2008 February 27 Wednesday
Ethnically Shia Basra Still Dangerous

Defenders of US military involvement in Iraq point to a substantial decline in US military casualties as a sign that the country is stabilizing. But since the British forces pulled out from around Basra the city demonstrates what becomes of a part of Iraq in the absence of a foreign occupying force. The picture in Basra is not pretty.

What makes the situation in Basra — Iraq’s second largest city and commercial hub — so alarming, they say, is that it is a test of Iraqi rule under relatively optimal conditions: Basra has the nation’s best economic base, little ethnic tension within a homogeneous Shiite population and no Western occupation force to inflame nationalist tensions.

Yet the city remains deeply troubled. Disappearances of doctors, teachers and other professionals are common, as are some clashes among competing militias, most of which are linked to political parties. Murder victims include judicial investigators, politicians and tribal sheiks. One especially disturbing trend is the slaying of at least 100 women in the last year, according to the police. The Iraqi authorities have blamed Shiite militiamen for many of those killing, saying the militants had probably deemed the women to be impious.

Did "the surge" bring a decline in violence in Iraq? Or was that surge just coincidentally done at the same time a more powerful tactic was developed? The large scale purchase of Sunni loyalty with US money strikes me as the biggest cause of decreased violence in Iraq. (I strongly urge you to click thru and read Nir Rosen's piece in full)

Now, in the midst of the surge, the Bush administration has done an about-face. Having lost the civil war, many Sunnis were suddenly desperate to switch sides — and Gen. David Petraeus was eager to oblige. The U.S. has not only added 30,000 more troops in Iraq — it has essentially bribed the opposition, arming the very Sunni militants who only months ago were waging deadly assaults on American forces. To engineer a fragile peace, the U.S. military has created and backed dozens of new Sunni militias, which now operate beyond the control of Iraq's central government. The Americans call the units by a variety of euphemisms: Iraqi Security Volunteers (ISVs), neighborhood watch groups, Concerned Local Citizens, Critical Infrastructure Security. The militias prefer a simpler and more dramatic name: They call themselves Sahwa, or "the Awakening."

Could we just pay the Sahwa larger sums of money and cut way back on US troop levels?

I have an idea of what it would take to stabilize Iraq. So far we still funding fewer security forces than Saddam had. This cries out for an obvious experiment: Scale up US loyalty rental payments to twice their current level and see if that brings calm.

The American forces responsible for overseeing "volunteer" militias like Osama's have no illusions about their loyalty. "The only reason anything works or anybody deals with us is because we give them money," says a young Army intelligence officer. The 2nd Squadron, 2nd Stryker Cavalry Regiment, which patrols Osama's territory, is handing out $32 million to Iraqis in the district, including $6 million to build the towering walls that, in the words of one U.S. officer, serve only to "make Iraqis more divided than they already are." In districts like Dora, the strategy of the surge seems simple: to buy off every Iraqi in sight. All told, the U.S. is now backing more than 600,000 Iraqi men in the security sector — more than half the number Saddam had at the height of his power. With the ISVs in place, the Americans are now arming both sides in the civil war. "Iraqi solutions for Iraqi problems," as U.S. strategists like to say. David Kilcullen, the counterinsurgency adviser to Gen. Petraeus, calls it "balancing competing armed interest groups."

Update: Nir Rosen's full piece "The Myth of the Surge" (the second link above) is excellent. It explains why we are not building any sort of permanent peace in Iraq. We are basically arming and training the two sides of the conflict. What happens when the money stops flowing in to rent their loyalties?

Update II: Americans are confusing a decline in US casualties with real progress. We are not bringing the warring sides together. The Shias see our arming of Sunni militias under US tutelage as the arming of their enemies (and the Shias are correct).

To the Americans, the Awakening represents a grand process of reconciliation, a way to draw more Sunnis into the fold. But whatever reconciliation the ISVs offer lies between the Americans and the Iraqis, not among Iraqis themselves. Most Shiites I speak with believe that the same Sunnis who have been slaughtering Shiites throughout Iraq are now being empowered and legitimized by the Americans as members of the ISVs. On one raid with U.S. troops, I see children chasing after the soldiers, asking them for candy. But when they learn I speak Arabic, they tell me how much they like the Mahdi Army and Muqtada al-Sadr. "The Americans are donkeys," one boy says. "When they are here we say, 'I love you,' but when they leave we say, 'Fuck you.'"

Rosen can speak Arabic. So he can get a clue. He watches the Arabs play and manipulate the American soldiers who delude themselves into thinking they are in control. Some US officers know that without Arabic language skills they are at a major disadvantage.

U.S. troops who work with the Iraqi National Police realize that beyond their gaze, the country's security forces do not act anything like police. "The INPs here are almost all Shiites," says Maj. Jeffrey Gottlieb, a lanky tank officer who oversees a unit charged with training Iraqi police. "Orders from their chain of command are usually to arrest Sunnis, not Shiites." The police have also been conducting what Gottlieb calls "United Van Lines missions" — resettling displaced Shiite families in homes abandoned by Sunnis. "The National Police ask, 'Can you help us move a family's furniture?' We don't know if the people coming back were even from here originally." Gottlieb shrugs. "We don't know as much as we could, because we don't know Arabic," he says.

The US military is making a huge mistake by not doing a large amount of Arabic training for every soldier going to Iraq with continuing intensive Arabic training while the soldiers are in-country.

You might think we can put Humpty Dumpty back together again. After all, the civil war in Lebanon eventually stopped. But I see the numeric majority of the Shias and the lack of oil in the Sunni Triangle as huge obstacles to a power sharing agreement. The sides are not evenly matched and they do not have equal amounts to win and lose. The Shias have the most oil and the most people. They are not inclined to give to the Sunnis. At the same time, the Sunnis know that without non-democratically achieved positions they are out of power and out of the money that oil brings. Our substitute money only works if we are willing to pay them for many years to come.

