2007 December 31 Monday
International Opinion Sees US As Declining Power

My quibble with world opinion is that in reality Russia is going to decline as soon as their oil production declines.

The USA is losing its image as a superpower. By 2020 China will almost have caught up with the USA in the eyes of the international public. In the meantime, according to international perception, Russia too will be seen increasingly as an international power. At the same time, awareness of the threats facing the environment has grown enormously in the past years. By 2020 the destruction of the environment and climate change will be considered internationally as the biggest threat to mankind. These are the findings of a current international opinion poll carried out by the German foundation, the Bertelsmann Stiftung, about the role and the challenges facing world powers.

When asked which countries are regarded as world powers today, 81% name the USA and only 50% China. Thereafter follow Russia with 39%, Japan with 35% and the EU equal with The United Kingdom, on 34%. In comparison with a corresponding survey two years ago, China has experienced an increase of 5%. The largest leap recorded is however for Russia, which was named as a world power by 12% more people than in 2005.

The United States has very unfavorable demographic trends. In a nutshell, the workforce is dumbing down. Whites are a declining fraction of the population and the big rising groups do poorly in school and at work, earning much less. But Russia has even bigger problems. It has a smaller and much more rapidly shrinking population. When Russian oil production starts declining (and this point might be very close) that combined with the population decline will make Russia into a basket case.

By Randall Parker 2007 December 31 12:06 AM  Polls Future Prospects
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2007 December 30 Sunday
Hillary Clinton Questions Benefits Of Globalization

An article in Der Spiegel reports on declining support for globalization among Americans.

Democratic presidential candidate Hillary Clinton has distanced herself from the idea of free trade, a philosophy which has shaped America's worldview since the end of World War II. The theory holds that trade between nations automatically increases the wealth of all participants, and that any form of trade is better than no trade at all. Every American president since Harry S. Truman has spent a good deal of his time in office eliminating customs restrictions and barriers to trade.

Globalization and "free trade" have become synonymous with the United States going massively in hock to the world. Yes, most people think this is bad. No, they don't buy the arguments of some doctrinaire free market economists that the market will somehow make it all work out well in the end. Ricardo's theory of comparative advantage has been modernized into a strange form where our comparative advantage is the ability to borrow money from other countries. Somehow I don't think that is what David Ricardo had in mind.

MIT Nobelist economist Paul Samuelson says the consequences of globalization are negative for the United States.

Does he think that globalization is a zero-sum game, in which one party wins, and the other loses? No, he replied after he had finished his sushi. The world's wealth will continue to increase. But, he quickly added, unfortunately this won't apply to all groups within a society.

But won't the profits of globalization's winners offset the losses of its losers? No, he responded, not any longer. According to Samuelson, the consequences of globalization for the United States have been negative for some time now. Compared with Asia's rising economies, the country is now in a "win-lose" situation. Asia, says Samuelson, is gaining economic strength while America is losing its assets.

What are some of those consequences? Much higher prices for oil, minerals and other natural resources. Much more pollution. Greater habitat destruction. Much more intellectual property theft.

How can America compete by producing knowledge if the knowledge gets ripped off? Designs that get copied are designs that pay less in return for their development. Shrinkwrap software that gets used illegally on a massive scale by Chinese companies gives them a competitive advantage over US companies that pay to legally use software. The situation is analogous to how employers of illegal aliens can drive out of business any company that only uses higher priced legal labor. China can beat us by cheating. Shouldn't we object to this?

Morton Kondracke is displeased that Lou Dobbs is opposed to immigration. I'm displeased with ole Mort and think he ought to stop supporting policies that damage America. Mort's also unhappy that Hillary Clinton has serious doubts about whether Ricardo's theory comparative advantage describes what is happening with world trade.

And Democrats increasingly have turned anti-free trade. As a prime example, Sen. Hillary Rodham Clinton (D-N.Y.), wife of the president who pushed through the North American Free Trade Agreement, the World Trade Organization and normal trade relations with China, now questions the whole basis of free trade.

She — along with other Democratic presidential candidates — has called for a “review” of NAFTA and a “time out” on new trade agreements.

And, in a Dec. 3 interview with the Financial Times, Clinton said she would take a “hard look” at reviving the stalled Doha Round of trade talks aimed at reducing trade barriers around the world.

She went so far as to question whether the theory of “comparative advantage” — the idea that everyone benefits when countries sell their best products and services to one another, the whole basis of post-World War II U.S. international economic policy — “may not be descriptive of the 21st century economy in which we find ourselves.”

How dare she question established dogma. Well, heresy comes easily to me. So I'm with Hillary on this one.

By Randall Parker 2007 December 30 11:29 PM  Economics Globalization
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Election Brings Tribal Violence To Kenya

In Kenya Mwai Kibaki of the Kikuyu tribe won reelection amid claims of unfairness. So supporters of Raila Odinga of the Luo tribe are rampaging and killing in anger.

NAIROBI, Kenya — It took all of about 15 minutes for the slums to explode on Sunday after Kenya’s president was declared the winner of a deeply flawed election.

Thousands of young men came streaming out of Kibera, a shantytown of one million people, waving sticks, smashing shacks, burning tires and hurling stones. Soldiers poured into the streets to meet them. In other areas across the country, gangs went house to house, dragging people of certain tribes out of their homes and clubbing them to death.

"It's war," said Hudson Chate, a mechanic in Nairobi. "Tribal war."


Mr. Odinga is Luo, an ethnic group that has long felt marginalized by the country’s Kikuyu elite that has dominated business and politics since independence in 1963.

Candidates make it clear to voters that they will deliver the goods to their own tribe if they win power.

Tribal allegiances have always been a factor in elections in Kenya, where there are more than 40 tribes. On the campaign trail, candidates usually use a mix of direct and indirect appeals to tribe. They use phrases like, "It is our time to eat," knowing voters understand that whoever controls the presidency has power to allocate money for projects and simple things like patrol cars for police countrywide.

Ethnically divided societies become zero sum games. So the United States should keep out members of ethnic groups that will see the aim of politics as delivering benefits to their group by taxing other groups.

The Luo are taking to the streets.

A close legal adviser to Odinga said the opposition leader would not challenge the results in court, which could take years, but would "take our case to the court of public opinion," the streets.

As the sun set, thousands of ardent Odinga supporters raged through the muddy, foot-worn paths of Nairobi's biggest slum, Kibera, wielding nail-studded sticks, heavy rocks, hammers, machetes and flasks of alcohol, setting ablaze a market run mainly by Kibaki's tribe, the Kikuyu, and continuing on.

"The president is Raila!" the rioters shouted, banging the machetes on tin roofs before tearing them down. "No Raila! No peace! They have rigged the election!"

Amy Chua, author of World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability, sees a world where in many countries the biggest political rifts are between ethnic groups (tribal groups are ethnic groups) and she believes democracy deepens these rifts.

There exists today a phenomenon - pervasive outside the west yet rarely acknowledged, indeed often viewed as taboo - that turns free market democracy into an engine of ethnic conflagration. I am speaking of the phenomenon of market-dominant minorities: ethnic minorities who, for varying reasons, tend under market conditions to dominate economically, often to a startling extent, the indigenous majorities.


For globalisation's enthusiasts, the cure for group hatred and ethnic violence around the world is more markets and more democracy. Together, markets and democracy will gradually transform states into a war-shunning, prosperous community, and individuals into liberal, civic-minded citizens and consumers. Ethnic hatred and religious zealotry will fade away.

I believe, rather, that in the numerous societies around the world that have a market-dominant minority, markets and democracy are not mutually reinforcing.

Democracy does not deliver greater happiness when elections are seen as a battleground in a zero sum game waged between tribes. We see this in Iraq as well. The Sunnis see elections as a tool by which Shias gain control of the government and use that government for Shia benefit at the expense of Sunnis. Well, the Sunnis actually are right about that. Though if the Sunnis were in power they'd do the same but with the identities of the winners and losers reversed.

By Randall Parker 2007 December 30 11:29 PM  Ethnic Conflict
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Employer Enforcement On Immigration Comes To Arizona

A law with real enforcement teeth to get employers to stop hiring illegal aliens is going into effect on January 1, 2008 and employers who knowingly employ illegal aliens can lose their business license.

Businesses knowingly employing illegal immigrants face corporate death penalties.

The first offense can result in a 10-day suspension of a company's business license. The second offense can mean loss of the business license altogether. The law is widely viewed as the toughest of more than 100 passed by states and municipalities nationwide since the summer to crack down on illegal immigration.

Employers can comply by checking all applications against a US federal database.

The state sanctions law is the toughest in the nation. It is aimed at turning off the job magnet that has drawn more than 500,000 undocumented immigrants to Arizona. In addition to punishing businesses for knowingly employing illegal workers, the measure requires employers to use a federal online computer program known as E-Verify to check the work eligibility of all new employees hired after Jan. 1.

If employers refused to hire illegals then the illegal aliens would stop coming and, in fact, would turn around and go home. In fact, self deportation by illegals is already accelerating. If Arizona's law is not overturned in court it could cut the number of illegals in Arizona and set an example for what could be done on a national scale.

Arizona has a huge illegal alien problem.

Arizona stands out in illegal hires – about 10 to 12 percent of the workforce. This border state with only 6.2 million people has more illegal immigrants than Illinois or New York. Two-thirds of Arizona's foreign-born population are not in the US legally, and the vast majority of them live at or near the poverty level.

The political impetus behind the law is due in large measure to the state's social services being overwhelmed in recent years by a flood of migrants evading tighter border security in California and Texas. The state, in other words, may represent the United States of the future, unless more is done to address the problem of both illegal (too much) and legal (too little) immigration. Since 2000, the US has seen its highest increase in immigrants, but more than half were illegal.

Cutting back on the supply of illegals will accelerate the automation of agriculture.

And one economist, Philip Martin at the University of California, Davis, predicts higher wages will force needed mechanization and increased productivity in farming and not significantly raise prices for produce. That was the case, he says, after the "Bracero" Mexican guest-worker program ended in the 1960s.

Lettuce field worker salaries have already risen with increased enforcement.

Simonds said, "What that means is you got workers who are not seasoned. They don't know how to work a field, and so production is way down across the board,. If you have new people showing up every day, you are going to spend half your day or more training them how to adhere to food safety standards."

Because employers have to compete more for workers, Rademacher said he has raised salaries from about $7 three years to close to $10 this year.

Waters said some growers are paying $15 to $18 an hour this season.

Some of the legal Hispanic field workers think like farmer workers union leader Cesar Chavez did and oppose the illegals since the illegals drive down wages.

Ramona Ortiz, 55, who has been working in the fields since she was 16, said that there are undocumented workers, contrary to growers who say most workers are documented. And she would like to see fewer of them.

"Too many workers hurt the people with documents," she said. "It holds the salaries down."

But that is why the employers want the illegals: to lower their costs of labor while sticking the rest of us with higher taxes to pay for welfare, police, jails, crowding, and other costs. Privatize profits, socialize costs. I say we put a stop to this.

By Randall Parker 2007 December 30 10:33 PM  Immigration Law Enforcement
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2007 December 29 Saturday
Steve Sailer: Jeopardy Game For Presidential Candidates

I hear Weird Al Yankovic singing "I lost on Jeopardy baby, woo ooo ooo."

For example, one cause of voter cynicism is the suspicion that the candidates are complete ignoramuses on every topic on which they haven't been preprogrammed by their handlers. So, instead of having them stand around and semi-argue with each other, why not have them play Jeopardy instead, with the categories weighted toward history and current affairs.

Sure, the frontrunners wouldn't be likely to agree to it, but why not let laggards like Duncan Hunter and Dennis Kucinich volunteer for a match. They don't even have to be in the same party. Come on, you'd watch that, right? And once a Hunter-Kucinich-Paul Jeopardy match got triple the ratings of the last debate, pressure would mount on the big boys and girls to pick up their buzzers and fight.

This is a great idea from Steve Sailer. Our current crop of Presidential contenders is pretty weak. To hear, say, Obama just go out and try to speak with really lofty rhetoric makes me disgusted. Sure, anyone can hire a speech writer. Yes, the published speeches of Churchill et. al. can be studied to look for ideas. And some of the candidates are pretty good performers (but no match for the Gipper). But what does this have to do with competency to carry out the duties of the US Presidency? Not much as near as I can tell. Good judgment and a highly excellent grasp of reality are more important.

Jeopardy is just a beginning. I have an idea for a reality TV show: Pair up Republicans and Democrats to survive in a wilderness setting. Let them choose each other. See who can best work in a bipartisan manner. Find out which pair can, say, figure out how to catch salmon without a fishing rod in a stream in Alaska. Or see which pair can build a raft to get off an island that is only a half mile from another island. Give them life preservers and homing beacons so none will drown. Plus, the camera crews will be on hand to fish them out.

I would also love to see them try to build a vehicle from parts. "We've given you each 3 times as many parts as needed to build a dune buggy and escape from the hell hole we've put you in. But some of the parts don't fit. You need some of the duplicates because some parts will fail part way through your trip. Have at it. First person to get into that distant old Western town on engine power wins."

