully.

A plan by the counterterrorism bureau of the Los Angeles Police Department to create a map detailing the Muslim communities in that city, an effort described as a step toward thwarting radicalization, has angered civil rights groups, which say it is no better than racial profiling.

At least three major Muslim groups and the American Civil Liberties Union sent a letter yesterday to top city officials raising concerns about the plan.

These Muslim groups ought to stop and think about what happens when Muslims in America carry out terrorist attacks. Do they become worse off when everyone looks at them with more suspicion? Might they be better of getting watched by police now if that watching prevents attacks that make all Muslims much less trusted than they are now?

Some Muslims in America really are on the side of the Jihadists.

Unlike Mr. bin Laden, the blogger was not operating from a remote location. It turns out he is a 21-year-old American named Samir Khan who produces his blog from his parents’ home in North Carolina, where he serves as a kind of Western relay station for the multimedia productions of violent Islamic groups.

In recent days, he has featured “glad tidings” from a North African militant leader whose group killed 31 Algerian troops. He posted a scholarly treatise arguing for violent jihad, translated into English. He listed hundreds of links to secret sites from which his readers could obtain the latest blood-drenched insurgent videos from Iraq.

His neatly organized site also includes a file called “United States of Losers,” which showcased a recent news broadcast about a firefight in Afghanistan with this added commentary from Mr. Khan: “You can even see an American soldier hiding during the ambush like a baby!! AllahuAkbar! AllahuAkbar!”

Immigration brings an inherently hostile religion into our midst. Why inflict that on ourselves?

If Western countries adopted separationism then we'd face less risk from the jihadists and their supporters.

By Randall Parker 2007 November 10 10:45 PM  Immigration Culture Clash
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Teachers Compete With Text Messaging For Attention

Columbia University journalism school professor Samuel Freedman, writing in the New York Times, reports that teachers increasingly find themselves competing with electronic gadgets for the attention of their students.

All the advances schools and colleges have made to supposedly enhance learning — supplying students with laptops, equipping computer labs, creating wireless networks — have instead enabled distraction. Perhaps attendance records should include a new category: present but otherwise engaged.

In the past three years alone, the percentage of college classrooms with wireless service has nearly doubled, to 60 percent from 31 percent, according to the Campus Computing Survey, an annual check by the Campus Computing Project of computer use at 600 colleges. Professor Bugeja’s online survey of several hundred Iowa State students found that a majority had used their cellphones, sent or read e-mail, and gone onto social-network sites during class time. A quarter of the respondents admitted they were taking Professor Bugeja’s survey while sitting in a different class.

Isn't this an argument for delivering lectures as recorded videos? If lecturers really are competing with Blackberry chats and web site reading in real time shouldn't lectures cease to get delivered in real time? Let students start and stop lecture playback during the slices of time when the students want to pay attention.

Scheduled lectures amount to an assertion of an absolute top level of priority at class times by lecturing teachers for the attention of students. Why make those times be the only times you can hear the material? I do not see this absolute rigidity of scheduling as serving a productive purpose.

Professor Michael Bugeja, who teaches journalism at Iowa State University, wants contemplative students. Um, good luck with that one.

“Education requires contemplation,” he continued. “It requires critical thinking. What we may be doing now is training a generation of air-traffic controllers rather than scholars. And I do know I’m going to lose.”

Seems to me that the new media formats are what Prof. Bugeja's students are going to end up writing for. They are immersing themselves in the new media while in class in spite of their professor. That seems like the professor's mistake. I can understand why the teachers object. The professors want to engage in exchanges with their students where their students react to what they've just been taught. Okay, how about doing this in a more modern fashion? How about moving those exchanges online and let those exchanges happen at more irregular times of the day? Create chat rooms for Blackberry exchanges about course topics.

Another option for schools: Create class rooms that block out most cellular signals. Don't want the students distracted? Remove their ability to communicate with anyone not in a classroom. Oh, and while you are at it: Build concert halls that block cellphone signals. Then we can sit in concerts without hearing the sound of cellphones ringing.