By Randall Parker 2008 February 27 05:10 PM  MidEast Iraq New Regime Failures
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2008 February 26 Tuesday
Oil And Food Costs Grow In Personal Budgets

Watch changes in the percentage that energy and food costs take in household budgets.

Still, things are not quite as bad as during the 1970s and 1980s oil shocks. In the early 1980s, at the height of the last energy crisis, energy accounted for more than 8 percent of household spending. As prices fell and the economy became less energy intensive, energy costs fell under 4 percent of household spending in the early 1990s.

With the run-up in prices in recent years, economists say energy's share of disposable income is slowly creeping up again. Last December, that figure reached 6.1 percent, the highest level since 1985. The increase of two percentage points — amounting to $200 billion — is a huge sum, a little less than half what Americans spend each year on new cars and automobile parts.

Energy costs would only need to rise another third to get us back to where we were in the early 1980s. Since electric prices will rise slower than oil prices we'd probably need to hit over $150 per barrel for energy to take as large a percentage of budgets as it used to almost 30 years ago.

Meanwhile grain prices are shooting up.

On Monday, the price of March spring wheat on the Minneapolis Grain Exchange shot up to $24 a bushel, the highest price ever. Within the past month, the price of some types of wheat has risen over 90 percent.

...

Overall, in January, consumer food prices were up 4.9 percent in comparison with January 2007. Cereal and baked goods rose 5.5 percent. Some items went up even more: Dairy products increased 12.8 percent and fruits and vegetables 6.1 percent.

...

Yet despite the recent rise in food prices, over a longer period of time, spending on food as a percentage of household income has been declining, points out Michael Rizzo, senior economist at the American Institute for Economic Research (AIER) in Great Barrington, Mass. For example, in 1970, food represented 19.3 percent of household expenditures. By 2006, it had shrunk to 12.6 percent.

I'd like to know what percentage food now takes in American household expenditures. Surely the percentage is higher than it was in 2006.

Remember when doctrinaire free traders told us not to worry about the enormous US trade deficit? Now that this trade deficit has driven down the value of the dollar foreigners can more cheaply buy US wheat. As a result we pay more for food.

Because of the weak dollar and poor harvests abroad, exports of US wheat are up 30 percent this year.

I wonder how far this is going to go.

Hope for a good wheat growing season this spring.

Wheat prices have surged 34 percent since the start of year, pushed higher by growing world demand, tight supplies and bad weather that has pummeled crops in Canada, Argentina and India. U.S. exporters are selling wheat a record pace to meet demand, rapidly depleting stockpiles

I think the US Federal Reserve has put avoiding a financial institution melt down ahead of controlling inflation. At the same time, world economic forces have turned very inflationary. China's growing buying power is going to drive commodities prices upward. Recessions will have to cut down on demand far enough to squeeze out the inflation.

By Randall Parker 2008 February 26 10:22 PM  Economics Family
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US Government Medical Spending To Double In 10 Years

Another $750 billion per year is like fighting 5 Iraq wars at once. Big money. Will younger folks agree to the taxes to fund it?

The federal government will spend twice as much on health care in 2017 as it did in 2007, as costs keep going up and as Boomers enroll in Medicare. The toll: federal outlays for Medicare and Medicaid will hit $1.5 trillion, up from $750 billion last year, according to an estimate published today in Health Affairs.

Somehow this huge increase in tax-funded spending just isn't enough for the Democrats.

The estimates don’t take into account the expanded role the feds would play under the Democratic presidential candidates health care proposals, which would cost about $100 billion a year, the WSJ notes. But once you’re at $1.5 trillion, the leap to $1.6 trillion doesn’t seem so vast.

Once you are at $1.5 trillion politicians will lose the ability to increase spending without increasing taxes.

The medical portion of the US economy will reach nearly 1 out of 5 dollars spent.

The outlook for national health spending calls for continued steady growth. Spending growth is projected to be 6.7 percent in 2007, similar to its rate in 2006. Average annual growth over the projection period is expected to be 6.7 percent. Slower growth in private spending toward the end of the period is expected to be offset by stronger growth in public spending. The health share of gross domestic product (GDP) is expected to increase to 16.3 percent in 2007 and then rise throughout the projection period, reaching 19.5 percent of GDP by 2017.

Taxpayers will pay more in taxes to fund all this. You looking forward to a decline in your living standard?

This projection is based on a US economic growth rate in the next 10 years that seems overly optimistic.

"At the same time, we are expecting economic growth to slow to an average annual rate of 4.7 percent. As a result, the combination of steady health spending growth and slowing economic growth will lead to the health care part of gross domestic product rising to nearly 20 percent by 2017, nearly one-fifth of the economy, Sisko said.

A slower growth rate in the total economy would cause a same dollar amount of increased medical care spending to take up a far larger percentage of the economy.

You can view side-by-side medical spending proposals of Hillary Clinton, Barack Obama, and other candidates.

By Randall Parker 2008 February 26 10:13 PM  Economics Health
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2008 February 24 Sunday
Tsar Putin Stage Manages Election Outcomes In Russia

The central authority in Tsar Putin's Russia operates a large national organization to assure Russians are properly instructed and guided to vote for the Putin's party.

NIZHNY NOVGOROD, Russia — Shortly before parliamentary elections in December, foremen fanned out across the sprawling GAZ vehicle factory here, pulling aside assembly-line workers and giving them an order: vote for President Vladimir V. Putin’s party or else. They were instructed to phone in after they left their polling places. Names would be tallied, defiance punished.