By Randall Parker 2007 December 29 05:37 PM  Politics American Presidency
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2007 December 27 Thursday
Assassinated Benazir Bhutto No Saint For Human Rights

John Burns of the New York Times paints a portrait of Benazir Bhutto as someone not very morally principled.

A deeply polarizing figure, the self-styled “daughter of Pakistan” was twice elected prime minister and twice expelled from office amid a swirl of corruption charges that ultimately propelled her into self-imposed exile in London and Dubai for much of the past decade.

She claims to have been framed on corruption charges by political enemies. But given what is known about her lifestyle, attitudes, and the assortment of people making the accusations her claims of innocence seem hard to credit.

Burns said her admirers compared the Bhuttos to the Borgias. The Borgia Popes were huge scandals.

Violence ran like a thread through her family life, to an extent that caused her admirers to compare the Bhuttos, in the contribution they made to Pakistan’s political life, and in the price they paid for it, to the Kennedys — and her enemies, pointing to the Bhuttos’ bitter family feuds, to compare them to the Borgias. The younger of Ms. Bhutto’s two brothers, Shahnawaz, died mysteriously of poisoning in 1995, in an apartment owned by the Bhuttos in Cannes, France. French investigators said they suspected that a family feud over a multimillion-dollar inheritance from Zulfikar Bhutto was involved, but no charges were filed.

Ms. Bhutto’s other brother, Murtaza, who along with Shahnawaz founded a terrorist group that sought to topple General Zia, spent years in exile in Syria beginning in the 1980s. When Murtaza finally returned to Pakistan, in 1994, he quickly fell into a bitter dispute with Ms. Bhutto over the family’s political legacy — and, he told a reporter at the time, over the money he said had been placed in a Swiss bank by their father when he was prime minister. In 1996, Murtaza was gunned down outside his home in Karachi, and his widow, Ghinva, blamed Asif Ali Zardari, Ms. Bhutto’s husband.

Okay, one or both of her brothers might have been killed in family feuds. Also, they both operated a terrorist group against the Zia government (and Zia was the one who said "Charlie did it!" about former Congressman Charlie Wilson's glorious war against the Soviets in Afghanistan).

She and her husband Asif Ali Zardari were accused of embezzling $1.5 billion dollars.

After her second dismissal from office in 1996, a friend said Ms. Bhutto’s sense of herself as inseparable from the fate of Pakistan contributed to actions that led Pakistani investigators to accuse her and Mr. Zardari of embezzling as much $1.5 billion from government accounts.

Pakistan is a pretty corrupt place. Benazir claimed her government was less corrupt than the military governments. Maybe that's true. But then is Pakistan incapable of a low level of corruption? Do the people have personalities and moral codes that make large scale corruption inevitable? After all, they do not possess the extreme genetic shyness that helps make Finland so uncorrupt. They might be innately corrupt people.

Anyone see a parallel with Ahmed Chalabi's tireless efforts to ingratiate himself with Washington DC power brokers?

The American bid to restore her to power in Islamabad reflected her tireless efforts to maintain a network of the powerful among the political media elite in Washington and in London.

So I want to know: Which foreign individuals are currently living in exile in Washington and London plotting and lobbying to be returned to power with American and British help? Which ones have a decent chance of pulling off their ambitions? Who are future Chalabis and Bhuttos? Do any of the people we put into power end up turning out well for us? We need to know.

Oh the irony. The New York Times editors simultaneously point to Bhutto's indifference to human rights and her supposed "electoral legitimacy". Um, aren't liberals supposed to view those indifferent to human rights as illegitimate?

Ms. Bhutto and her father and political mentor, Zulfikar Ali Bhutto, were democratic, but imperfect political leaders — imperious, indifferent to human rights and, in her case, tainted by serious charges of corruption. The father was deposed by a military coup and then hanged. The daughter was twice elected and twice deposed. But both had one undeniable asset: electoral legitimacy — legitimacy that the generals and the Islamic extremists could only seek to destroy or, in Mr. Musharraf’s case, hope to borrow.

Democracy is not an end in itself. The will of the majority is not (or at least should not be) the definition of the moral and ethical. The will of democratically elected dictators (which describes what electoral politics produces in many countries) should not be accorded legitimacy.

Someone who appoints herself "chairperson for life" for her own political party is not a friend of limited government.

That confidence led her to declare herself "chairperson for life" of the opposition Pakistan People's Party and to an imperious style that rewarded loyalists but alienated many others.

Mansoor Ijaz, described as a New York financier of Pakistani ancestry, describes Benazir in unflattering terms.

During her two terms in office as prime minister, Ms. Bhutto earned a reputation among many as an imperious, venal, and corrupt politician, bringing Pakistan to the brink of financial ruin on more than one occasion.


I knew Benazir well. I am often blamed by her supporters for having helped bring her government down in 1996 by exposing her hypocrisy and corruption in two Wall Street Journal Op-Ed pieces. We remained in touch over the years after she went into exile, even developing a begrudging respect for each other over time. She struck me as a terribly conflicted person who deep in her heart wanted to save Pakistan from its evils, but was unable to put her personal lifestyle choices aside in doing so.

Lots of people refer to the woman as imperious. They also call her corrupt. But did she have any redeeming qualities? Well, yes, one big one I can think of: She tried to hold power as a woman in a country where fundamentalist Muslims hate women in high places. But aside from that what can be said in her favor? The answer is not clear to me.

Update: Fatima Bhutto, Benazir's niece, wrote an opinion piece in the Los Angeles Times arguing that Benazir's brother was assassinated by the Pakistani government while Aunt Benazir was prime minister.

And I am suspicious of her talk of ensuring peace. My father was a member of Parliament and a vocal critic of his sister's politics. He was killed outside our home in 1996 in a carefully planned police assassination while she was prime minister. There were 70 to 100 policemen at the scene, all the streetlights had been shut off and the roads were cordoned off. Six men were killed with my father. They were shot at point-blank range, suffered multiple bullet wounds and were left to bleed on the streets.

My father was Benazir's younger brother. To this day, her role in his assassination has never been adequately answered, although the tribunal convened after his death under the leadership of three respected judges concluded that it could not have taken place without approval from a "much higher" political authority.

Benazir's husband prospered from his marriage to her.

Zardari's reputation as a dodgy businessman was cemented by his remarkable transformation from a bankrupt into a fabulously wealthy man shortly after marrying Benazir, earning him the tag "Mr Ten Percent". Nevertheless, Benazir Bhutto stood by him, appointing him to her cabinet in 1996. After her second government fell, a stream of real and dubious corruption and criminal charges was brought against him, keeping him in jail without trial for eight years.

Benazir tried to control the press just as she criticized Musharraf for doing.

The strongest backlash was provoked by her attempts to control the press and manipulate the judiciary. The appointment of judges on the basis of loyalty to her party caused great damage to the judiciary's already dwindling credibility, not to say her own.

Connections got her into elite schools and she lived the high life.

In 1969, aged 17, she was admitted to study comparative government at Harvard, aided by a recommendation from the economist J.K. Galbraith, a friend of her father's. "I was amongst a sea of women," she later wrote, "who felt as unimpeded by their gender as I did." From there she went to Oxford, where she was remembered as a cosmopolitan Asian girl about town, known to her friends as Bibi or Pinky. She drove to lectures in a yellow MG, and spent her winters in Gstaad and summers on the Cannes lido. She had a penchant for royal biographies, slushy romances and 1970s easy listening, and she liked to browse in Harrods. Yet her ambitious side was to surface later.

Three years before he was killed by the police Benazir's brother Murtaza Bhutto was accused of trying to stir rebellion against his sister's government.

Charges of rebellion were filed today against Murtaza Bhutto, the younger brother of Prime Minister Benazir Bhutto, and a trial was scheduled for Jan. 2.

Saying "the prosecution has enough evidence to establish the involvement of the accused in the case," a special court accused Mr. Bhutto of mounting an insurgency, undertaking activities to destabilize the Government by force, spreading hatred and rebellion against the state and anti-state activities.

Benazir had lots of enemies. But the Muslim fundamentalists were her biggest enemies and probably killed her.

Bhutto had returned from eight years of self-imposed exile with a pledge to reform Pakistan in ways that would upset entrenched political interests, powerful fundamentalist religious organizations, and Al Qaeda and the Taliban. She was aligned with the U.S., and vowed to crack down on the increasingly popular radicalism spreading through the country. And she had publicly accused the government's military and intelligence establishments of coddling terrorists.

With lots of ties between elements of the Pakistani government and the fundamentalists it is hard to tell whether elements of the Pakistani government are close to whoever did a hit on Benazir.

Complicating the situation is the fact that many of the extremist groups have ties to Pakistan's political establishment, including elements of the government loyal to President Pervez Musharraf, as well as close ties to the military and its intelligence agencies. Bhutto had long criticized such links, and in the wake of her killing Thursday, some of her supporters accused the government of playing a role. One senior U.S. counter-terrorism official also said Washington suspected that rogue officials within the military or intelligence agencies could have been involved, noting that though there is no evidence, they have detested Bhutto for more than a decade.

If the US government really wanted her to go in there and purge the Pakistani government of Muslim fundamentalist radicals then the US government should have done far more to ensure her security before she returned to Pakistan. Bush should have worked out her security with Musharraf in advance in detail.

Before you start feeling sympathy for Shahnawaz and Murtaza you might want to know that Benazir's brothers ran a group that carried out bombings in Pakistan.

*Ms Bhutto wrested control of the PPP from her mother, Begum Nusrat Bhutto, while her two younger brothers, Shahnawaz and Murtaza, set up a militant group called al-Zulfikar, which orchestrated a string of bombings in Pakistan. They were both killed in 1985 and 1996 respectively.

*Shahnawaz, 28, was found dead in his apartment while in exile on the French Riviera. His family insisted he had been poisoned.

Steven R. Weisman of the New York Times says Benazir represented Pakistan's feudal aristocracy.

What did she represent? There have traditionally been three major power bases in Pakistan: the army, the clergy and the feudal aristocracy. They make shifting alliances with each other. Benazir “is feudal to the core,” a friend of hers once told me. She was a brilliant debater as president of the Oxford Union, and wore blue jeans, drove a sports car and enjoyed parties, and she was devoted to her father without that much of an ideological set of beliefs. She knew her father was a man who trusted no one, especially the army. They often talked about it.

Well, that explains why George W. Bush liked her. She's just like the feudal aristocracy in Mexico that the Bush family see as kindred spirits. Pakistan has other parallels with Mexico such as the Benazir's assassination compared with the circumstances surrounding the assassination of Mexican presidential candidate Luis Donaldo Colosio in 1994.

By Randall Parker 2007 December 27 10:20 PM  Democracy Failure
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2007 December 25 Tuesday
Online Courses Make MIT Physics Prof Internationally Popular

Lots of very talented teachers only get seen by the people who physically sit in their class rooms at the times they deliver their lectures. As soon as they deliver a lecture performance that performance is lost forever. What a waste. But the move by major universities to put at least some of their courses on the web is reducing the amount of that waste. Online video courses have made an MIT physics professor popular with students from around the world

CAMBRIDGE, Mass. — Walter H. G. Lewin, 71, a physics professor, has long had a cult following at M.I.T. And he has now emerged as an international Internet guru, thanks to the global classroom the institute created to spread knowledge through cyberspace.

Professor Lewin’s videotaped physics lectures, free online on the OpenCourseWare of the Massachusetts Institute of Technology, have won him devotees across the country and beyond who stuff his e-mail in-box with praise.

These course will last longer than Lewin will teach. Every professor whose courses get recored in this fashion will add to an expanding store of valuable course work. This course work breaks students free of geographical locations, schedules, and makes a large assortment of lecture series accessible any time of the day and any day of the year.

You can watch Professor Lewin teach 8.01 Physics I: Classical Mechanics from Fall 1999, 8.02 Electricity and Magnetism from Spring 2002, and 8.03 Physics III: Vibrations and Waves from Fall 2004. Most of MIT's online courses do not come with full audio and visual. However, look at MIT's complete list and note the icons that tell you what is available for each course.

By Randall Parker 2007 December 25 06:43 PM  Education Online
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2007 December 24 Monday
Stephen Roach: Yet Another Asset Bubble Recession

Remember when recessions were caused by the Federal Reserve clamping down on excessive consumer goods inflation? Stephen Roach of Morgan Stanley opines that the United States is headed for its second post-bubble recession in 7 years.

THE American economy is slipping into its second post-bubble recession in seven years. Just as the bursting of the dot-com bubble led to a downturn in 2001 and ’02, the simultaneous popping of the housing and credit bubbles is doing the same right now.

It is very important that the last two downturns are not for the typical reasons. Globalization brought so many cheap goods to market that foreign suppliers kept US consumer prices in check. So excess money supply growth manifested as inflation in housing prices and financial assets. Roach is correct to argue that the Fed made a big mistake by not acting against asset market inflation.

America’s central bank has mismanaged the biggest risk of our times. Ever since the equity bubble began forming in the late 1990s, the Federal Reserve has been ignoring, if not condoning, excesses in asset markets. That negligence has allowed the United States to lurch from bubble to bubble.