By Randall Parker 2007 November 10 02:20 PM  Education
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2007 November 08 Thursday
Immigration Boosting Measures Die In Congress

Congress is showing some fear that the populace doesn't want what the elites want on immigration.

Last month, the Senate gave up on the DREAM Act, after falling short of the votes needed to take up debate. The plan, which would have given children of illegal immigrants access to US colleges and universities and, eventually, to citizenship, was once viewed as one of the more likely immigration measures to pass Congress.

This week, another program with broad bipartisan support fell off the legislative agenda, as Sen. Dianne Feinstein (D) of California said she was postponing plans to legalize the status of hundreds of thousands of migrant agricultural workers. She had urged her colleagues to add the guest-worker provisions in her AgJobs bill to the $283 billion farm bill now before the Senate. But she said in a statement Monday that the politics on the issue weren't promising: "When we took a clear-eyed assessment of the politics of the Farm bill and the defeat of the DREAM Act and comprehensive immigration reform, it became clear that our support could not sustain these competing forces."

Millions of phone calls, letters, faxes, and emails have reached into fear centers of politicians who want to get reelected. People got mad enough about plans for amnesty that Congress got the message.

We still have work ahead of us. We need to defeat some of the biggest pro-immigration and pro-amnesty Congressmen and Senators who are running for reelection. If we can do that then Congress will go further down the path of immigration restriction.

By Randall Parker 2007 November 08 10:36 PM  Immigration Politics
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End Of Real Estate Boom Cuts Consumer Spending

A lot of people accumulated debt on their houses so they could buy lots of other stuff.

From 2004 through 2006, Americans pulled about $840 billion a year out of residential real estate, via sales, home equity lines of credit and refinanced mortgages, according to data presented in an updated working paper by James Kennedy, an economist, and Alan Greenspan, the former Federal Reserve chairman. These so-called home equity withdrawals financed as much as $310 billion a year in personal consumption from 2004 to 2006, according to the data.

But in the first half of this year, equity withdrawals were down 15 percent nationally compared with the average for the last three years, and consumption supported by such funds plunged nearly one-fourth, according to the Kennedy and Greenspan data.

This summer, the size of withdrawals fell even more sharply to about one-third below the level of late last year, according to Mark Zandi, chief economist at Moody’s Economy.com.

Housing prices are still falling. Also, credit conditions are tightening. So the amount of money people will have to spend from home equity loans and home sales will drop even further.

US Federal Reserve Chairman Ben Bernanke says the credit crunch and housing price downturn are going to slow the economy.

On a day when stock prices swung wildly, the dollar hit another new low against the euro and further signs emerged that consumers are growing more cautious about spending, Mr. Bernanke warned that the economy is about to “slow noticeably” as the housing market continues to spiral downward and financial institutions tighten up on lending.

The party's over.

America is coming off a real estate bender, a cheap oil bender, and a cheap imported goods bender. We are experiencing withdrawal symptoms from three different forms of substance abuse. How you feeling?

By Randall Parker 2007 November 08 10:20 PM  Economics Housing
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Andrew Sullivan Recounts His Errors On Iraq

Sullivan admits to mistakes on Iraq and lists ways he was wrong.

I was wrong because a) one critical element of the case for war was simply not there (whether lied about or misrepresented or incompetently judged or so riddled with "evidence" from the tortured or the criminal that the info was FUBAR); b) the president did mismanage the war so grotesquely that it clearly made the US less safe, empowered Iran, gave al Qaeda a new lease on life, opened the borders of Iraq to al Qaeda, permitted the ransacking and looting of much of Iraq, and led to tens of thousands of deaths of innocent civilians; c) I fatally misread the history of Iraq and did not fully appreciate the depth of the sectarian divides, the absence of any national identity that could effectively supersede tribal loyalties, and the trauma that Saddam's regime had imposed; d) I did not realize that the Bush administration would effectively suspend the Geneva Conventions in the war thus leading to the atrocities across the theater that did a great deal to undermine the moral basis for a just war.