Even children serve the Tsar on election day.

The city’s children, too, were pressed into service. At schools, teachers gave them pamphlets promoting “Putin’s Plan” and told them to lobby their parents. Some were threatened with bad grades if they failed to attend “Children’s Referendums” at polling places, a ploy to ensure that their parents would show up and vote for the ruling party.

Opponents of the Tsar are threatened with physical harm.

Around the same time, volunteers for an opposition party here, the Union of Right Forces, received hundreds of calls at all hours, warning them to stop working for their candidates. Otherwise, you will be hurt, the callers said, along with the rest of your family.

Over the past eight years, in the name of reviving Russia after the tumult of the 1990s, Mr. Putin has waged an unforgiving campaign to clamp down on democracy and extend control over the government and large swaths of the economy. He has suppressed the independent news media, nationalized important industries, smothered the political opposition and readily deployed the security services to carry out the Kremlin’s wishes.

The outcome of democratization in Russia illustrates how democracy doesn't succeed in every country. For other examples of democracy failure and theories on why democracies fail see my previous posts History Of American Interventions Bodes Poorly For Democracy, Liberal Democracy Is Not A Universal Desire, Low Per Capita Income Countries Never Remain Democracies, Robert Conquest On The Limits And Pitfalls Of Democracy, and Democracy Debate Needs More Realism.

In Russia's case I see a crisis on the horizon when Russia's oil production starts declining rapidly. The Russian people have been willing to follow Putin's orders in part because high oil prices and rising oil production have boosted Russian living standards. But when the Russian economy turns down their patience with autocracy might wear thin.

By Randall Parker 2008 February 24 03:29 PM  Russia
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2008 February 23 Saturday
Christopher Buckley Postures Against Immigration Law Enforcement

Writing in the quite liberal New York Times Christopher Buckley, a former aide to George H.W. Bush and son of William F. Buckley, tries to defend John McCain against conservative criticisms by claiming that Hispanics are conservatives.

True, too, on immigration, Mr. McCain has allied himself with the Archfiend, Ted Kennedy. It’s also true — odd — that Mr. McCain is popular among Hispanic voters, who are themselves paradigms of cultural conservatism and without whose support any “conservative” candidate for president may be doomed to failure.

If Hispanics are conservatives then why can the Democrats rely on large majorities of Hispanics to almost always vote for Democrats? If Hispanics are conservatives then why do they have far higher rates of out-of-wedlock births? Just what makes establishment pseudo-conservatives like Christopher Buckley so eager to proclaim the myth of Hispanic conservatism?

Next Buckley seems to imply that anyone who has broken the law has lost the right to demand law enforcement.

(It would be interesting, by the way, to hear from Mr. Limbaugh, Ms. Coulter and Mr. Hannity as to whether they’ve ever availed themselves of the services of illegal immigrants. Answer carefully, now: that ambassadorship could be at stake!)

Mr. Buckley doesn't think laws should be enforced at midnight?

Is the “conservative” position on immigration that the only solution is a wall and midnight roundups by Border Patrol agents at Wal-Mart?

Is the pseudo-conservative position that open borders is the only solution?

By Randall Parker 2008 February 23 10:57 PM  Immigration Politics
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Obama Is Malcolm X Light

A friend who is old enough to remember the 1960s calls up to relate her emotional reactions to the election. She tells me "Obama is Malcolm X light - and I liked him!". Then she says "But Malcolm X was way better than Obama." Then she says about Obama: "He's just not as real.... but he doesn't want to offend anybody." Malcolm X didn't need white votes.

She tells me that people are voting for Obama to feel cool about themselves. White people do all sorts of things to feel cool and boost their status relative to other white people.

She adds "I like him. He's very likable." I have to agree. He doesn't come across as grating or obnoxious or hostile. He seems to really like people.

She thinks Obama really helped a lot of Democrats by giving them a reason to get out of their obligation to vote for Hillary Clinton. They don't have to hold their noses and vote for Hillary.

By Randall Parker 2008 February 23 06:25 PM  Politics American Presidency
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2008 February 21 Thursday
Mild Stagflation Makes A Return

The Federal Reserve has put fighting the credit crisis and threat of recession ahead of fighting inflation.

With the credit markets in disarray from the collapse of the housing bubble, Bernanke is cutting rates in a headlong rush to blunt the risks of recession.

But in putting its emphasis above all on reviving growth, America's central bank may face a bigger inflation problem down the road, according to some economists and even a few Fed officials.

"They are cutting rates with a bill to be paid later," said John Ryding, chief U.S. economist at Bear Stearns. "The question is not, will we get inflation, but how much will it cost to stuff the genie back in the bottle. This has the feel of 1970s stagflation."

Is the Federal Reserve making the right decision? I'm thinking the inflation problem is going to worsen because oil production is going to stay flat or decline. Plus, the US trade deficit is still too large and so the US dollar will drop further, raising the costs of imports and the foreign demand for US products (and hence their prices).

Amidst lowering forecasts for economic growth inflation is up.

Even as Fed officials ratchet down their forecasts, acknowledging that growth will be almost stagnant in the first six months of this year, investors are pushing up long-term interest rates and mortgage rates out of fears about bad debt and rising inflation.

On Wednesday, the central bank disclosed that Fed policy makers now expect the United States economy to expand between 1.3 percent and 2 percent in 2008. That would be the slowest growth in five years.

Making matters more difficult, the Labor Department reported on Wednesday that consumer prices are rising faster than analysts had expected and faster than the central bank’s unofficial comfort zone.