Basically when people spend more to buy food or clothes or appliances it feels bad. But when the value of one's house or stocks go up it feels good to a great many people. Never mind that new buyers have to pay more. There are more existing owners than new buyers. Even the new buyers expect to reap gains from ever rising asset prices. So the buyers do not complain about big asset price inflation as much as they ought to.

The Fed basically acts as if only non-durable goods inflation matters. Therefore the Fed lets asset price inflation get out of hand. The Fed claimed soundness of bank lending was not a Fed responsibility.

As housing prices soared in what became a speculative bubble, Fed officials took comfort that foreclosure rates on subprime mortgages remained relatively low. But neither the Fed nor any other regulatory agency in Washington examined what might happen if housing prices flattened out or declined.

Had officials bothered to look, frightening clues of the coming crisis were available. The Center for Responsible Lending, a nonprofit group based in North Carolina, analyzed records from across the country and found that default rates on subprime loans soared to 20 percent in cities where home prices stopped rising or started to fall.

“The Federal Reserve could have stopped this problem dead in its tracks,” said Martin Eakes, chief executive of the center. “If the Fed had done its job, we would not have had the abusive lending and we would not have a foreclosure crisis in virtually every community across America.”

The Fed has decided it really does have the authority to force banks to more carefully qualify mortgage loans. They came to this conclusion a few years too late.

Greenspan acknowledges what happened but argues he was powerless to stop it.

“The root of the current crisis, as I see it, lies back in the aftermath of the Cold War, when market capitalism quietly, but rapidly, displaced much of the discredited central planning that was so prevalent in the Third World,” Mr Greenspan argued in an article printed in The Wall Street Journal yesterday.

“The resulting growth of fairly educated low-cost workers in those countries, together with an increase in their exports, combined to keep down wages and inflation in the developed world.

“Interest rates are, in part, designed to reduce the impact of inflation, which erodes an asset’s value in real terms. As the outlook for inflation continued to remain low, so interest rates came down and borrowing for mortgages and other assets went up.”

Interest rates came down in part because he drove them down. He went too far to prevent deflation.

By Randall Parker 2007 December 24 10:53 PM  Economics Business Cycle
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2007 December 23 Sunday
Only RINOs Available To Run As Republican Presidential Candidates?

Scott Rasmussen finds a large portion of Republican voters see only moderates and liberals running as Republican candidates for President.

Seventy-four percent (74%) of Republican voters see Rudy Giuliani as politically moderate or liberal. Fifty-nine percent (59%) say the same about John McCain while 43% hold that view of Mitt Romney. A Rasmussen Reports national telephone survey finds that 41% now see Mike Huckabee as moderate or liberal and 39% see Fred Thompson in that manner. (see crosstabs)

For all the candidates except John McCain, those figures are higher than a month ago.

Fred has managed to show up on the far right of that pack. Life is full of giggles if you just know where to look. Remember Ronald Reagan? He really came across like a Republican. No branding problems. These guys running now all seem like watered down people who are just a bit too conservative to run as Democrats. So they run as Republicans. Couldn't a real conservative run? Aren't there any left?

If a real conservative jumped in the race I think there's a big opening even at this late date. The Republican base is thoroughly disgruntled with the whole lot of those running.

Meanwhile the Democrats can choose between Hillary and Obama or a few guys whose names I tend to forget. Who is that other unmemorable Democrat guy aside from Chris Dodd? There's another Democrat guy running from some small Eastern state right?

By Randall Parker 2007 December 23 10:16 PM  Civilizations Decay
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2007 December 21 Friday
Mortgage Fraud Helped Create Real Estate Bubble

The Wall Street Journal fingers fraud as a core cause of the mortgage meltdown.

Fraud goes a long way toward explaining why mortgage defaults and foreclosures are rocking financial institutions, Wall Street and the economy. The Federal Bureau of Investigation says the share of its white-collar agents and analysts devoted to prosecuting mortgage fraud has risen to 28%, up from 7% in 2003. Suspicious Activity Reports, which many lenders are required to file with the Treasury Department's Financial Crimes Enforcement Network when they suspect fraud, shot up nearly 700% between 2000 and 2006.

In 2006, losses from fraud could total a record $4.5 billion, a 100% increase from the previous year, says Arthur Prieston, chairman of the Prieston Group, which provides lenders with mortgage-fraud insurance and training. The surge ranges from one-off cases of fudging and fibbing to organized criminal rings. The FBI says its active mortgage-fraud cases have increased to 1,210 this year from 436 in 2003. In some regions, fraud may account for half of all foreclosures. "We've created a culture where a great many people know how to take advantage of the system," says Mr. Prieston.

Organized criminal rings used fake documents to make homes sell for very high prices and people involved in the transactions pocketed large sums. Buyers pretended to have very high incomes. Payouts when mortgages closed that were supposedly to construction companies instead went to shell companies.

Lax standards by banks helped fuel the growth of mortgage fraud.

Embroiled in an all-out war for market share, issuers reduced barriers to credit, for example, by offering so-called "stated-income" loans, which require no proof of income. "The stated-income loan deserves the nickname used by many in the industry, the 'liar's loan,' " says the Mortgage Asset Research Institute, which works with lenders to prevent fraud. A recent review of a sampling of about 100 stated-income loans revealed that almost 60% of the stated amounts were exaggerated by more than 50%, MARI says.

So if you get laid off due to the huge credit crisis remember that the sins of men made the massive market failure possible.

Fraud by Hispanics in Illinois.

A Rockford Realtor was sentenced to 20 months in prison this afternoon for his role in falsifying documents to help Hispanic families qualify for loans backed by the Federal Housing Authority.

Cesar Arenas was the fourth person sentenced in the five-person mortgage-fraud ring that operated from 2001 through 2003 and the second to receive prison time. Rhonda Torossian, the loan officer in the scheme, was sentenced Monday to 20 months in federal prison.

Arenas helped Latin Americans (blood runs thicker than water) get mortgages under fraudulent pretenses.

Fraud in Miami.

Federal officials in Miami announced charges Monday against 31 people accused of participating in a scheme to illegally obtain mortgage loans worth roughly $14 million.

Prosecutors said the group's leaders secured inflated loans for the purchase of at least 28 properties and then pocketed the difference between the loan and the actual purchase price.

Several of the properties involved in the charges are in Broward County, according to the 20-page indictment.

Fraud in Paterson New Jersey.

An unlicensed Branchville appraiser pleaded guilty Tuesday in U.S. District Court in Newark to one count of conspiracy to commit wire fraud for his part in an elaborate real estate scheme in Paterson.

William Ottaviano, 41, who went by the name "Billy the Kid," was one of more than 10 co-conspirators in a wide-ranging housing scam overseen by Mahwah real estate agent Michael Eliasof. The team Eliasof assembled falsified mortgage applications for unqualified buyers, who were sold dozens of overpriced houses between 2002 and 2005.

Anthony Accetta, a former federal prosecutor, says the biggest fraud in the mortgage business was committed by the big investment banks. Without sufficient virtue in its people America can quickly become a Third World nation.

By Randall Parker 2007 December 21 09:46 PM  Economics Housing
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2007 December 18 Tuesday
People Exaggerate Their Support Of Obama To Pollsters

Would liberal Democrats say they support Barack Hussein Obama in order to seem not racist while in reality not intending to vote for him? Sure looks that way.

A new national study of voters who say they might vote in Democratic primaries and caucuses shows a striking disconnect between their explicit and implicit preferences, according to University of Washington researchers.

When asked who they would vote for, Sen. Barack Obama held a 42 percent to 34 percent margin over Sen. Hilary Clinton. Former senator John Edwards was in third place with 12 percent. However, when the same people took an Implicit Association Test that measures their unconscious or automatic preferences, Clinton was the runaway winner, the favored candidate of 48 percent of the voters. Edwards was second with 27 percent and Obama had 25 percent.

Bethany Albertson, a UW assistant political science professor and Anthony Greenwald, a UW psychology professor and inventor of the Implicit Association Test, emphasized that their participants were not a representative sample of Democrats but were self-selected volunteers who took an experimental test over the Web. The data came from 926 people age 18 and over who took the test between Oct. 16 and Nov. 5. Of that total, 687 people said they might vote in the Democratic primaries.

“In the past, poll numbers have often overestimated support for black candidates when compared to their actual vote percentages,” said Albertson. “Findings of this study suggest that this familiar pattern may be about to repeat itself in the 2008 Democratic presidential primaries.”

Who will Hillary Clinton face in the 2008 general election? Fred Thompsom? Mick Huckabee? Mitt Romney?

By Randall Parker 2007 December 18 10:47 PM  Politics Human Nature
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Congress Cuts Border Fence Depth

The House of Representatives follows the US Senate in scaling back the scale of the border fence getting built along parts of the US border with Mexico. Unless we apply constant pressure our elites will continue to act contrary to our best interests.

Congress last night passed a giant new spending bill that undermines current plans for a U.S.-Mexico border fence, allowing the Homeland Security Department to build a single-tier barrier rather than the two-tier version that has worked in California.

The spending bill, written by Democrats and passed 253-154 with mostly their votes, surrenders to President Bush's budget demands, meeting his spending limit with a $515 billion bill to fund most of the federal government and setting up votes to pay for the Iraq war. But Democrats reached his goal in part by slashing his defense and foreign-aid priorities to pay for added domestic spending.

The fence has to be less formidable to allow easier illegal crossings.

The 2006 Secure Fence Act specifically called for "two layers of reinforced fencing" and listed five specific sections of border where it should be installed. The new spending bill removes the two-tier requirement and the list of locations.

The fence is still getting built. Future Congresses will come under considerable pressure to upgrade and expand its length. The outcome of future elections matter for immigration law enforcement. Pay attention to what the candidates say. Make your views known.

The biggest immigration battle currently raging is in the Republican Party for nomination for the Presidency. If a hard line immigration restrictionist takes the lead in the Republican primary then Hillary will have to move rightward on immigration. So which of the Republican mediocrities wins the early primaries will help set the tone for the wider election.

It has finally dawned on Jim Gilchrist that Mike Huckabee isn't really tough on illegal immigration.

Minuteman Project founder Jim Gilchrist says he will have to reconsider his endorsement of former Arkansas Gov. Mike Huckabee after learning the Republican presidential candidate favors allowing illegal aliens to wait only days to receive documents allowing re-entry into the U.S.

Why is Gilchrist reconsidering his support for Huckabee? Because Huckabee wants the illegals to leave in order to apply for legal work permits and to return a mere days or weeks after they leave.

HUCKABEE: Well, I don't think there's an inconsistency. When I said a pathway, I didn't say what the pathway was.

I now believe that the only thing the American people are going to accept — and, frankly, the only thing that really makes sense — is a pathway that sends people back to the starting point.

But this idea of the waiting years — no, I don't agree with that. In fact, look, if we can get a credit card application done within hours, if we can get passports done within days, if we can transact business over the Internet any place in the world within seconds, do a background check instantaneously — it's our government that has failed and is dysfunctional.

It shouldn't take years to get a work permit to come here and pick lettuce. So part of the plan that I have is that we seal the borders. You don't have amnesty and sanctuary cities. You do have a pathway that gets you back home.

But that pathway to get back here legally doesn't take years. It would take days, maybe weeks, and then people could come back in the workforce.

So this heart throb of many fundamentalist Christian Republicans wants to end the illegal alien problem by rapidly turning all the illegal aliens into legal aliens with work permits.

By Randall Parker 2007 December 18 10:10 PM  Immigration Border Control
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Happy Holidays? Which Holidays?

The VDare reporting on the War Against Christmas (and parts II and III) reminds me of how annoying the term "Happy Holidays" really is. Happy Holidays? Which holidays exactly? Easter? Halloween? Why, in the month of December, do commercials say "Happy Holidays" and they don't say it before Thanksgiving or Labor Day?

Granted, Christmas and New Year's Day come in quick succession, a mere week apart. But the sales in the department stores aren't for New Years gifts. Santa doesn't hook up his reindeer and ride to hundreds of millions of homes on New Year's Day. We do not put up New Years trees or New Years lights. Christmas is the holiday event of the year in the United States and in many other Western countries as well.

Merry Christmas and a Happy New Year. And to hell with Happy Holidays.

By Randall Parker 2007 December 18 08:33 PM  Cultural Wars Western
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2007 December 17 Monday
On The Market Dominant Minority Revolt In Bolivia

In Bolivia the more successful ethnic group wants to escape from the predations of the less successful ethnic group. In this case that means the lighter colored people want to escape from the tyranny of the darker colored people.

Four Bolivian departments are on collision course with the leftwing government of President Evo Morales after declaring radical autonomy statutes at the weekend.

The legislation, declared illegal by Mr Morales, would insulate the wealthier and mainly mixed-race eastern part of the country from parts of a controversial new constitution that grants greater powers to the country's majority indigenous groups.

On Saturday, tens of thousands of people took part in rallies in Santa Cruz and departmental capitals to celebrate the autonomy measures, while similarly large numbers of pro-government supporters demonstrated in favour of the new constitution in La Paz.

Rather, the market dominant (i.e. smarter and more economically successful) minority get treated as unfair and deserving of fleecing by the less intelligent and less successful majority.

The dispute in Bolivia has strong racial undertones.