There are some mistakes missing from that list. How about "I failed to appreciate how much Islam is inimical to liberal democracy". Iraq is not the only Arab country. The rest of them are not models of democratic freedom either. Did we really need to invade an Arab country to discover that liberal democracy doesn't go down well with Arabs?

Or how about "I greatly overestimated the competency of government while posing as a conservative". Iraq isn't just a story of mistakes by George W. Bush and the neocons. It is also a story of a lot of people who claim to see government as far less competent than the private sector putting faith in the ability of government bureaucracies. Why should we expect high competence from CIA nuclear weapons analysts? The most talented people are turned off from the idea of working for government, let alone from working for a highly secretive agency which offers oppressive working conditions. Why should we expect competence from a bunch of US occupation administration officials? I wouldn't expect a lot of competence from people willing to go work in Iraq for the US government, even less so when a major filter on who got chosen was the extent of their loyalty to Bush.

Sullivan correctly points out that even if Iraq eventually improves that doesn't justify invading Iraq or make invading Iraq a worthwhile undertaking.

Even if, in a decade or so, we see something approaching a normal society in Iraq (which would be the first time in centuries), I will still have been fantastically wrong. Just because in the very long run, it is possible that a decision made was retrospectively the right one, that was not the basis on which I supported the war and lambasted its opponents. I'm not going to pull that excuse. And the costs of the enterprise - both human and financial - continue to bear no rational relationship to the benefits we haven't even begun to see. To have embroiled ourselves in a large, open-ended, $3 trillion occupation of a country that is clearly no longer a country, and to trap the bulk of the military in that theater while threats proliferate globally, and to have no viable exit strategy ever: this is a colossal, historic error. And all this holds even if. it turns out in the very long run to have made Iraq a more normal society than it was under Saddam.

Even if (and this is still an unknown) we can bribe and bludgeon major Iraqi faction leaders into a sustained reduction in violence that doesn't make the invasion a good idea. There's no benefit accruing to America for invading Iraq. We would have been better off had we never invaded.

By Randall Parker 2007 November 08 07:09 PM  Mideast Iraq Blame Game
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2007 November 07 Wednesday
No Farm Labor Shortage Seen

In spite of the self-serving calls of fruit and vegetable farmers for more imported cheap laborers the farming industry does not show signs of a labor shortage or of high wages due to a labor shortage.

For several years stories in the media have reported a farm labor shortage. This study examines this question and finds little evidence to support this conclusion. First, fruit and vegetable production is actually rising. Second, wages for farm workers have not risen dramatically. Third, household expenditure on fresh fruits and vegetables has remain relatively constant, averaging about $1 a day for the past decade.

Among the findings:

  • Production of fruits and vegetables has been increasing. In particular, plantings of very-labor intensive crops such as cherries and strawberries have grown by more than 20 percent in just five years.
  • The average farm worker makes $9.06 an hour, compared to $16.75 for non-farm production workers.
  • Real wages for farm workers increased one-half of one percent (.5 percent) a year on average between 2000 and 2006. If there were a shortage, wages would be rising much more rapidly. 
  • Farm worker earnings have risen more slowly in California and Florida (the states with the most fruit and vegetable production) than in the United States as a whole.
  • The average household spends only about $1 a day on fresh fruits and vegetables.
  • Labor costs comprise only 6 percent of the price consumers pay for fresh produce. Thus, if farm wages were allowed to rise 40 percent, and if all the costs were passed on to consumers, the cost to the average household would be only about $8 a year.
  • Mechanization could offset higher labor costs. After the “Bracero” Mexican guestworker program ended in the mid-1960s, farm worker wages rose 40 percent, but consumer prices rose relatively little because the mechanization of some crops dramatically increased productivity.
  • Labor-saving mechanization can be difficult for one farmer, since packers and processors are usually set up to deal either with hand-picked or machine-picked crops, but not both. Government has a key role to play in facilitating mechanization.