Consumer prices jumped 4.3 percent in January, compared to one year earlier, the fastest year-over-year jump since September 2005.

US inflation over the last 3 months has risen at an annualized rate of 6.8%. How big was your last raise?

The consumer price index rose 0.4 percent in January from the previous month, topping economists' expectations of a 0.3 percent increase. Over the past 12 months, the index has risen an unsettling 4.3 percent, and the pace is increasing: Over the past three months, it has been increasing at an annualized rate of 6.8 percent.

Even more disconcertingly, the "core" index, which excludes volatile food and energy costs and is generally a more restrained measure, also topped expectations in January with a 0.3 percent month-over-month increase, rather than the 0.2 percent advance economists had been anticipating.

But inflation was much higher in the 1970s.

However, some inflation watchers were also quick to point that the current situation is a long way from the stagflation seen in the 1970's, when interest rates and inflation both climbed into the teens. To put that in perspective, the federal funds rate is now at 3%.

What are good investments for protecting your assets against inflation? Any suggestions?

But Zimbabwe is worse.

The Zimbabwean dollar collapsed Thursday in parallel market dealings following the announcement that the official inflation rate has topped 100,000%. The country's Central Statistical Office said 12-month inflation in January was 100,580%.

By Randall Parker 2008 February 21 09:46 PM  Economics Business Cycle
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2008 February 20 Wednesday
New Record Highs For Oil Prices

Peak Oil?

U.S. crude ended up 74 cents at $100.74 barrel, the top settlement on record, after hitting an all-time high of $101.32 a barrel earlier in the day. The gains sent crude near the all-time inflation adjusted high of $101.70 hit in April 1980, a year after the Iranian revolution, according to the International Energy Agency.

Think about better insulating your home. Or maybe cut your commute by living closer to where you work. Figure out how you can adapt to the coming decline in world oil production.

Also consider the economics of diesel and hybrid cars.

“We’re looking at retail prices for regular unleaded of $3.50 to $3.75 in April and May,” said Tom Kloza, an analyst with Oil Price Information Service. “Those will be records.” The record of $3.22 a gallon was set last May.

Mr. Kloza also predicted record highs for diesel and jet fuel “within the next 90 days.”

While the oil price rise gets the most press, the huge increases in grain prices suggest the presence of wider inflationary pressures.

Wheat for May delivery shed 14 cents to settle at $10.325 a bushel on the Chicago Board of Trade, after earlier falling as low as $10.22 a bushel. Wheat hit an all-time high of $11.6975 a bushel earlier this month.

Other agriculture futures traded mixed. Soybeans for March delivery fell 0.75 cent to settle at $14.17 a bushel on the CBOT, while March corn gained 3.5 cents to settle at $5.235 a bushel.

By Randall Parker 2008 February 20 09:11 PM  Economics Energy
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2008 February 19 Tuesday
Michelle Obama: Proud American For The Very First Time

Honesty from others is helpful for understanding the world around you. Does Michelle Obama see America in such a negative light because she's black or a leftist or a multiculturalist or what? Barack's wife speaking in Milwaukee Wisconsin:

"What we've learned over this year is that hope is making a comeback. It is making a comeback and let me tell you something, for the first time in my adult lifetime, I'm really proud of my country. And not just because Barack has done well, but because I think people are hungry for change. And I have been desperate to see our country moving in that direction and just not feeling so alone in my frustration and disappointment. I've seen people who are hungry to be unified around some basic common issues, and it's made me proud. And I feel privileged to be a part of even witnessing this, traveling around states all over this country and being reminded that there is more that unites us than divides us..."

The above comment suggests that Michelle's attitude hasn't changed much since her Princeton undergrad years.

In her 1985 Princeton senior thesis, “Princeton-Educated Blacks and the Black Community,” Michelle LaVaughn Robinson lamented that white professors and classmates always saw her as “Black first and a student second.”

She had surveyed alumni to see whether they sacrificed their commitment to other blacks on the altar of success, and foresaw for herself an uneasy future: “further integration and/or assimilation into a White cultural and social structure that will only allow me to remain on the periphery of society; never becoming a full participant.”…

As Michelle Obama wrote in her thesis introduction, “My experiences at Princeton have made me far more aware of my ‘Blackness’ than ever before. I have found that at Princeton no matter how liberal and open-minded some of my White professors and classmates try to be toward me, I sometimes feel like a visitor on campus; as if I really don’t belong.”…

Want a really big chip-on-her-shoulder First Lady who resents white Americans? You are well on your way to getting one.

By Randall Parker 2008 February 19 09:04 PM  Politics Identity
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2008 February 18 Monday
Kenya: All We Are Saying Is Give War A Chance

Kenya is populated by the anti-John Lennon. All we are saying is give war a chance.

AS THE road approaches Kisumu, Kenya's third-biggest city and capital of the Luos, the country's third-biggest but angriest ethnic group, it becomes littered with rubble and burnt vehicles. A man beats at a smouldering ambulance's number-plate with his machete. “See,” he explains, “this belongs to the government of Kenya.” Mobs cry out for their fellow Luo, Raila Odinga, to be made president of Kenya. They plead for guns. An earnest man pushes to the front of one mob. “What we are saying is give violence a second chance.”

These guys are determined to rehabilitate the reputation of violence as a respectable way to fix what ails a society.

In Kenya getting stoned on reefer gets you riled up and ready to literally stone members of the opposing tribe.

The youths from his Luo ethnic group who burned buildings in Kisumu in the wake of the election say they will accept little in the way of compromise. The stones in the road – marking the spot where one their friends was shot by riot police – could quickly become missiles.

"We voted for a president, not a prime minister," says one. "The least we can accept is an interim government with a revote in six months."