Morales purports to represent the indigenous "majority," although others say most of Bolivia's population actually is mixed-race, not fully indigenous. Many immigrants from Europe, the Middle East and even Japan settled in and around subtropical Santa Cruz during the 20th century.

Morales, an Aymara Indian who grow up in poverty, has viewed his election as an opportunity to reverse centuries of domination by what he calls a European-descended, light-skinned elite.

The highlanders are Amerinds who are much poorer than the partially and fully Spanish low landers.

Morales' core support comes from the poor, indigenous majority that lives primarily in arid Andean highlands.

The country's first indigenous president, Morales considered his December 2005 election victory a mandate to reverse what he considers centuries of discrimination by a European-descended elite.

Vice President Alvaro Garcia, addressing leaders of the revolting states on national television Thursday, called on the scores of opposition members engaged in hunger strikes to cease them. He said he feared "a catastrophic standoff" had been reached in a power struggle of unforeseeable consequences.

The events in Bolivia fit a much larger and tragic pattern which Amy Chua, author of World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability, has described. Chua sees a world where in many countries the biggest political rift is between between ethnic majorities and market dominant minorities and this rift is made deeper by a combination of democracy and free markets.

There exists today a phenomenon - pervasive outside the west yet rarely acknowledged, indeed often viewed as taboo - that turns free market democracy into an engine of ethnic conflagration. I am speaking of the phenomenon of market-dominant minorities: ethnic minorities who, for varying reasons, tend under market conditions to dominate economically, often to a startling extent, the indigenous majorities.

Market-dominant minorities can be found in every part of the world. The Chinese are a market-dominant minority throughout southeast Asia. Whites are a market-dominant minority in South Africa - and, in a more complex sense, in Brazil, Ecuador, Guatemala and much of Latin America. Indians have historically been a market-dominant minority in east Africa, the Lebanese in west Africa and the Ibo in Nigeria. Croats were a market-dominant minority in Yugoslavia, as Jews are in post-communist Russia (six of the seven biggest "oligarchs" are of Jewish origin). India has no market-dominant minority at the national level but plenty at the state level.

Market-dominant minorities are the Achilles heel of free market democracy. In societies with such a minority, markets and democracy favour not just different people or different classes but different ethnic groups. Markets concentrate wealth, often spectacular wealth, in the hands of the market-dominant minority, while democracy increases the political power of the impoverished majority. In these circumstances, the pursuit of free market democracy becomes an engine of potentially catastrophic ethnonationalism, pitting a frustrated indigenous majority, easily aroused by opportunistic politicians, against a resented, wealthy ethnic minority. This conflict is playing out in country after country today, from Bolivia to Sierra Leone, from Indonesia to Zimbabwe, from Russia to the middle east.

Since 11th September, the conflict has been brought home to the US. Americans are not an ethnic minority. But Americans are perceived as the world's market-dominant minority, wielding disproportionate economic power. As a result, they have become the object of the same kind of popular resentment that afflicts the Chinese of southeast Asia, the whites of Zimbabwe, and the Jews of Russia.

Global anti-Americanism has many causes. One of them is the US-promoted global spread of free markets and democracy. Throughout the world markets are perceived as reinforcing US wealth and dominance. At the same time, global populist and democratic movements give strength and voice to the impoverished masses. The result is that Americans have directed at themselves what the Turkish writer Orhan Pamuk calls "the anger of the damned."

For globalisation's enthusiasts, the cure for group hatred and ethnic violence around the world is more markets and more democracy. Together, markets and democracy will gradually transform states into a war-shunning, prosperous community, and individuals into liberal, civic-minded citizens and consumers. Ethnic hatred and religious zealotry will fade away.

I believe, rather, that in the numerous societies around the world that have a market-dominant minority, markets and democracy are not mutually reinforcing. Because markets and democracy benefit different ethnic groups in such societies, the pursuit of free market democracy produces highly combustible conditions. In absolute terms, the majority may or may not be better off - a dispute that much of the globalisation debate revolves around - but any sense of improvement is overwhelmed by its continuing poverty relative to the hated minority's economic success. More humiliating still, market-dominant minorities, along with their foreign investor partners, invariably come to control the crown jewels of the economy, which are often symbolic of the nation's patrimony and identity - oil in Russia and Venezuela, diamonds in South Africa, silver and tin in Bolivia, jade, teak and rubies in Myanmar.

America's promotion of democracy and free market capitalism around the world has unleashed conflicts between ethnic groups. The more of a market a country has the greater will be the differences in levels of success of different ethnic groups. This is a very strong argument against letting in immigrant groups who will do worse than the existing market dominant majority. But it is also an argument against letting in immigrant groups that will do better than the existing majority. Homogeneity (or at least heterogeneity with small differences in ability between groups) is the formula for peaceful democracy and capitalism that does not breed deep resentments.

By Randall Parker 2007 December 17 09:38 PM  Ethnic Conflict
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2007 December 16 Sunday
Bolivia Breaks Into White And Indian Pieces

I saw this story and since it seemed totally unsurprising to me I didn't think to post on it. It is like watching the Sun come up in the East. Sometimes I need to remind myself that my view of the world is outside of the mainstream's conventional wisdom about how the world works and that writing about obvious truths is therefore necessary. But Tyler Cowen mentioned the Bolivian secession and I realized then that, hey, gotta state some obvious things. Says Tyler: "What does Bolivia have to do to make the front page?" (says me: "have a big rainbow coalition parade?")

As far as I can tell, there has been a partial secession in Bolivia.  (This story makes it sound more like "autonomy" than secession, but that line is a fine one, try this story too.)  The wealthier, more business-oriented, lighter-skinned, and natural gas-rich provinces near Santa Cruz wish to control their own fate.  But as of 8 a.m., there is nada on the front page of The New York Times.  So far it doesn't make the front page of news.google.com either.  Nor The Washington Post.  Here is a Spanish-language account from Bolivia, it does make the front page there.  Here's a blog report as well.

Multiculturalism. Diversity. Rainbows. Did I mention the power of diversity? The greatness of multiculturalism?

I'm glad Tyler did a post on it because the split between the smarter Spanish and dumber Amerinds in Bolivia fits with a larger pattern going on in Latin America that ought to serve as a cautionary tale for Americans debating immigration. No, the Latins are not all one happy family of diversity. We weaken our own country by importing their divisions and their low trust and low social capital societies into our own.

If you aren't familiar with Harvard political scientist Robert Putnam's research on diversity and trust in America now is the time to start. See Pat Buchanan's Robert Putnam: Diversity Is Our Destruction and Steve Sailer's Diversity Is Strength! It’s Also…Oh, Wait, Make That “Weakness” and Boston Globe and Steven Durlauf on Putnam's diversity research for starters.

By Randall Parker 2007 December 16 11:18 PM  Ethnic Conflict
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United States Headed For Stagflation?

We can not move from running a huge yearly trade deficit of 5+% of GDP to a balance or surplus without a decline in living standards. The day of reckoning has to come sooner or later. Either living standards stagnate for several years or the correction is severe enough to cause a decline in purchasing power. Well, the decline in the dollar and rise in fuel, food, and imports (due to the dollar decline) are starting to cause noticeable inflationary effects. Alan Greenspan fears stagflation.

"Because of the tremendous geopolitical shifts that occurred at the end of the Cold War, we've had a period of remarkable disinflation," he said. "That period is now coming to an end, and the evidence is clearly there in rising export prices coming out of China. It's showing up in a slowed rate of productivity growth in the United States and elsewhere, and we are beginning to get not 'stagflation,' but the early symptoms of it."

Do I seem distracted from the topics I typically cover? Well, I see lots of storm clouds gathering. Many long running bad economic and demographic trends are starting to catch up with us. We might go through a period of rising unemployment and rising inflation. Just like the 70s. So then are people going to get back into wearing polyester?

Greenspan observes higher inflation in consumer and producer prices.

"Core inflation is up. Wholesale prices had their highest increase I think in a generation. That raises the specter of stagflation again," said Greenspan, referring to a simultaneous stagnant economy and upward pressure on prices.

Greenspan has been worrying about the return of inflation for a while. He saw this coming before it started to show up in the most visible statistics.

An inflation rate of 4.3% put us in territory we haven't been in for a long time.

US inflation hit a two-year high of 4.3 per cent in November, underlining the problems facing the Federal Reserve as it fights to free the economy from the grip of the credit crisis.

Rising inflation could delay further cuts in interest rates as the headline US CPI rate has more than doubled in just over a year, rising from a four-year low of 1.3 per cent in October 2006.

Pricing pressures on food and energy costs show no signs of slackening.

The data showed the continued pressure on prices from high food and energy costs and highlighted the risk the economy will face at least a brief period of "stagflation" as growth slows and inflation rises.

Policymakers worry that persistently high prices could unsettle inflation expectations, leading workers and businesses to factor higher inflation into their wage and price-setting decisions.

"The pick-up in prices may not only be sustained next year, but we could see even higher rates of inflation," said Conrad DeQuadros, economist at Bear Stearns. "In an environment where monetary policy is going to become easier, it's going to give businesses the chance to pass on higher prices to consumers."

The cost increases show up in many categories.

Boosting the rate, not surprisingly, was energy, up a huge 5.7% after a 1.4% push in October. Gasoline prices climbed 9.3% and are up 37.1% year-over-year. Transportation costs were up 2.9%. Housing costs rose 0.4%, with a 0.3% increase in owners' equivalent rents and a 1.5% gain in fuels and utilities.

Rounding out the ugly picture, apparel prices were up 0.8%, food rose 0.3%, and education increased 0.1%.

On a year-over-year basis, the headline rate accelerated to 4.3% from a 3.5% rate in October. The core rate was up 2.3% from 2.2%, and above the Fed's implicit 2% ceiling for inflation.

Wholesale prices increased the most since 1973? Wow.

And costs may only go up. Wholesale prices, which are passed on to consumers, rose last month at their fastest rate in 34 years. Import prices recorded their biggest monthly gain since 1990.

The stagflation of the 1970s was not fun. If oil production stays on a plateau then we might be living with stagflation for years to come.

Not everyone sees inflation as the biggest risk however. Some see big deflationary forces emanating out from the credit crisis. For example, Mike "Mish" Shedlock thinks bank losses, real estate price declines, and declines in value of commercial debt instruments mean that deflation is the far bigger risk. We might go through a period of a mix of deflation in real estate and inflation in manufactured goods, energy, and food. We import a much larger fraction of our manufactured goods and the US dollar is declining due to the trade deficit. Rising Asian demand for food and US government engineered demand for corn ethanol are both pushing up the price of food. Plus, oil production constraints are pushing up energy prices. So a mix of rising and falling prices seems quite possible.

By Randall Parker 2007 December 16 05:45 PM  Economics Business Cycle
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China Displacing US And Russian Influence In Central Asia

China is exporting into and investing deeply in Central Asia, displacing US and Russian influence in the process.

China today is reaching deep into Central Asia to tap oil and gas reserves, using pipelines and investments to challenge Russia's monopoly on gas shipments and to thwart Moscow's hopes of controlling a bigger share of the region's oil.

In recent years, China and Russia have forged a strategic alliance, as part of a group called the Shanghai Cooperation Organization, to squeeze the United States out of Central Asia, after the U.S. established military bases here. They have largely succeeded.

However, friction is developing between the two neighboring giants. And given China's 1.3 billion people and its economic strength, it seems certain that Russia, with its dwindling population and economy based narrowly on energy, will increasingly be on the defensive.

Of course, Russia's two-century presence in region gives it potent advantages in trying to preserve its influence.

But Niklas Swanstrom of Johns Hopkins University's School of Advanced International Studies argues China is succeeding in using "soft power" - judiciously apportioned aid, aggressive diplomacy and massive investment - to shove Russia aside.

"China will be the dominant player over time," he predicts.

Neoconservative military strategizing will come to nothing compared to a massive growing economy exporting large volumes of finished goods and importing large volumes of raw materials. The money spent on the stupid Iraqi war would be far better spent eliminating US dependence on imported oil. For the weekly cost of the Iraq war we could complete 1 nuclear reactor per week. Then we could shift all of our heating to ground sink heat pumps powered by nuclear electricity and shift most rail and a portion of vehicle transportation to electricity.

The China-Kazakhstan border is like the US-Mexico border.

Nowhere, perhaps, is China's presence more starkly evident than at Khorgos, straddling the Kazakh-China border.

On the Kazakh side sits a sleepy village, a mosque and arid steppes where shepherds ride horseback. On the Chinese side sprawls a city, its skyline punctuated by two construction cranes, the skeletons of several large buildings and a massive white arch topped by two scarlet Chinese flags.

Talipzhan Suleimanov, a captain in the Kazakh border service in Khorgos, stood outside his ramshackle post and pointed at the gleaming Chinese city across a dry riverbed.

"This looks like the U.S.-Mexican border," he said. "We are the Mexicans, because the Chinese are so much more advanced."

While George W. Bush and allies have pursued their losing strategy of what Steve Sailer calls "Invade the world, invite the world, in hock to the world" the Chinese have been busy building up capital stock, making fancier things, and pursuing commerce. The hope of the neocons to have continued influence on foreign affairs depends on the US continuing to be a world power. But that neocon hope will most certainly die unless the neocons start supporting policies that seek to reverse the financial and demographic trends that will otherwise make the United States into a second tier power.