We can stop the influx of illegal aliens and we can deport all the illegal aliens already here without damaging the US economy. A reduction in the supply of cheap low skilled labor would increase the rate of innovation in farm equipment design. The rate of growth of productivity would be accelerated if illegals were deported and manual labor wages increased as a result.

Hordes of Mexican and Central American farm workers just lower the wages of farm workers and stifle innovation in agriculture. Plus, these low skilled and poorly paid workers create health, welfare, and educational burdens we all have to pay for. Cheap labor for farmers is subsidized labor. The labor is subsidized with taxes on all of us.

By Randall Parker 2007 November 07 11:15 PM  Immigration Economics
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US Tactic In Iraq: Bribery

You've heard how the Sunnis in the west of Iraq became tired of the foreign fighters who were brutalizing them and therefore the Sunnis turned against the fighters who claim membership in Al Qaeda and embraced an alliance with US forces. Well, maybe there is something to that story. But the Christian Science Monitor reports on an entirely different reason for the big change in the Sunni Triangle: Bribery to rent tribal loyalties in Anbar province. (and what happens when the rent stops?)

TIKRIT, Iraq - Inside a stately guesthouse on the grounds of Saddam Hussein's palace in Tikrit on the banks of the Tigris, sheikh Sabah al-Hassani jokes that the initials "SH" of the former dictator etched on the walls are his.

"I have a weakness for Cuban cigars, French cologne, and Spanish-made loafers," he says with a wide grin.

Since June, Mr. Hassani, who claims to be one of the princes of the legendary Shammar tribe, which numbers nearly 7 million across the Arab world, says he has received at least $100,000 in cash and numerous perks from the US military and the Iraqi government.

With his help, at least $1 million has also been distributed to other tribal sheikhs who have joined his Salahaddin Province "support council," according to US officers. Together, they have assembled an armed force of about 3,000 tribesmen dubbed the "sahwa [awakening] folks."

This is not a tale of the triumphal march of democracy. But it is a tale of how humans respond to incentives. The tribal chiefs were given both carrots and sticks by both sides. The insurgents who threatened and killed tribal sheikhs helped to create the conditions that made American bribery so productive.

Al-Qaida in Iraq insurgents took advantage of the upheaval, Allen said, initially portraying themselves falsely as “liberators,” but rapidly showed their true intentions not long after, declaring Anbar to be the starting point for their vision of an “Islamic State of Iraq.”

When their extremist views were rejected by Anbar’s tribes, al-Qaida in Iraq began a campaign of murder and intimidation, Allen said, targeting traditional “anchor points” including influential tribal sheikhs, doctors and teachers, as well as roads, bridges and other key infrastructure.

Can the US repeat this bribery process with the Shias? I think the bribery teams will face tougher sledding in Shia areas for a few reasons. First off, there are a lot more Shias to bribe. Second, some of the Shia insurgencies are bound at the hip to political parties with real power. The Shia insurgents aren't outsiders so much as tools of governing factions. The Shias can't be split away from the insurgents as easily. Plus, the Shias are getting a lot more of the oil revenue and powerful Shias are more likely to be wealthy Shias. So I'm thinking the bribery tool isn't going to be as successful outside of the Sunni areas.

By Randall Parker 2007 November 07 07:16 PM  MidEast Iraq New Regime Failures
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2007 November 06 Tuesday
Froma Harrop: Even Democrats Oppose Illegal Immigration

Froma Harrop argues that Democratic candidates for the presidency need to get tough on illegal immigration.

Hillary Clinton -- and the other Democrats running for president -- couldn't possibly have assumed that they would forever skate around the issue of illegal immigration. That notion came to an end in the most recent debate, when the New York senator badly slipped over a question about her state's controversial plan to issue driver's licenses to illegal aliens. Did she think no one would ask?

Democrats had better start dealing with this. Polls show a large majority of Americans, including Democrats, opposed to illegal immigration. They also find that most Americans favor some sort of amnesty for many illegals. Clinton apparently tried to finesse the two, while ignoring what's behind the numbers.