The young men, who spend their days drinking or smoking bhang, the local name for marijuana, are typical of the dispossessed from whom Odinga draws much of his support.

What do these guys see when they take LSD? Satan?

I figure the Luo see no need to compromise because a member of their tribe is front runner to win the Presidency of the United States. They probably figure Barack Obama will pull US troops out of Iraq in order to send them to Kenya to fight against the Kikuyu tribe.

Obama's Kenyan family hail from the Luo tribe of opposition leader Raila Odinga, who accuses Kenyan President Mwai Kibaki of stealing re-election in a poll that has triggered ethnic bloodshed, especially between the Luo and Kibaki's Kikuyu tribe.

The mostly West African blacks in the US who are voting about 80% in favor of a fellow African probably don't realize they are voting for a member of an East African ethnic group that is currently in rebellion against the government of Kenya. The Luo know. But African Americans are voting with loyalty that extends over a larger scaled definition of an ethnic group. They are still very much voting on blood though.

By Randall Parker 2008 February 18 08:36 PM  Ethnic Conflict
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2008 February 17 Sunday
Kenya Ethnic Separation Continues Apace

The Luo-Kikuyu divorce is well underway. At least most of them are getting away from each other without huge numbers of deaths.

Kenya used to be considered one of the most promising countries in Africa. Now it is in the throes of ethnically segregating itself. Ever since a deeply flawed election in December kicked off a wave of ethnic and political violence, hundreds of thousands of people have been violently driven from their homes and many are now resettling in ethnically homogenous zones.

Luos have gone back to Luo land, Kikuyus to Kikuyu land, Kambas to Kamba land and Kisiis to Kisii land. Even some of the packed slums in the capital, Nairobi, have split along ethnic lines.

The bloodletting across the country that has killed more than 1,000 people since the election seems to have subsided in the past week. But the trucks piled high with mattresses, furniture, blankets and children keep chugging across the countryside, an endless convoy of frightened people who in their desperation are redrawing the map of Kenya.

Western countries will refuse to let Kenya officially break up. Countries that break up create precedents. Other countries could follow. A redivision along ethnic lines cuts against faith in liberal universalism.

The Kenyan army is escorting convoys of people who are fleeing back to their ethnic heartlands.

The convoy joins its army escort on the road out of Nairobi as it starts its 150-mile journey in the verdant highlands where sheep and goats graze next to vegetable plots. Soon, the bus descends to the dusty savannah of the Rift Valley, passing occasional herds of zebra.

Along the way, it overtakes run-down cargo trucks crammed with other fleeing Luos and their furniture, clothes, goats, chickens. The passengers stare in silence when driving by burned out homes, which they assume belonged to Luos.

Hours later, as the bus barrels past tea plantations, safely out of Kikuyu territory and now in hills dominated by ethnic groups aligned with the opposition, they pass more burned-out homes. This time they presume the charred wrecks belonged to Kikuyus, and they start chattering.

"We are glad," says Christina Odhiambo, a 39-year-old who used to clean houses in Nairobi. "It is what they deserve."

Is Kenya finished? It looks like Humpty Dumpty to me.

Nobody knows how many people are moving across Kenya to seek the safety of ethnic numbers in this country of 38 million. But it's not just the rural poor; there are many reports of Nairobi landlords renting only to the right ethnicity, and businesses taking care about which staff are sent to which jobs.

For many ordinary Kenyans, the new reality is sobering.

"Sure, we all made jokes about each other, the Luos and Kikuyu, the other people," said Victor Gitonga, a 24-year-old Kikuyu Red Cross worker who was helping at the Luo camp.

"But that was joking. If people cannot live, work, stay in any place in this country, than is this a country? We are finished," he said.

By Randall Parker 2008 February 17 10:50 PM  Ethnic Conflict
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Price Controls And Export Controls Signs Of Commodity Shortages

Price controls around the world are becoming much more noticeable as a result of the run-up in oil prices and coal prices. Countries with energy price controls are getting hit by power outages rather than just simply higher energy prices. These price controls in more socialist countries (e.g. South Africa, China) could limit their usage of energy and therefore leave more fossil fuels for the rest of us. However, in big oil exporting countries (e.g. Venezuela, Saudi Arabia, Russia) the internal price controls cause big internal surges in oil consumption and hence less oil for the rest of us. So price controls cut both ways. Finally, I wonder whether the willingness of the Chinese leaders to use price controls will ultimately limit Chinese economic growth. First off, the mandarins in Beijing are using price controls on electricity and food to lower galloping inflation.

Beijing's resort to command economy decrees has not been confined to electricity alone. Beset by inflation galloping at a decade high of more than 6 percent, the government has steadily widened price controls, finally freezing all food prices last month as well as clamping limits on fertilizer prices and raising price supports for rice and wheat.

What do you suppose price controls on fertilizer will do to the supply of food? Will the Chinese government mismanage the Chinese economy into chaos? If the Chinese government is so afraid of mass discontent due to inflation that the mandarins feel the need to resort to price controls then the coming world decline in oil production is going to hit China much harder than it needs to. The Chinese will make a bad situation even worse if they try to mange through the crisis using price controls.

The controls are meant to shield China's poor and working classes, who spend up to half their incomes on food. But the inflation spike is blamed on shortages of pork and grain, and economists warn that putting a lid on prices just shifts the hardship to farmers, discouraging them from raising output, which would bring down high prices.

The inflation in China functions as an incentive for the Chinese leaders to let their currency appreciate. A stronger currency will lower their cost of imports for energy, food, and minerals. But a rise in Chinese currency will also increase the price of Chinese goods and therefore increase inflation in Western countries.