By Randall Parker 2007 December 16 12:19 PM  China
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Schwarzenegger To Declare California State Budget Crisis

Never mind that the state of California has both high state income taxes and sales taxes. Never mind that some states get by with no state income tax (e.g. Florida, Texas, Washington State, South Dakota, Wyoming). Never mind that some states get by with no sales tax. Politicians can spend beyond what they can get their hands on and cry for more. The economic downturn in California has boosted the state government deficit to about $400 per capita. The Governator is declaring a state fiscal emergency.

SACRAMENTO - Facing a projected $14 billion budget deficit, Gov. Arnold Schwarzenegger on Friday said he will declare a fiscal emergency, which will allow the governor and lawmakers to cut spending more quickly and also sets the stage for slashing state services and programs - perhaps by as much as 10 percent.

Legislative leaders said they will meet with Schwarzenegger next week to begin working on what the governor described as "across-the-board" cuts. His aides said departments have been told to prepare for a range of possible cuts, with 10 percent a central figure.

This crisis stretches back to 2001 and forced former governor Gray Davis out of office in 2003. Arnie won as his replacement and hasn't really fixed the problem. Now it has become too large to pretend it doesn't exist as the US economy slows down with high oil prices, a declining real estate market, and a banking crisis.

Dan Walters of the Sacramento Bee has an excellent succinct explanation of the California budget crisis: both the Democrats and Republicans can block each other's way to solve the crisis.

Just-the-facts rationality collides with the other two dimensions – legal and political. Some of that extra spending, particularly the $2 billion or so given to schools, is locked into constitutional law and could be reduced only by extraordinary votes in the Legislature. Likewise, restoring the taxes that had been reduced, such as the notorious "car tax," would require two-thirds legislative votes.

The legal thicket creates a political impasse since Democrats don't want to reduce the former and Republicans won't rescind the latter. For more than a half-decade, the two parties have tolerated the deficits because leaders of both believed that when the day of reckoning arrived, which may be now, the other side would surrender.

Will Arnie get his way with the spending cuts? I think my taxes are already high enough, thank you very much. If they decide to raise taxes they won't get money from poor Mexicans who cost far more than they pay in taxes. Oh no, the middle class (shrinking as it is) and the upper class will have to pay.

Jobs losses and declines in retail sales both are contributing to a projected decline in state tax revenues (see the chart at the bottom of the page which is from Cal state Dept. of Finance). The decline in housing prices will also cut revenue growth for local governments.

The deficit is about 10% of the total budget.

Privately, Schwarzenegger and his aides have told lawmakers and interest groups that his January budget will reflect a shortfall closer to $14 billion, but he has not yet publicly released any proposals. The state's current total budget is $145.5 billion for the fiscal year that began July 1. General fund spending for day-to-day operations is $102.3 billion.

But if past experience can be relied upon the deficit could get much bigger.

"It was about this time of year in the last fiscal crisis under Gov. Gray Davis that they started leaking word of a $10 billion gap," said David Hitchcock, a credit analyst with Standard and Poor's in New York, referring to the state's economic downturn in 2002. "The following May the gap had grown to $35 billion."

A deep recession will cause more people to claim welfare benefits while also slashing revenues even deeper.

In percentage terms the 1991 budget deficit was much larger.

And who could forget the sobering Budget Crisis of 1991, when the Golden State was confronted with a $14.3 billion hole in a $55.7 billion budget. Legislators and then-Gov. "Cranky Pete" Wilson handled that with $7.2 billion in tax increases, $5.1 billion in spending cuts and $2 billion in parlor tricks.

California's financial crisis is going to continue for years and even decades to come. Unfavorable national demographic trends are further along in California. When Hispanics take over control of enough of the California state legislature to force through big tax increases on the white and Asian middle and upper classes this will drive the goose out to other states and many fewer golden eggs will get laid in the Golden State. The Hispanic Democrats (and what will be left of their white Democrat allies) will enjoy a pretty pyrrhic victory.

By Randall Parker 2007 December 16 08:03 AM  Economics Political
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2007 December 15 Saturday
Keeping Women Down In Iraq

Down in Basra the women are killed for not being sufficiently Muslim.

There have been 48 women killed in six months for “un-Islamic behaviour”. The murders in the teeming southern port of Basra have highlighted the weakness of the security forces and the strength of Islamic militias as Britain prepares to hand over control to Iraqi officials today.

In another case, two teenagers saw a woman beaten to death by five or six men from the Mahdi Army, Basra’s most powerful militia. One picked up a rock and crushed her skull. The teenagers were told that their home and family would be destroyed if they betrayed the killers.

The Bush Administration measures success in Iraq by declines in the total amount of killing. But local monopolies in violence can lower the rate of killing while raising the level of repression and reducing the level of freedom. Bush and company point to the elections and claim that democracy is great. But democracy is making Iraqi women less free than they were under Saddam.

Under Saddam Hussein women had far more rights than they do under the democracy that America put into place.

Before the invasion, Iraqi women had rights enshrined in the country's constitution since 1959 that were among the broadest of any Arab or Islamic nation. The new constitution says that women are equal under the law; critics, however, have condemned a provision that says no law can contradict the "established rulings" of Islam as weakening women's rights.

The vigilantes patrol the streets of some cities on motorbikes or in cars with dark-tinted windows and no license plates. They accost or harass women who aren't wearing the traditional robe and head scarf known as the hijab. Religious extremists also have been known to attack men for clothes or even haircuts deemed too Western.

Christian women have it especially hard.

Another woman, a 43-year old Christian housewife, said her family was driven from the city where they had lived for years, and fled to a Christian neighborhood of Baghdad.

"It started last May when gunmen stopped me and my husband as we were walking and asked me about my clothes and why I did not wear the hijab," she said. "Then we were beaten when I told them that we are Christians, and they threatened to kill me if I would not respect Islam in this city."

Sometimes the militias first threaten to kill women who do not cover enough rather than immediately kill them.

This time a man in the black clothes of the Shia militia stopped them at the entrance and took them aside. “He said, 'We asked you yesterday to wear a hijab, so why are you and your friends not covering your hair?'. He was talking very aggressively and I was scared,” Zeena recalled.

The girls explained that they were Christians and that their faith did not call for headscarves. “He said: 'Outside this university you are Christian and can do what you want; inside you are not. Next time I want to see you wearing a hijab or I swear to God the three of you will be killed immediately',” Zeena recalled. Terrified, the girls ran home. They now wear the headscarf all the time.

Policewomen in Iraq have just lost the right to carry guns.

BAGHDAD, Iraq - The Iraqi government has ordered all policewomen to hand in their guns for redistribution to men or face having their pay withheld, thwarting a U.S. initiative to bring women into the nation's police force.

The Ministry of Interior, which oversees police, issued the order late in November, according to ministry documents, U.S. officials and several of the women.

Serving as a police officer in Iraq is a dangerous job because opponents of the regime kill anyone who works for the regime. Well, a police officer without a gun is an easier target than one with a gun. These women are now in much more danger since they can no longer carry a gun.

By Randall Parker 2007 December 15 11:24 PM  Mideast Iraq Freedom Rights
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Frozen Credit Markets Compel Central Banks To Operate In Unison

A group of central banks made up of the US Federal Reserve, the Bank of Canada, the European Central Bank, the Bank of England, and the Swiss National Bank tried to work in unison to inject cash into credit markets to try to unfreeze them.

The Bank of Canada joined the U.S. Federal Reserve and other central banks yesterday in an audacious attempt to ease choked credit markets without resorting to inflation-stoking interest-rate cuts.

Analysts said the moves, billed as the biggest act of coordinated economic co-operation since 9/11, could be a novel way to get borrowing rolling again or a costly mistake if markets fail to respond and the freeze in borrowing drags on.

Not much happening here kids. Just most of the big central banks trying to act in unison to reverse a worsening global financial crisis. What, me worry?

This action is apparently unprecedented in scope.

If there is a precedent for yesterday's joint operation to inject liquidity into the international finance system by the western world's five leading central banks, we have yet to find it.

There was some co-ordination of activity after 9/11 but this operation is of a wholly different magnitude. The new multi-billion dollar facility is the starkest illustration yet of the alarming scale of the collapse of credit - and a welcome sign that central banks are treating it with the seriousness it deserves.

We have this size of crisis and world oil production hasn't even started to decline rapidly. Wait till that happens and this crisis will seem like small potatoes in comparison.

They certainly gave it the good old college try. But oops, darn it, the attempt looks like a dud.

The biggest concerted effort by central banks in six years to restore confidence in global money markets is showing little sign of success.

The rates banks charge each other for three-month loans held at seven-year highs for a second day after policy makers in the U.S., U.K., Canada, Switzerland and the euro region agreed to ease the logjam in short-term credit markets. The cost of borrowing in euros stayed at 4.95 percent, the British Bankers' Association said today, up from last month's low of 4.57 percent and 3.68 percent a year ago.

Noone knows how to value huge quantities of SIVs and other obscure debt instruments. Any institution that holds lots of them has a balance sheet that can't be deciphered. What is Citibank worth? That's an extremely speculative question. Is Morgan Stanley or Chase solvent? Hard to tell. A lot of investors thought our markets are very transparent and now they discover they can't trust debt ratings issued by Fitch, Moody's or Standards & Poors.

The ratings agencies are paid by the very organizations that want their bonds to get high ratings.

Rating agencies face a similar conflict to that of independent experts – that is, they are paid by the very people upon whom they are assessing. Ratings agencies are paid hefty sums by bond issuers to assess the creditworthiness of the asset. Moody’s is a stand-alone publicly listed company on the NYSE, while S&P is part of publisher McGraw Hill – both have to earn a return for shareholders.

Regular (non central) banks are afraid to lend each other money.

While yesterday's joint move was sketched at the G20 a month ago, and fine-tuned in encrypted telephoned calls over the past month, the final trigger seems to have been the spike in the crucial three-month money rates that lubricate finance. Dollar and sterling Libor spreads have vaulted in recent days. Euribor spreads reached an all-time high of 99 yesterday morning.

"A co-ordinated move like this has the 'wow factor'," said Paul Mackel, currency strategist at HSBC. "But there's a lot of scepticism over whether this will be enough medicine to end the credit crisis. Is it already too late?"

It is unusual for so many banks to engender fear all at the same time.

Central banks in Europe and North America unleashed a powerful and rare arsenal of liquidity measures Wednesday meant to stave off the threat of a steep deterioration in credit conditions over Christmas.

But analysts fear the measures will only delay the inevitable balance sheet pain and market turmoil that is necessary to purge shaky debt securities from global markets. And Bank of Canada Governor David Dodge conceded he was unsure the measures would have a lasting effect.

“It's very unusual. But it's also very unusual to see all the world's banks at such risk,” said Sherry Cooper, chief economist at BMO Nesbitt Burns Inc.

“They wouldn't be doing this if they didn't know this situation is very serious.”

Dr. Irwin Kellner sees parallels with the 1930s liquidity trap.

Today there are some similarities to the liquidity trap of the 1930s. The credit crunch is clearly one of them. No matter what the Fed does on Tuesday, it will not be able to thaw out the frosty financial markets.

This is because the markets lack confidence. As I wrote two weeks ago, "fear, and not a lack of liquidity, is what's freezing up the credit markets ... and ... it's going to take a lot more than infusions of liquidity to thaw them." See Nov. 26 column

You know that fear is stronger than greed these days when banks refuse to lend to each other - never mind to businesses or to consumers.

A good indication of this is the three-month LIBOR spread against comparable maturity Treasuries. It's over 200 basis points (2 percentage points) today versus an average of about 25 bps between 2003 and this past spring.

The banking industry is experiencing a crisis in trust.

What scares the central bankers now is the evaporation of trust from the system. Banks don't believe each other's numbers; since nobody knows the real value of some of the mortgage-backed securities everyone is holding, they assume the worst. They start hoarding cash as a buffer against their own losses and because they're nervous about lending to anyone else.

I hope the central banks can prevent a much larger crisis and just limit the fall-out to a moderate recession.

By Randall Parker 2007 December 15 02:25 PM  Economics Financial
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2007 December 13 Thursday
Hispanics In America Unhappy About Opposition To Illegal Aliens

Hispanics are unhappy about the majority's opposition to illegal aliens.

After a year of stepped-up enforcement against illegal immigration and polarized debate on the issue, about half of the Hispanics in the United States now fear that they or a relative or close friend could be deported, a report released Thursday by the Pew Hispanic Center found.

That means a large fraction of Hispanics in the US are either illegals or related to illegals and see a vested interest in supporting law breaking. So law breaking breeds the conditions for further law breaking. What to do about it? Totally crack down and enforce immigration laws. Do some big deportations. The illegals will mostly then self deport.

A quarter of Hispanics are illegal aliens. So the poll result is totally unsurprising.