What many Democrats (and Republicans) don't "get" is that the support for amnesty is highly conditional. It rests on trust that any official pardon will be the last one.

People have been fooled too many times by past amnesties. I see no need for an amnesty. We can just deport all the illegals that are here.

I don't think the leading Democrats are capable of moving right on immigration to an appreciable extent. Hillary's recent obvious support for amnesty ("bring everybody out of the shadows") shows she's not going to come down hard on illegals.

I think it’s important to bring everybody out of the shadows. To do the background checks. To deport those who have outstanding warrants or have committed crimes in the United States, and then to say to those who wish to stay here, you have to pay back taxes, you have to pay a fine, you have to learn English, and you have to wait in line. And I hate to see any state being pushed to try to take this into their own hands, because the federal government has failed.

So I know exactly what Governor Spitzer’s trying to do and it makes a lot of sense, because he’s trying to get people out of the shadows. He’s trying to say, “O.K., come forward and we will give you this license.”

But without a federal policy in effect, people will come forward and they could get picked up by I.C.E. tomorrow. I mean, this can’t work state-by-state. It has to be looked at comprehensively. I agreed with President Bush and his efforts to try to approach this. He just didn’t have the political capital left by the time he actually got serious about it.

And it’s unfortunate that too many people are using this to demagogue the issue, instead of trying to solve it: you know, people in politics, people in the press, and there’s a kind of unholy alliance.

Let me translate "demagogue this issue": That means "demand that illegal aliens be deported and oppose amnesty". Hillary isn't saying that we should build a wall along the entire US-Mexico border. She's not calling for tough enforcement against employers who hire illegals. She's not calling for deportation of the sort that Ike Eisenhower carried out in the 1950s (I like Ike).

What the Democrats have going for them: 7 years of George W. Bush and counting. Rising oil prices. A real estate meltdown. A potential recession starting next year. An unpopular war in Iraq.

What the Democrats have going against them: They are even less willing than the Republicans to obey rising popular demands an end to illegal immigration and reduce legal immigration. They want more tax money to spend.

By Randall Parker 2007 November 06 10:29 PM  Immigration Politics
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2007 November 04 Sunday
Impoverished Growing Portion Of All Children

Our future is in the hands of the growing lower class.

Atlanta - The plight of the South's school-reform movement now hangs on kids from families that make less than $36,000 a year.

For the first time in 40 years, two new studies show, more than half of public school students in the South are eligible for free or reduced lunch – a watershed moment in a 15-year wealth slide that comes amid resurging racial and economic inequalities in the former Confederacy. The rise is part of a nationwide surge: Low-income students now represent 12 percentage points more of the student body than in 1990.

Part of this is due to immigration. Part of it is due to the fewer children being born to the smartest and most educated.

I am reminded of the Harvey Danger tune Flag Pole Sitter.

Been around the world and found
That only stupid people are breeding
The cretins cloning and feeding
And I don't even own a tv

I also hear "We are Devo. D-E-V-O".

Progress is not inevitable.

By Randall Parker 2007 November 04 09:06 PM  Civilizations Decay
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Political Fight Over Plan For London Mega-Mosque

This is nature's way of telling you that you have a problem with immigration.

But the fight raging over an abandoned lot in London’s East End is of an altogether grander scale. A large and secretive Islamic sect proposed building what would have been the largest mosque in Europe, smack at the gateway to the 2012 Olympic Games, and within sight of London’s financial district.

A fundamentalist Muslim group is behind the mosque and Western law enforcement officials say the group is a recruiting ground for terrorists.

In Newham, the borough where the mosque would stand, Alan Craig, the leader of the Christian Peoples Alliance Party in the East End, started a one-man campaign against the mosque a year ago that has grown and gained national prominence.

He began by emphasizing the size of the mosque. But now he focuses on its sponsor, Tablighi Jamaat, a worldwide evangelical Islamic group based in Pakistan with millions of followers that professes to encourage Muslims to be more loyal to their faith.