Price controls caused cascading shortages in China.

Power executives and government statements attributed the electricity shortfall this winter to a confluence of problems. Many of the problems appear to have their roots in the government’s imposition of a long list of price controls in recent months in an attempt to tamp down inflation, which reached 6.9 percent at the consumer level in November.

Trucks did not deliver adequate coal stockpiles to power plants before winter snows arrived in northern China, partly because of nationwide diesel shortages. Refiners had cut back on the production of diesel because price controls were forcing them to sell the diesel for slightly less than the cost of the crude oil needed to make it.

The Chinese government even imposed export tariffs on agricultural products.

In January, the National Development and Reform Commission announced tightened supervision of prices for grain, edible oils, meat, poultry, eggs, feed and other items in both wholesale and retail markets.

This followed the announcement in late December that from January 1 the government would slap taxes ranging from 5-25 percent on exports of a range of products including wheat, corn, rice and soybeans to try and ensure stable food supplies at home.

The actions appeared to be stoked by memories of the widespread protests that resulted from the government's clumsy handling of food price controls that led to inflation of around 50 percent in the summer of 1988.

The Chinese government imposed an outright ban on coal exports.

BEIJING, Jan. 26 -- China's Transport Ministry yesterday ordered ports to temporarily stop loading coal for exports as the country struggles to meet domestic needs amid mounting power shortages.

The availability of internationally tradeable fossil fuels energy will decline much more rapidly than the total extraction of fossil fuels from the ground. Governments won't hesitate to cut exports to supply domestic industry and populaces

Price controls and exports controls are signs of the times. Commodities prices are rising rapidly. The government of Pakistan has banned private sector flour exports.

ISLAMABAD, Jan 22: The Economic Coordination Committee (ECC) of the cabinet on Tuesday banned the export of flour to Afghanistan through private sector to stabilise flour price in the domestic market.

South Africa really takes the cake for sheer stupidity. Price controls combined with rising prices have created power shortages. Electric power was cut to coal mines that extract the coal that is needed to generate electric power.

Some of South Africa's coal mines have resumed production after being shut down on Friday because of power cuts.

Coal is used to generate about 90% of electricity supplies at state power company Eskom.

But the main gold, diamond and platinum mines remain closed. South Africa is one of the world's biggest producers of platinum and gold.

South Africa doesn't have much going for it aside from its mining industry. I already expected South Africa to decline before considering the effects of Peak Oil. White flight makes that a certainty. But a maladaptive response to Peak Oil could make the decline much faster. Industries that depend on South African platinum ought to start working hard on substitutes.

More generally, Peak Oil is going to widen economic differences in the world. The messed up places with low social capital will respond much less adaptively than the smarter places with high levels of trust and cooperation. Plan accordingly.

By Randall Parker 2008 February 17 02:04 PM  Economics Energy
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2008 February 16 Saturday
Will Cynicism Win Out Over Hope For Obama Magic?

Dahlia Lithwick can't be an Obama groupie now that Obamamania is so mainstream.

I know this is going to sound strange, but it's not you, Barack, it's me. Really it always was me, but now it's really, really about me. I don't know when we started to feel weird supporting you, but: My friend Hanna thinks it started with that "Yes We Can," video. I mean, last week I was totally crying watching it. Now just thinking about how choked up I got gives me the creeps. I think I felt something at the time, but even if I did, I'm pretty sure I don't want to feel it anymore. Feeling inspired is soooo early-February.

I think Dahlia only wants to lead trends. She doesn't actually want to stick around once a trend matures for any longer than it takes to show that she was out front in the vanguard.

Or maybe it started when everyone began madly posting last week about how you are not the Messiah. And that got me thinking. Then, when commentators started accusing me of being a venomous drone in a "cult of personality," I just needed to get out. I mean cults are soooo 1970s. And cults of personality? So totally first century.

Once everyone else has joined up you are just one in a huge mass and you lose the characteristic that made you part of a small, distinctively different, and most importantly better group. You can't stay well above average by supporting the mainstream. That's Dahlia's problem and one of the basic problems with the human condition. Well, I'm glad she doesn't want to be part of a cult of personality. This need to be separate puts limits on dangerous herding activity.

A twenty one year old writes to Andrew Sullivan about his emotional needs that he looks to Obama to fill.

There's one salient reason why people of my age are supporting Obama and that's because we feel that Obama will finally show us what it means to be proud of our president.

This foolish kid likes Obama because he felt giddy in Obama's presence.

I attended an Obama rally a few days ago and was amazed at how filled up with emotion I was. Halfway through his speech, other 21 year olds just like that filled the Hall were screaming their heads off, waving banners, and grinning. Everyone was giddy, hell even I was giddy. I was smiling and chanting along to "Yes We Can."

As for "Yes We Can": Oh no you can't. The hippies in the 60s thought music could change the world. Neil Young recently commented that, no, music can't change the world. Neil appears to more realistically think that scientists working alone matter more than singers. I wonder when he figured that out.

A Song Alone.
By Neil Young

No one song can change the world. But that doesn’t mean its time to stop singing.
Somewhere on Earth a scientist is alone working. No one knows what he or she is thinking. The secret is just within reach. If I knew that answer I would be singing the song.

Though Neil thinks there was a time when music could change the world. But of course Don McClean explained how that ended in "The Day The Music Died".

"I think that the time when music could change the world is past," Young told reporters, according to the AP. "I think it would be very naïve to think that in this day and age."

Maybe Neil and others like him see the world as going through stages where the magic gradually drains away. I'm reminded of the movie in which Queen Mab (Miranda Richardson) failed to stop the decline of magic by creating Merlin (Sam Neill). I see that movie as trying to build a mental bridge showing how a mythical past was replaced with our physically constrained present. The political magic believers ought to try to reconcile themselves with the modern world by seeing this story as explaining how the magic died.