Hispanics are the nation's largest minority group, numbering 47 million (about 15.5% of the total U.S. population). About a quarter of Hispanic adults are unauthorized immigrants, most of them arriving as part of a heavy wave of immigration that began gathering force in the 1970s. Twice in the past two years, the U.S. Congress tried but failed to pass comprehensive legislation to deal with the problem of illegal immigration. However, federal, state and local governments have pressed forward with hundreds of new enforcement bills, regulations and procedures--including stepped up deportations, more workplace raids, and restrictions on access to driver's licenses and other government services and benefits.

Those two failures by Congress to pass "comprehensive" immigration legislation were both attempts to grant massive amnesties and keep up with business as usual. Popular anger stopped those attempts. The masses triumphed in two battles with the elites. Though the outcome of the war is still far from certain. Steve Sailer says we are in a demographic death spiral. Sure looks that way.

By Randall Parker 2007 December 13 11:09 PM  Immigration Culture Clash
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Baby Wrapped In Bomb Almost Kills Benazir Bhutto

In Pakistan an attempt was made to kill Benazir Bhutto as she passed along a road in a political campaign. The use of a baby as a bomb delivery device serves as a reminder of just how values and beliefs vary around the world and between individuals.

"It was about one or two years old, and I think it was a girl," Mrs. Bhutto recalled. "We feel it was a baby, kidnapped, and its clothes were rigged with explosives. He kept trying to hand it to people to hand to me. I'm a mother, I love babies, but the [street lights] had already gone out, and I was worried about the baby getting dropped or hurt." She would have been dead, she said, if she had not just dipped back inside her vehicle to loosen the shoes on her swollen feet.

"The baby, the bomb, it went off only feet from me; there was nothing between us but the wall of the truck," she said in an interview with The Washington Times on Tuesday.

Was the baby kidnapped? Or was some Muslim true believer thinking their baby was headed for heaven by dying for Jihad?

This is nature's way of reminding us that Muslim immigration is a bad idea.

By Randall Parker 2007 December 13 10:16 PM  Chaotic Regions
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2007 December 11 Tuesday
Morgan Stanley Foresees 2008 Recession

Richard Berner and David Greenlaw at Morgan Stanley say a recession will hit the United States for the first 3 quarters of 2008.

We’re changing our calls for US growth and monetary policy. Since the shock of tighter financial conditions surfaced in August, we’ve incrementally reduced our outlook for future growth. But the time for incremental changes is over. A mild recession is now likely: We expect domestic demand to contract by an average 1% annualized in each of the next three quarters, no growth in overall GDP for the year ending in the third quarter of 2008 and corporate earnings to contract by 5-10% over that longer period. Three factors have tipped the balance to the downside: Financial conditions continue to tighten, domestic economic weakness is broadening into capital spending, and global growth — for us, long the key bulwark against a downturn — is slowing.

Time to put aside money to ensure you can make it through a period of unemployment.

Lenders are cutting back on available credit.

First, compared even with a few weeks ago, financial conditions have tightened significantly further as the price of credit has risen and lenders have made credit less available. Money-market rates have risen significantly, and yield spreads over those money-market rates on loans have stayed high or widened. Three-month dollar Libor-OIS spreads have jumped by 60 bp to 100 bp over the past month, so that Libor rates in that tenor are merely 20 bp lower than where they were in the spring. Some of that jump in Libor rates reflects the transitory impact of year-end precautionary demands for liquidity. But we think that some also represents a more fundamental deleveraging and re-intermediation of the banking system that will last well into 2008 (see “Funding Pressures: More Fundamental than Turn of Year,” Global Economic Forum, November 19, 2007).

Leveraged loan and credit default swap spreads over Libor, meanwhile, have been mixed: They have tightened appreciably over the past fortnight but have widened by 40 bp or more over the past month, measured by either the LCDX leveraged loan index or the S&P secondary LCD/LSTA measures. High-yield and CMBS spreads have widened even more significantly, increasing the cost of borrowing appreciably for lower-rated borrowers, including those in commercial real estate. As a result, the absolute cost of borrowing is higher than in June.

They expect further decreases in credit availability even as the US Federal Reserve lowers rates.

They expect a huge contraction in home construction and continued high oil prices.

While investors are expecting that an ongoing housing downturn and threats to consumers already menace growth, it’s worth noting some lesser-plumbed features of the domestic scene. First, we think tighter lending standards will depress housing demand further. But even if demand stabilizes, so large is the supply-demand mismatch that builders must slash single-family housing starts by 40% from current levels to eliminate the inventory of unsold homes. As a result, we think overall housing starts will run below one million units in each of the next two years — a level not seen in the history of the modern data since 1959. The housing downturn will likely subtract 0.9% from growth in the next four quarters, and the housing recovery in 2009 will hardly merit the name.

Second, while energy prices have come down from their recent peaks and may continue to slip, the rise in energy and food quotes between June and December of 2007 likely will have drained about $45 billion, or 0.4%, from consumer discretionary income. Moreover, long-term relief is unlikely; Doug Terreson and our oil team expect that crude oil quotes (measured by WTI) will average about $83/bbl in 2008, or about $10 higher than this year (we translate that into a $7 increase for Brent to $79.40).

Oil could go higher than that if Saudi Arabia can't maintain exports at current levels.

I think commodity price inflation makes a US recession much harder to avoid.

Overall, commodity prices are showing the largest sustained gains since the late 1970s and early 1980s. The Reuters (RTRSY) CRB index, which measures the price of a basket of basic foodstuffs, metals and fuels, has soared 18% in the past 12 months, and 121% since Dec. 31, 1999.

Rising Asian demand combined with the approaching world peak in oil production seem very inflationary. If this starts translating into an increase in general inflation then the Fed is going to run out of room to maneuver.

By Randall Parker 2007 December 11 10:12 PM  Economics Business Cycle
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2007 December 10 Monday
Ayaan Hirsi Ali Sees Western Cowards Toward Islam

A Der Spiegel profile of Ayaan Hirsi Ali, the Somalian immigrant to the Netherlands who is targeted for death by Muslim fundamentalists, includes some great comments by Hirsi Ali.

Her attacks drew criticism from Islamic fundamentalists as well as leftist Western intellectuals, who accused Hirsi Ali of discriminating against, offending and stirring up resentment among Muslims across the board. Her critics said her demands amounted to nothing less than a demand for Muslim immigrants to renounce their religion.

She's discovered, she now says, that even those who claim to be fighting outdated dogmas are quick to impose their restrictions on thought. From public life she's learned that minorities should not be rebuked; that there are also racists among non-whites; and that "tolerance of the intolerant is nothing but cowardice."

Respect for cultures of Muslim immigrants amounts to disrespect for individual rights.

Hirsi Ali admits her behavior could be seen as provocative. But, she adds, there was no doubt the Dutch had turned a blind eye to the horrors some of their Muslim neighbors were inflicting on their wives and daughters. "Teachers, the authorities, politicians and even the media looked the other way when girls didn't return to school after the summer vacation, because they had been married off in Morocco in the meantime." All the talk about respect for the identity of immigrants and their culture, Hirsi Ali says, is "nothing but thoughtlessness, laziness and fear of openly addressing human rights violations."

As Lawrence Auster noted a couple of months ago, Hirsi Ali has thought her way out of the box of conventional thinking that still held her back from advocating effective and sufficient policies for dealing with Islam. She's no longer in the elite crowd that defends the conventional wisdom that the problem with Islam is some small number of radicals who have hijacked it. She's not even in the smaller crowd that holds Islam is the problem but that we are basically helpless to do nothing but wring our hands and talk about it.

She gave a great interview to the libertarian Reason magazine. Hirsi Ali pretty much advocates forcing Islam to submit to the West rather than vice versa.

Reason: Here in the United States, you’d advocate the abolition of—

Hirsi Ali: All Muslim schools. Close them down. Yeah, that sounds absolutist. I think 10 years ago things were different, but now the jihadi genie is out of the bottle. I’ve been saying this in Australia and in the U.K. and so on, and I get exactly the same arguments: The Constitution doesn’t allow it. But we need to ask where these constitutions came from to start with—what’s the history of Article 23 in the Netherlands, for instance? There were no Muslim schools when the constitution was written. There were no jihadists. They had no idea.

Reason: Do you believe that the U.S. Constitution, the Bill of Rights—documents from more than 200 ago—ought to change?

Hirsi Ali: They’re not infallible. These Western constitutions are products of the Enlightenment. They’re products of reason, and reason dictates that you can only progress when you can analyze the circumstances and act accordingly. So now that we live under different conditions, the threat is different. Constitutions can be adapted, and they are, sometimes. The American Constitution has been amended a number of times. With the Dutch Constitution, I think the latest adaptation was in 1989. Constitutions are not like the Koran—nonnegotiable, never-changing.

Look, in a democracy, it’s like this: I suggest, “Let’s close Muslim schools.” You say, “No, we can’t do it.” The problem that I’m pointing out to you gets bigger and bigger. Then you say, “OK, let’s somehow discourage them,” and still the problem keeps on growing, and in another few years it gets so bad that I belatedly get what I wanted in the first place.

I respect that it needs to happen this way, but there’s a price for the fact that you and I didn’t share these insights earlier, and the longer we wait, the higher the price. In itself the whole process is not a bad thing. People and communities and societies learn through experience. The drawback is, in this case, that “let’s learn from experience” means other people’s lives will be taken.

I love how she's figured out that constitutions aren't supposed to be suicide pacts.

By Randall Parker 2007 December 10 10:16 PM  Civilizations Clash Of
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2007 December 09 Sunday
Robert Novak: Mike Huckabee A False Conservative

Robert Novak sees Presidential candidate Mike Huckabee as bad news for the Republican Party.

The rise of evangelical Christians as the force that blasted the GOP out of minority status during the past generation always contained an inherent danger: What if these new Republican acolytes supported not merely a conventional conservative but one of their own? That has happened with Huckabee, a former Baptist minister educated at Ouachita Baptist University and Southwestern Baptist Theological Seminary. The danger is a serious contender for the nomination who passes the litmus test of social conservatives on abortion, gay marriage and gun control but is far removed from the conservative-libertarian model of Barry Goldwater and Ronald Reagan.

There is no doubt about Huckabee's record during a decade in Little Rock. He was regarded by fellow Republican governors as a compulsive tax-and-spender. He increased the Arkansas tax burden 47 percent, boosting the levies on gasoline and cigarettes. When he lost 100 pounds and decided to press his new lifestyle on the American people, he was hardly being a Goldwater-Reagan libertarian.

The parallels with George W. Bush are obvious. They both make much about their religious beliefs and appeal to the Religious Right. But they also aren't fiscal conservatives. As President Bush spent much more than people on the Right hoped or expected. But Bush's record as governor of Texas was not as bad (someone correct me if I'm wrong) as Huckabee's as governor of Arkansas. So Huckabee starts out to the left of Bush on spending.

Both Bush and Huckabee are most notably out of step with the Republican base on immigration and Huckabee is for amnesty for illegals while pretending not to be. Just as immigration restrictionists are attacking Huckabee on his immigration positions anti-tax organizations are organizing attacks against Huckabee on spending.

Washington – Club for Growth.Net will begin running ads on Monday nationwide, urging taxpayers to Call Mike Huckabee and challenge him on his tax policy.

To emphasize Mike Huckabee’s eager support for tax increases, the ad excerpts a 2003 clip of Mike Huckabee rattling off a list of tax increases he deems acceptable. While the former governor will argue that he had no choice and was bound by state law to balance the budget, the 2003 clip is emblematic of Huckabee’s ten-year tenure in which raising taxes was his first resort. Many cities and states have balanced budget laws like Arkansas, but not all governors and mayors embrace higher taxes the way Mike Huckabee did. Some actually cut government spending and waste in order to make ends meet. But under Mike Huckabee’s tenure, the average Arkansas tax burden increased 47%. Mike Huckabee’s support for tax hikes include:

  • 1996 Sales Tax Hike: Huckabee campaigned for an amendment to raise the sales tax
  • 1999 Gas and Diesel Fuel Tax Hike
  • 2001 Cigarette Tax Hike
  • 2001 Nursing Home Bed Tax
  • 2002 Grocery Tax: Huckabee opposed repeal
  • 2003 Income Surcharge Tax
  • 2003 Tobacco Tax Hike
  • Taxes on Internet Access
  • 2006 Beer Tax: Huckabee opposed letting the tax expire

“Mike Huckabee is telling folks that he cut taxes 94 times, but the truth is, Huckabee’s tax increases far surpassed his tax cuts, and taxpayers deserve to know the truth,” said Club for Growth.Net President Pat Toomey. “The purpose of this ad is to educate taxpayers so they can ask Mike Huckabee why he supported all those tax increases.”

Romney's Mormonism is viewed with enough suspicion by conventional Christians that Huckabee has an opening. But why can't Republican party operative come up with a candidate who appeals to Christians while also opposing tax increases and strongly favoring an end to illegal immigration? Does some Republican governor fit the bill?

By Randall Parker 2007 December 09 12:04 PM  Politics American Right
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Inflation To Force Recession In Europe?

Germany's inflation rate is in a danger zone.

Oil prices have risen 83 percent since mid-January, reaching a record $99.29 a barrel on Nov. 21. In Germany, inflation accelerated to 3.3 percent in November, the fastest pace since records began in January 1996.