American and European law enforcement officials say Tablighi Jamaat’s simple message masks a fertile recruiting ground for terrorists. Two of the suicide bombers who attacked the London transit system in July 2005 had attended Tablighi Jamaat gatherings, British security officials said.

Consider the erroneous assumption behind the use of the term "mask" in the sentence I bolded above. A simple Muslim fundamentalist message does not mask the nature of a Muslim organization. The only masking going on is in the minds of those Westerners who refuse to see Islam for what it is: an aggressive dominating religion that was founded by a warrior ruler. Islam is radically different than Christianity which was founded by a guy who never led soldiers into battle and who did not seek to overthrow existing secular authority ("Render unto Caesar that which is Caesar's").

Alan Craig argues that Tablighi Jamaat’s officially stated renunciation of violence to spread Islam is a matter of pragmatics and not of principle. Since they so closely try to live as Muhammad lived and since Mohammad used violence and warfare to spread Islam they see the spread of Islam at the point of a spear, the barrel of a gun, or via improvised explosive devices as morally acceptable as long as violent tactics can work. Check out Alan Craig's video on this at YouTube.

Also see Alan Craig's YouTube home page.

There's a solution for this problem: Separationism.

While I'm at it, I like Brussels Journal and think Europeans shouldn't have to face a growing list of no-go zones and battles by Turks and Moroccans. Read more on Turkish nationalism in Brussels. I think it is very wrong for the European Union to outlaw speech against the Islamization of Europe. I agree with Diane West that those who see Nazis everywhere are fighting the last war and ignoring real threats in the process.

By Randall Parker 2007 November 04 11:19 AM  Immigration Culture Clash
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2007 November 03 Saturday
Democrats Want To Raise Taxes

The Democrats are getting back their nerve. The Democrats think they can win the 2008 election on a Robin Hood platform of higher taxes for the rich.

WASHINGTON -- More than two decades after presidential candidate Walter F. Mondale called for tax increases -- and lost the White House in a landslide -- the Democratic Party is on the verge of a major political gamble: Some of its leading members are proposing an array of tax hikes on wealthier Americans.

All of the major Democratic presidential candidates would allow President Bush's tax cuts for wealthier households to lapse. Most support raising the cap on income subject to Social Security taxes. Some want to raise taxes on capital gains and other investment income.

I have a hypothesis to present to you: Rising income inequality enables growth of government.

Why? As more and more income and assets go to a smaller and smaller portion of the population a government can tax fewer people in order to collect a lot of revenue. The smaller the fraction of the population that needs to be offended or violated the easier a government can raise taxes in a democracy.

Left-leaning politicians can argue to their base that some of the assets of the wealthy are ill-gotten gains. So the seizing of these assets via taxes can be morally justified to at least a portion of the electorate.

But the wealthy have ways to fight back. First off, they can afford to pay for think tanks, lobbyists, and other agents of influence. They can generate lots of opinion pieces in newspapers and talking heads on TV.

Also, the wealthy can afford legions of tax attorneys and accounts. These tax experts themselves cost a lot of money and therefore only a portion of the avoided taxes represent money saved.

The wealthy aren't united however. Some wealthy people make their money via capital gains which is a transaction tax. They can delay selling and therefore delay paying taxes on their gains. Warren Buffett and Bill Gates have paid proportionately very little in taxes for how much money they made. They aren't motivated to oppose higher taxes.

The growing lower class (thank you immigration) combined with the growing ranks of the elderly create conditions much more favorable to the higher tax agenda. Taxes are going to go up. The question is how high?

By Randall Parker 2007 November 03 09:18 AM  Economics Political
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2007 November 01 Thursday
Rising Percentage Of Elderly Income Goes To Medical Costs

Out-of-pocket spending is a rising portion of total income of the elderly in the United States.

This study evaluated the changes in Medicare beneficiaries' health care spending between 1997 and 2003, and found beneficiaries spent a growing share of their income on health care.

The results showed that median out-of-pocket health spending increased from 11.9% of income in 1997 to 15.5% in 2003, and about four in 10 beneficiaries spent at least one-fifth of their income on health care in 2003. Researchers using data from the Medicare Current Beneficiary Survey found that growth in out-of-pocket health spending outpaced growth in income over time.