We live in a world with no rock stars - at least none under the age of 50. So younger politicians see an opening to try to pose as rock stars in order to appeal to that youthful demographic. Some people obviously want a Barack Obama or other conjurer to somehow bring back supposedly lost magic so that people who chant "Yes We Can" really can change the world. But that's not going to happen. The best outcome we can hope for is that someone ends up with a beautiful Isabella Rossellini made youthful again using scientific rejuvenation therapies.

If Obama gets elected then his giddy supporters of today are eventually going to end up feeling pretty disappointed. The problems of the world are not that tractable by political leaders with enormous wisdom and people with enormous wisdom pretty much don't want to run for the US Presidency anyway. Instead we end up with charismatic showmen who only pretend to possess real wisdom.

Today our biggest problems aren't even part of the mainstream debate in this election and many of those problems are denied by the major political players. The world's population grows by 100 million a year (97 million in 2007, more in 2008). Most of that growth comes among the most ignorant, poor, and dumb parts of humanity. While our intellectuals worry about global warming we are running out of fossil fuels and consuming an ever growing portion of nature as food, fiber, and fuel. Obama might present his policies as a radical departure from the past but I bet his Africa policies will just be an extension of the aid scale-up that Bush is already doing. The population and habitat destruction problems will be totally ignored. The doubling of Africa's population by 2050 will be ignored. This isn't magic. This is mass delusion.

By Randall Parker 2008 February 16 09:49 AM  Politics Human Nature
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2008 February 13 Wednesday
Arizona Enforcement Against Illegal Aliens Driving Them Out

This is a great time to enforce more laws against employers of illegal aliens. The downturn in the economy has already cut back on jobs available to illegals. Now Arizona's new law that will revoke business licenses of companies that employ illegals combined with the economic downturn is causing a flight of illegal immigrants out of Arizona.

PHOENIX — The signs of flight among Latino immigrants here are multiple: Families moving out of apartment complexes, schools reporting enrollment drops, business owners complaining about fewer clients.

While it is too early to know for certain, a consensus is developing among economists, business people and immigration groups that the weakening economy coupled with recent curbs on illegal immigration are steering Hispanic immigrants out of the state.

Immigration amnesty advocates argue that amnesty is the only practical response to large scale illegal immigation. But immigration law enforcement obviously works and quickly too.

Arizona employers have begun firing illegal aliens in order to get compliant with the new law.

Although prosecutors in the state do not plan to begin enforcing the sanctions against employers until next month, several employers have reportedly already dismissed workers whose legal authorization to work could not be proved, as required by the law.

Illegal alien families are moving out of Arizona to other states and back to Mexico.

Property managers report that families have uprooted overnight, with little or no notice. Carlos Flores Vizcarra, the Mexican consul general in Phoenix, said while he could not tie the phenomenon to a single factor, the consulate had experienced an “unusual” five-fold increase in parents applying for Mexican birth certificates for their children and other documents that often are a prelude to moving.

Building contractors find no shortage of willing laborers.

Gary Hudder, president of the Yavapai County Contractors Association board of directors, said that to his knowledge, no members have suffered from the illegal immigrants departing the area at this time.

Hudder believes the slowdown in the construction sector has skewed the magnitude of the illegal immigrants departing the area.

Illegals are fleeing both Arizona and Oklahoma for more lax Texas.

HOUSTON: Illegal immigrants are coming into Texas, but not from where one might think.

While Texas shares a border with Mexico, this rush is coming from Oklahoma, Arizona and other U.S. states that have recently passed tough new anti-illegal immigrant laws.

The two toughest measures are in Oklahoma and Arizona.

Faced with a $550 million budget deficit Rhode Island legislators are getting ready to chase out the illegals in order to cut costs.

PROVIDENCE - Rhode Island, facing a budget crisis that will lead to massive cutbacks, is engulfed in the most intense battle over illegal immigration in New England, with Republicans and Democrats alike calling for a crackdown on unauthorized workers.

In the past few weeks, state lawmakers and the governor have proposed a battery of measures targeting unauthorized workers, from expelling undocumented children from the state's healthcare system to making English the official language to jailing business owners and landlords who harbor illegal workers.

Never mind that the major Presidential candidates are soft on illegal immigration. The populace across the nation can get their will enforced at state and local levels and at those levels they are forcing a crackdown on illegal immigrants. That crack down is going to continue to scale up.

By Randall Parker 2008 February 13 09:00 PM  Immigration Law Enforcement
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Bush Administration Limiting Troop Withdrawal After Surge

George W. Bush wants to keep lots of troops in Iraq in case John McCain wins election as President of the United States so that McCain will be in a position to continue fighting. US Defense Secretary Robert Gates is halting the troop reduction in Iraq at near 130,000 troops remaining.

Meeting with top commanders here, Mr. Gates said that after the departure this summer of the five extra combat brigades sent last year in “the surge” to pacify the Baghdad area, the American command should assess whether further troop reductions would hurt security.

In practical terms, his assertion makes it likely that American troop levels in Iraq will not drop much below 130,000 this year — and certainly not to the 100,000 level advocated by some military officials and analysts worried about the protracted strain on the Army from long deployments in the nearly five-year-old Iraq war.

A McCain-Obama contest will probably feature a big disagreement over Iraq. Will Obama highlight a willingness to withdraw? Will McCain harp on his willingness to keep fighting and force Obama to respond? Which one will see a bigger advantage to be had from drawing attention to their enthusiasm or lack of enthusiasm over the Iraq war? How explicitly will they paint their pro or anti war position?