Adding to inflation concerns, M3 money-supply growth, which the ECB uses as a gauge of future price pressures, accelerated to the fastest pace in more than 28 years in October.

The European Central Bank (ECB) wants to lower interest rates in order to cushion the effects of the credit crisis and in order to prevent any further rise in the Euro against the US dollar. But the ECB might be forced to raise interest rates instead in order to lower inflation. Such a move would likely force Europe into a recession.

Food and energy prices are going up most dramatically.

Consumer price increases are clearly evident in stores. In the western state of Hesse, the cost of butter has jumped by 48 percent over the past year and fuel prices have shot up by 26 percent.

Lettuce, meanwhile, costs 74 percent more in eastern Saxony than it did in November 2006.

Inflation is a problem for the entire Euro currency zone.

A figure for the entire 13-nation zone is due for release on Friday, with Broyer forecasting it could now hit 2.9 percent, up from 2.6 percent in October.

The ECB is worried about inflation.

European Central Bank President Jean-Claude Trichet threatened to raise interest rates if an oil-driven jump in inflation spurs pay increases.

There is ``strong short-term upward pressure on inflation,'' Trichet said at a press conference in Frankfurt after the ECB left its benchmark interest rate at 4 percent. The ECB ``will not tolerate second-round effects'' on wages and some policy makers wanted to raise rates as early as today, Trichet said.

But the southern European countries are voting against higher interest rates. The conflict between southern and northern Europe on inflation and interest rates could eventually lead some European countries to exit the Euro. Megan McArdle places only 50:50 odds on the survival of the Euro.

Overall, I'd place the odds on the survival of the euro at about 50%, which makes me definitely a euro-skeptic. Europe is not an optimal currency zone. America isn't either, but we have a lot of things that make it tenable: high labor mobility (so depressed regions depopulate rather than stagnating), high capital mobility, and automatic fiscal stabilizers that transfer federal money, in the form of things like unemployment benefits, to depressed areas. These are no panacea, but they make the dislocations of central monetary policy bearable. Europe, on the other hand, is full of people who stay where they are no matter what the economy does, and the EU government does not, broadly speaking, transfer money by local need. At some point, I find it easy to imagine that the costs of exit could be outweighed by the costs of staying, particularly as euro-enthusiasm wanes.

Since Trichet and the ECB face such conflicting pressures from different European countries one has to take what the ECB members say with a grain of salt. They can't speak as confidently as US Fed members can. Their institution is walking a tightrope of sorts. So observers tend to see the ECB has more restrained in terms of what it might do.

"Trichet's remarks can't be taken seriously," said Jörg Krämer, an economist at Commerzbank. The reality is that the ECB has cut its growth forecast for next year from 2.3pc to 2pc and expects inflation to fall back to 1.8pc by 2009.

Dario Perkins, an economist at ABN Amro, said the tough tone was intended to cool wage demands in Germany, now reaching the highest in a decade. "He was threatening the unions directly," he said.

Can the ECB get away with forcing the Euro zone into a recession?

Some European economic analysts hoped that Europe has become decoupled from the US economy since so little European exports go to the United States (we use East Asian producers in order to live beyond our means). But Nouriel Roubini is having none of that. He argues that Europe's economic fortunes are still closely linked to that of the United States in his post Global Recoupling Rather than Decoupling as the US Heads towards a Recession.

Recoupling or contagion is also evident in financial markets. Certainly European financial markets did not decouple from the summer and fall financial turmoil in US financial markets; rather there was massive contagion: the ECB was forced to inject liquidity faster and more than the Fed. And the lingering liquidity and credit crunch has been as severe – if not more severe – in Europe than in the US. Thus, based on recent European loan officer surveys, the credit crunch – especially towards corporate lending – is now more severe in Europe than in the US. This is no surprise as the relatively more bank-based financial system of continental Europe – relative to the capital markets-based financial system of the US and UK – is more vulnerable to credit crunches when there is a seizure of liquidity and credit that flows to the corporate sector.

The ECB faces a big problem: Europe is hard hit by a credit crunch. But high inflation is preventing the ECB from following in the footsteps of the US Federal Reserve to lower interest rates. Europe's higher inflation combined with the credit crunch might force Europe into a recession before the United States. Since salaries haven't been keeping up with inflation in Germany for years that's going to be a pretty bitter pill to swallow.

By Randall Parker 2007 December 09 11:00 AM  Economics Business Cycle
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2007 December 08 Saturday
German Double Standard On Scientology And Islam

The German government is probably going to ban Scientology for being repressive and a threat to democracy.

Germany's federal and state interior ministers have declared the Church of Scientology unconstitutional, clearing the way for a possible ban.

The ministers have asked Germany's domestic intelligence agency to examine whether the Church's legal status as an association could be challenged.

Scientology is not recognized as a religion in Germany.

So if a non-religious organization has parasitic and problematic aspects it can be banned. But if the members of a large religious organization held similar views and engaged in similar behaviors because of their beliefs about the supernatural then the German government would show more tolerance for it .

This exaltation of supernatural belief over this world origin belief is an enormous mistake. It empowers any group that wants to engage in unacceptable behavior. Do it in the name of God and suddenly the rules change. The original motive for it (to avoid any more religious wars among European peoples) doesn't even make sense. Islamic Jihadists aren't going to treat us better just because we tolerate Islam. They'll take it as a sign of weakness on our part and up their demands.

Ralf Stegner thinks Scientology uses massive repression.

"Scientology works on the basis of massive repression, like a totalitarian organisation which wants to break the will of the people, which is precisely why we have to fight it," Ralf Stegner, interior minister of Schleswig-Holstein, said after yesterday's meeting.

What does Ralf think about Islam? I'd be curious to know.

Unlike these German security officials Ayaan Hirsi Ali knows real repression when she sees it:

"The woman and the man guilty of adultery or fornication, flog each of them with 100 stripes: Let no compassion move you in their case, in a matter prescribed by Allah, if you believe in Allah and the Last Day." (Koran 24:2)

Absurd and parasitic Scientology is pretty mild stuff as compared to repressive Islam. Hirsi Ali recounts recent episodes of Muslim repression such as the Saudi case where a raped woman was sentenced to a couple of hundred lashes for being in the company of a man without her family around and the British school teacher in Sudan arrested and nearly whipped for allowing her students to name a teddy bear "Mohammad". Hirsi Ali sees these episodes as stemming from the core nature of Islam.

It is often said that Islam has been "hijacked" by a small extremist group of radical fundamentalists. The vast majority of Muslims are said to be moderates.

But where are the moderates? Where are the Muslim voices raised over the terrible injustice of incidents like these? How many Muslims are willing to stand up and say, in the case of the girl from Qatif, that this manner of justice is appalling, brutal and bigoted - and that no matter who said it was the right thing to do, and how long ago it was said, this should no longer be done?

Usually, Muslim groups like the Organization of the Islamic Conference are quick to defend any affront to the image of Islam. The organization, which represents 57 Muslim states, sent four ambassadors to the leader of my political party in the Netherlands asking him to expel me from Parliament after I gave a newspaper interview in 2003 noting that by Western standards some of the Prophet Muhammad's behavior would be unconscionable. A few years later, Muslim ambassadors to Denmark protested the cartoons of Muhammad and demanded that their perpetrators be prosecuted.

But while the incidents in Saudi Arabia, Sudan and India have done more to damage the image of Islamic justice than a dozen cartoons depicting the Prophet Muhammad, the organizations that lined up to protest the hideous Danish offense to Islam are quiet now.

Imagine the German government banning Islam because it is repressive. If repressiveness is the standard that should trip illegalization then Islam crossed that line a long time ago.

Curiously, the German people see Islam as repressive.

In May last year a national poll was published in the German newspaper Frankfurter Allegmaine which indicated that attitudes towards Islam had worsened in the two years since 2004. 91% of respondents thought that Islam oppressed women (in 2004, the amount was 85%). 83% of Germans thought Islam was dominated by fanaticism (in 2004, the figure was 75%). 71% of Germans questioned felt Islam was intolerant, compared to 66% in 2004. 56% thought the "Clash of Civilisations" had already started. In 2004, 46% believed it had started.

The German survey also asked if strict limits should be imposed upon Islam in Germany, and nearly half (40%) agreed. Germans were asked if building of mosques should be forbidden in their nation while some Islamic states refused permission for churches to be built. Again, more than half (56%) agreed. More than half (61%) of the respondents agreed that there would perpetually be "major conflict between both faiths". The pollsters concluded: "If one looks at this from a pessimistic viewpoint it could be seen as the start of a downward spiral toward conflict...The clash of civilizations has already begun in the minds of citizens."

The German government fears that Scientologists will influence German politics.

The argument is nothing new; in fact the German Office for the Protection of the Constitution has watched the group for years because of its recruitment practices. The federal government worries that Scientology, as a foreign organization, wants to win over adherents and influence German politics. "There is substantial evidence that the Scientology organization is involved in activities directed against the free democratic order," the agency has written in official reports.

Islam is winning adherents by conversion and by reproduction. Muslims have more babies than Germans do. The Germans would be lucky if their biggest problem was Scientology. But it is not.

By Randall Parker 2007 December 08 09:18 PM  Cultural Wars Western
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2007 December 05 Wednesday
Ivy League Gets Steadily Richer

The trend in finance for higher education mirrors the trend of increasing inequality of distribution of wealth and is at least partially drive by it.

Meanwhile, the wealth gap between the Ivies and everyone else has never been wider. The $5.7 billion in investment gains generated by Harvard's endowment for the year that ended June 30 exceeded the total endowment assets of all but six U.S. universities, five of which were Ivy Plus: Yale, Stanford, Princeton, MIT, and Columbia. Ivy dominance extends to fund-raising. A mere 10 schools accounted for half the growth in donations to all U.S. colleges and universities last year. All of the top five on the list were Ivies, led by Stanford, which set a record for higher education in 2006, collecting $911 million in gifts.

During 2006-07, the Ivy "Big Three"—Harvard, Yale, and Princeton—collectively spent $6.5 billion on operations, up over 100% from a decade ago. This was more than double the 41% average budget increase for all U.S. colleges and universities over this period and quadruple the 26% rise in the consumer price index. The Big Three sank a further $1.2 billion into new construction and other capital spending last year. "Yale is wealthier now, so we can add resources in almost every dimension," says its president, Richard C. Levin.

The people who attend the Ivy League are selected for in large part for their future prospects for success. This becomes a virtuous cycle (at least for the Ivies) as very successful alumni make big donations to their alma mater which increase the prestige of these schools and hence their appeal to those who are most likely to achieve big successes in business and finance.

What I wonder: Could second tier schools more precisely target the future wealthy and get a competitive edge against the top tier? Consider, the top tier hobble their institutions with racial preferences and wide humanities and social sciences offerings as well as other majors that do not give as big a leg up on the road to success. A more narrowly focused institution could profile prospective students more narrowly based on odds of financial success.

The second tier could also shape their general education offerings and programs for internships with the single-minded aim at getting their students aimed at investment banks, venture capital start-ups, and other higher potential careers. Why train future botanists when you can train future genetic engineers and medical doctors? Recruit students who claim they want to start their own business.

What I also wonder: Are these huge donations to the Ivies a waste? The billions of dollars can't be improving the quality of undergraduate instruction all that much. Some of those donations just go toward making the undegraduate experience more plush. So that part's a waste. But the portion that goes toward science buildings and higher pay for research superstars pulls smarter people into research and outfits those people with more of what they need to perform.

To the extent that Ivy fund raisers get rich people to fund R&D who otherwise would spend that money on conspicuous consumption (or even worse: leave their money to heirs who then become unproductive) the Ivies are serving a constructive purpose. But if wealthy people want to speed up the rate of research in some area of interest they ought to think about more efficient ways to do that. For example, fund highly talented young researchers regardless of which institution they are at.

By Randall Parker 2007 December 05 10:46 PM  Education
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2007 December 04 Tuesday
Romney And Huckabee On Illegal Immigrants

The Boston Globe had to report on Mitt Romney's use of illegal immigrants for lawn care not once but twice to get him to stop it. It took the desire to appeal to the Republican base to turn Romney into an immigration restrictionist.

Standing on stage at a Republican debate on the Gulf Coast of Florida last week, Mitt Romney repeatedly lashed out at rival Rudy Giuliani for providing sanctuary to illegal immigrants in New York City.

Yet, the very next morning, on Thursday, at least two illegal immigrants stepped out of a hulking maroon pickup truck in the driveway of Romney's Belmont house, then proceeded to spend several hours raking leaves, clearing debris from Romney's tennis court, and loading the refuse back on to the truck.

In fact, their work was part of a regular pattern. Despite a Globe story in Dec. 2006 that highlighted Romney's use of illegal immigrants to tend to his lawn, Romney continued to employ the same landscaping company – until today. The landscaping company, in turn, continued to employ illegal immigrants.

Two of the workers confirmed in separate interviews with Globe reporters last week that they were in the country without documents. One said he had paid $7,000 to a smuggler to escort him across the desert into Arizona; the other said he had come to the country with a student visa that was now expired. Both were seen on the lawn by either Globe reporters or photographers over the last two months.

Romney, informed of this situation by the Globe reporters, finally cracked down.