Old folks are experiencing a higher rate of inflation than the public as a whole. Old folks are a rising percentage of the total population. So the aging of the population increases inflationary pressures on the economy.

A rise in retirement ages would cause many aging people to pay taxes for longer, thereby easing the financial crunch on taxpayers to support old folks. Also, the longer people are employed the more of their medical costs will get paid by employer health benefits.

By Randall Parker 2007 November 01 10:20 PM  Economics Aging
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US To Start Partial Iraq Troop Withdrawal

US soldiers have had their tours of duty in Iraq extended and their times at home between tours shortened. The US military has reached its practical limits. Now the surge is nearing an end and that brings a reality test.

Tikrit, Iraq, AND Washington - The end of the US surge is in sight here. In two key central Iraqi provinces, American units will soon reduce their forces and modify their role in a region that is a microcosm of the fractured nation. There are Sunnis and Shiites in this Baathist heartland. Al Qaeda fighters have fled here from Anbar Province. This region is home to one of Iraq's three major oil refineries.

It's a risky move, both US and Iraqi officials say, but a necessary test of the strength and ability of Iraqi security forces.

The US is pulling out one of its brigades (about 3,500 soldiers) in December without replacing it. As the Americans leave, the US plans to give Iraqis more responsibility, an overall strategy the US will employ as it pulls out five brigades – the bulk of the surge forces – by next summer.

I am expecting a surge in violence as the number of US military personnel in Iraq goes down. Anyone else want to make a prediction?

By Randall Parker 2007 November 01 09:51 PM  MidEast Iraq New Regime Failures
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Hot Potato: Which President Gets Next Recession?

Megan McArdle expects the Democrat who wins the US Presidency in the November 2008 election will get saddled with the next recession.

The next term is going to be pretty interesting, in terms of watching what wonks say about presidential impacts on the economy. If Bush doesn't end up with a recession on his watch, the next person in office will almost certainly catch a nasty twofer: a deepening hole opening up in the budget due to entitlements, and a recession that will make any such problems desperately worse. I expect a neat (and amusing) flip between Democrats proclaiming that deficits don't matter, and anyway, the president has limited power over the economy; and Republicans righteously screaming about fiscal responsibility.

If oil prices keep going up then I expect the recession will happen sooner. But we could get lucky and avoid a recession until 2009.

The big budget crisis coming up due to exploding old age entitlements spending makes me expect higher taxes. But in the last 45 years US federal taxes as a percentage of total GDP have averaged 18.2% of the economy with a peak in the late 1990s of 20.5% of GDP. Tax revenues were only 16.5% of GDP in 2003 rising to 18.4% in 2006. That rise probably was due to especially fast income growth among higher income people in higher tax brackets.

That historic range of tax revenues as a percentage of GDP suggests the people are pretty opposed to paying high taxes. So on one hand, we have the historical post-WWII limits on the federal government's slice of GDP. But on the other hand we have the huge unfunded old age entitlements and the demands that the Baby Boomers will make to have their old age entitlements paid in full. How is this going to pan out? Does the resolution of this conflict depend on who gets elected as the next President?

I'd rather raise retirement ages and cut old age entitlements than increase taxes and avoid big tax increases. For that reason I'm suspicious of all new forms of taxes even if those taxes are billed as ways to cut other taxes. Value Added Tax (VAT) seems like a bad idea because the European countries with VAT have governments that (and someone correct me if I'm wrong) take larger percentages of GDP than the US government does. My guess is that people are less opposed to VAT because VAT is less visible. Money taken out of one's paycheck is visible in every check you get and every time you fill out income tax forms. But taxes that just show up as higher prices for various products are more hidden and create less opposition. So oppose hidden taxes.

If the Democrats win the White House and Congress in the next election will we see enactment of a national VAT to pay for old age entitlements?

By Randall Parker 2007 November 01 09:39 PM  Economics Political
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