He also released a copy of the short letter of termination he sent to Mr. Ricardo Saenz of Community Lawn Service.

"Given your company's disregard for the clear instructions provided on this issue last year, I am forced to terminate my contract with your company, effective immediately," the letter stated. "My family will no longer utilize your services and all scheduled visits are cancelled as of today. I am disappointed that our relationship must end on this note,

He's disappointed that this gardener service didn't put forth the effort needed to make it easier for him to win the Presidency. He's disappointed that running for President places constraints on who he can use as a servant.

but we simply cannot tolerate your inability to ensure that your employees are legally permitted to work in the United States."

But Ricardo Saenz argues that enforcing immigration laws is not his job.

Ricardo Saenz, of Community Lawn Service, told NewsCenter 5's Jorge Quiroga Tuesday, "I'm not the INS (Immigration & Naturalization Service). It's not my job to keep track of all that."

Illegal immigrants are not just a problem for the American southwest any more. They've spread far and wide. Now they've spread far enough to get Mormon Presidential candidates from Massachusetts in trouble.

But latest emerging contender for the Republican Presidential nomination, Mike Huckabee, makes Romney a hard core immigration enforcement supporter in comparison.

Groups that support a crackdown on illegal aliens haven't settled on their champion in the race for the White House, but there's little doubt which Republican scares them most — former Arkansas Gov. Mike Huckabee.

"He was an absolute disaster on immigration as governor," said Roy Beck, president of NumbersUSA, a group that played a major role in rallying the phone calls that helped defeat this year's Senate immigration bill. "Every time there was any enforcement in his state, he took the side of the illegal aliens."

Huckabee is making headway because Romney is a Mormon. Many Christians do not see Mormons as really one of them.

Romney is poking at Huckabee on his views about illegal immigrants.

After Romney and Giuliani argued over immigration, Romney turned on Huckabee for a proposal he made as governor of Arkansas to give breaks in college tuition to the children of illegal immigrants. "Mike, that's not your money," he said. "That's the taxpayers' money. And the right thing here is to say to people that are here legally as citizens or legal aliens, we're going to help you. But if you're here illegally, you ought to be able to return home or get in line with everybody else, but illegals are not going to get taxpayer-funded breaks that are better than our own citizens." Huckabee responded: "In all due respect, we're a better country than to punish children for what their parents did. We're a better country than that." "I worked my way through college," Huckabee added. "I started work when I was 14, and I had to pay my own way through, and I know how hard it was to get that degree. I'm standing here tonight on this stage because I got an education. If I hadn't had the education, I wouldn't be standing on this stage. I might be picking lettuce. I might be a person who needed government support rather than who was giving so much money in taxes I want to get rid of the tax code that we've got and make it really different."

Romney's campaign has sent out an email explaining how Huckabee sees illegals as net taxpayers (and Huckabee is deluded).

To back up its claims against Huckabee, the Arkansas Republican is quoted in the Romney mailer as saying last year that "what is good is a pathway to a legal status." In 2006, Huckabee supported the Senate's earned legalization plan over a House bill, which would have made illegal immigration a felony.

The mailer also quotes Huckabee as saying in 2005 that "illegal immigrants are actually financially supporting U.S. citizens."

Think that's an exaggeration of Huckabee's position? Nope. Huckabee told John Hawkins he wants the old path toward citizenship for illegals and this is just like George W. Bush.

Mike Huckabee: Well, I'm not as sure that leaving and then coming back is as important as it is to acknowledge that what they've done is illegal, pay a fine, and then get in line behind the people that are going through the process of being here legally. It's important that we have a legal process.

We can't just ignore our laws. We either change them or enforce them for clearly this land is a land that is dependent on more workers than we currently have for many of the jobs that Americans honestly don't want. So there is, I think, a reality that we shouldn't just sort of look the other way. I don't believe in amnesty. That's not a good idea, but creating a pathway where people can have a form of restitution to make things right, to understand that laws have to be obeyed or some consequences have to be applied.

The rest of the Republican field is so weak that Huckabee has a chance. Will fundamentalist Christians who oppose the Open Borders elites put Huckabee's positions on other issues ahead of immigration policy and vote for him in spite of his immigration positions?

By Randall Parker 2007 December 04 09:46 PM  Immigration Politics
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2007 December 03 Monday
US Government: Iran Stopped Nuclear Weapons Program

16 U.S. intelligence agencies can't be wrong. Cancel (or at least delay for several years) the US military's urban renewal program for Natanz Iran.

WASHINGTON, Dec. 3 — A new assessment by American intelligence agencies released Monday concludes that Iran halted its nuclear weapons program in 2003 and that the program remains frozen, contradicting a judgment two years ago that Tehran was working relentlessly toward building a nuclear bomb.

The conclusions of the new assessment are likely to reshape the final year of the Bush administration, which has made halting Iran’s nuclear program a cornerstone of its foreign policy.

The assessment, a National Intelligence Estimate that represents the consensus view of all 16 American spy agencies, states that Tehran is likely to keep its options open with respect to building a weapon, but that intelligence agencies “do not know whether it currently intends to develop nuclear weapons.”

Iran is continuing to produce enriched uranium, a program that the Tehran government has said is intended for civilian purposes. The new estimate says that the enrichment program could still provide Iran with enough raw material to produce a nuclear weapon sometime by the middle of next decade, a timetable essentially unchanged from previous estimates.

Life is just chock full of surprises. If the 2007 NIE is right then the 2005 NIE is wrong. This is a shocker.

Recall the long range bombers and detonate those missiles headed for Iran.

There are still hawks in the administration, Vice President Dick Cheney chief among them, who view Iran with deep suspicion. But for now at least, the main argument for a military conflict with Iran — widely rumored and feared, judging by antiwar protesters that often greet Mr. Bush during his travels — is off the table for the foreseeable future.

As Senator Chuck Hagel, Republican of Nebraska, put it, the intelligence finding removes, “if nothing else, the urgency that we have to attack Iran, or knock out facilities.” He added: “I don’t think you can overstate the importance of this.”

The White House struggled to portray the estimate as a validation of Mr. Bush’s strategy, a contention that required swimming against the tide of Mr. Bush’s and Mr. Cheney’s occasionally apocalyptic language.

Well, maybe the US invasion of Iraq helped persuade the Iranians to back off of nuclear weapons development. Hard to tell.

Here is the full 2007 National Intelligence Estimate "Iran: Nuclear Intentions and Capabilities" (PDF format):

  • We assess with high confidence that until fall 2003, Iranian military entities were working under government direction to develop nuclear weapons.
  • We judge with high confidence that the halt lasted at least several years. (Because of intelligence gaps discussed elsewhere in this Estimate, however, DOE and the NIC assess with only moderate confidence that the halt to those activities represents a halt to Iran's entire nuclear weapons program.)
  • We assess with moderate confidence Tehran had not restarted its nuclear weapons program as of mid-2007, but we do not know whether it currently intends to develop nuclear weapons.
  • We continue to assess with moderate-to-high confidence that Iran does not currently have a nuclear weapon.
  • Tehran’s decision to halt its nuclear weapons program suggests it is less determined to develop nuclear weapons than we have been judging since 2005. Our assessment that the program probably was halted primarily in response to international pressure suggests Iran may be more vulnerable to influence on the issue than we judged previously

Regards intentions: Iran's top leaders probably want nukes. But under what conditions would they make the push to build some?

Iran might not be able to afford a serious nuclear weapons program several years from now because Iran's financial situation is going to decay considerably in coming years. Economic geographer Roger Stern at Johns Hopkins University argued in a PNAS paper that most likely Iran will cease to be an oil exporter by 2014-2015.

The U.S. case against Iran is based on Iran's deceptions regarding nuclear weapons development. This case is buttressed by assertions that a state so petroleum-rich cannot need nuclear power to preserve exports, as Iran claims. The U.S. infers, therefore, that Iran's entire nuclear technology program must pertain to weapons development. However, some industry analysts project an Irani oil export decline [e.g., Clark JR (2005) Oil Gas J 103(18):34-39]. If such a decline is occurring, Iran's claim to need nuclear power could be genuine. Because Iran's government relies on monopoly proceeds from oil exports for most revenue, it could become politically vulnerable if exports decline. Here, we survey the political economy of Irani petroleum for evidence of this decline. We define Iran's export decline rate (edr) as its summed rates of depletion and domestic demand growth, which we find equals 10-12%. We estimate marginal cost per barrel for additions to Irani production capacity, from which we derive the "standstill" investment required to offset edr. We then compare the standstill investment to actual investment, which has been inadequate to offset edr. Even if a relatively optimistic schedule of future capacity addition is met, the ratio of 2011 to 2006 exports will be only 0.40-0.52. A more probable scenario is that, absent some change in Irani policy, this ratio will be 0.33-0.46 with exports declining to zero by 2014-2015. Energy subsidies, hostility to foreign investment, and inefficiencies of its state-planned economy underlie Iran's problem, which has no relation to "peak oil."

While Stern claims this does not have anything to do with "peak oil" it most certainly does. Iran would have a much easier time maintaining oil production if their remaining oil was fairly easy to extract. Also, their subsidized internal consumption is mirrored in Venezuela, Iraq, Saudi Arabia, and a few other oil producers. They all have rapidly rising internal consumption that is leading toward declining exports. That effectively means peak oil for the rest of us.

By Randall Parker 2007 December 03 11:03 PM  MidEast Iran
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2007 December 02 Sunday
Corruption Worsening In Iraq

Damien Cave of the New York Times reports on the worsening corruption in Iraq.

BAGHDAD, Dec. 1 — Jobless men pay $500 bribes to join the police. Families build houses illegally on government land, carwashes steal water from public pipes, and nearly everything the government buys or sells can now be found on the black market.

Painkillers for cancer (from the Ministry of Health) cost $80 for a few capsules; electricity meters (from the Ministry of Electricity) go for $200 each, and even third-grade textbooks (stolen from the Ministry of Education) must be bought at bookstores for three times what schools once charged.

“Everyone is stealing from the state,” said Adel Adel al-Subihawi, a prominent Shiite tribal leader in Sadr City, throwing up his hands in disgust. “It’s a very large meal, and everyone wants to eat.”

Transparency International rates 180 countries for corruption and finds only Somalia and Myanmar are worse. Iraqi and American officials say that as Iraq's level of violence has gone down the corruption has gotten worse. Why is that? Peace helps allow corrupt commerce to flourish?

Government jobs and promotions are sold for cash. This makes the government far less efficient and more predatory in its behavior toward the populace. When every police recruit bought his job (according to one police officer interviewed by the reporter) what sort of police force does that create?

Half-way colonialism is a recipe for disaster. If the US government directly controlled hiring it could make hiring and promotions based on merit and keep track of money and prevent most bribery and corrupt contracting. Instead we are enablers. The invasion of Iraq has been and continues to be a disaster. Bush and the neoconservatives have a lot to answer for.

By Randall Parker 2007 December 02 11:40 PM  MidEast Iraq New Regime Failures
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Tyler Cowen Sees Benefits From US Dollar Decline

In a New York Times column where he paints a pretty optimistic picture about the effects of the declining US dollar Tyler Cowen argues that the Chinese won't use their massive holdings of US dollars to cause a severe dollar crash.

Another worry is that a falling dollar puts the United States at the mercy of China. Dr. Brad Setser, a currency analyst at RGE Monitor, estimates that the Chinese hold about $1.2 trillion in dollar-denominated assets. China is likely to slowly diversify into other currencies, but Chinese leaders have no interest in encouraging a run on the dollar or a fire sale of dollar-denominated assets. China is in a more vulnerable position than the United States, if only because China is a poorer country and has underdeveloped capital markets.

Still, it would be naïve to argue that a weak or falling dollar can never hurt the United States. Extreme volatility can increase general anxiety and discourage economic commitments. If the dollar went into a true free fall, it would damage the reputation of the United States as a desirable place for foreigners to invest. That would hurt; but on the other hand a low dollar would mean bargains for foreigners, thereby attracting investment and limiting the potential negative fallout from a dollar collapse.

I am reminded of how some people were convinced before World War I that a war between the major powers was no longer possible because they had too many shared interests as a result of mutually beneficial world trade. Well, my point is that individuals and countries are not always cool rational calculators of their interests.

If the people running China have Tyler's wisdom on where their best interest lie then they'll aim for a slow decline in the dollar against the Chinese yuan currency. If they have that wisdom they might even succeed in managing that decline. But, hey, governments aren't always wise. A libertarian-leaning free market economist like Tyler surely understands that. So we can't expect that the Chinese will make wise decisions about their capital markets and currency. In fact, China is currently undergoing a boom with a really immature capital market that very easily could blow up.

Well, turns out Tyler thinks China might slip into a massive depression within 7 years of last year and he even thinks the United States runs a similar risk. Tyler's pretty optimistic about what markets can accomplish. But he thinks for whatever assortment of reasons we haven't escaped from the risk of massive economic depression.

China's economic development and the continued intertwining of the Chinese economy with the whole world economy connects the rest of the world with a country that has a historic tendency to go into convulsions. This will create problems.

By Randall Parker 2007 December 02 10:57 PM  Economics Globalization
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