Also, will the insurgency rebound as US troop levels decrease? How bad will the war look to the American public in the fall of 2008?

By Randall Parker 2008 February 13 06:07 PM  Mideast Iraq Exit Debate
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2008 February 10 Sunday
Americans Fooled By Obama's Charm?

Writing for the Washington Post Peter Wehner presents reasons Why Republicans Like Obama.

What is at the core of Obama's appeal?

Part of it is the eloquence and uplift of his speeches, combined with his personal grace and dignity.

...

A second reason Republicans appreciate Obama is that he is pitted against a couple, the Clintons, whom many Republicans hold in contempt.

...

A third reason for Obama's GOP appeal is that unlike Clinton and especially John Edwards, Obama has a message that, at its core, is about unity and hope rather than division and resentment. He stresses that "out of many we are one."

Note to Republicans: The enemy of my enemy is not always my friend.

Steve Sailer points to the evidence that Obama's primary allegiance is toward blacks and not toward Americans as a whole and that Obama is quite radical in a leftist way.

As of the writing of his 1995 book, Obama appears to have been further to the left than about 95% of the public. For example, his concerns in the late 1980s (and repeated with a straight face in his autobiography) about the Rev. Dr. Jeremiah A. Wright, Jr.'s church was whether it was not radical enough. Similarly, in Obama's book, there's virtually no criticism of welfare. Indeed, Obama's mission in life when he was a racial activist and then when he became a discrimination lawyer was to get more money out of whites for blacks.

Many people assume that because Obama likes to show that he understands their arguments by paraphrasing them back to them, often better than they made them themselves, that he therefore must agree with them. But it's just conservative egomania to assume that the problem with people who disagree with you is that they don't understand your arguments, and therefore anybody who is smart enough to understand you, like Obama is, must agree with you and have your best interests at heart.

Sorry, it doesn't work that way.

For example, when Charles De Gaulle visited embattled French Algeria in 1958, the first thing he told a vast crowd of worried pied noirs was, "I have understood you." The French-speakers cried in relief because, finally, France had a leader who understood their plight. De Gaulle then proceeded to give their country to their mortal enemies. He understood the French Algerians just fine, as well as they understood themselves. He just didn't care about them as much as they cared about themselves.

Sen. Obama has written a 442 page autobiography in which he took great pains to indicate that A. He cares about his own feelings a vast amount. B. He cares about one segment of the population far more than he cares about the rest.

I do not want a President whose ethnic loyalties put me on the outside. Feminist loyalties toward women are less deep than racial loyalties.

We've reached a point where the possibility of an Obama Presidency has become quite high. If you haven't yet taken a hard look at Obama now is the time. Read Steve Sailer's articles and blog posts for some excellent analysis of Obama's ethnic identity problem: Obama’s Identity Crisis, MainStream Media Won’t Ask Obama Those Nasty Paul-Type Questions. But Shelby Steele Could!, Winter Kills: Obama Exposed As Race Racketeer, Why Obama's church matters, and Obama misspeaks (to put it mildly)

Court Rulings Help Local Battles Against Illegal Aliens

A few recent US federal court rulings bolstered the power of local governments to enforce laws aimed against illegal immigrants.

On Thursday, a federal judge in Arizona ruled against a lawsuit by construction contractors and immigrant organizations who sought to halt a state law that went into effect on Jan. 1 imposing severe penalties on employers who knowingly hire illegal immigrants. The judge, Neil V. Wake of Federal District Court, methodically rejected all of the contractors’ arguments that the Arizona law invaded legal territory belonging exclusively to the federal government.

On Jan. 31, a federal judge in Missouri, E. Richard Webber, issued a similarly broad and even more forcefully worded decision in favor of an ordinance aimed at employers of illegal immigrants adopted by Valley Park, Mo., a city on the outskirts of St. Louis.

And, in an even more sweeping ruling in December, a judge in Oklahoma, James H. Payne, threw out a lawsuit against a state statute enacted last year requiring state contractors to verify new employees’ immigration status. Judge Payne said the immigrants should not be able to bring their claims to court because they were living in the country in violation of the law.

By contrast, in an earlier court ruling Hazleton Pennsylvania lost in its attempt to enforce ordinances against illegal aliens. But Hazleton has appealed.

I would like to know who appointed each of these judges. Anyone know of an online resource for finding out which Administration appointed each US federal judge?

If John McCain is elected he's probably going to feel constrained to appoint judges that pass muster with the Federalist Society and other right wing strict constructionist legal organizations. So even though he personally prefers weaker immigration law enforcement at least on the topic of judiciary rulings he's not likely to get his way.

Hillary Clinton or Barack Obama would appoint judges far more likely to overrule local anti-illegal immigrant statutes based on supposed civil rights or federal supremacy in setting and enforcing immigration policy.

Hazleton PA will cite the Valley Park Missouri ruling in Hazleton's appeal.

'Whatever frustrations officials of the city of Hazleton may feel about the current state of federal immigration enforcement, the nature of the political system in the United States prohibits the city from enacting ordinances that disrupt a carefully drawn federal statutory scheme,'' U.S. District Judge James Munley wrote.

In his opinion, issued six months after Munley's, Webber noted he was free to depart from the ruling in the Hazleton case.

''The Court respectfully notes that the Pennsylvania decision is not binding, and therefore, the Court will conduct its own thorough analysis of the issues presented,'' he wrote.

Hazleton has appealed Munley's ruling to the 3rd U.S. Circuit Court of Appeals in Philadelphia. The city's lawyers plan to file a brief with the court Thursday arguing that Munley erred in his interpretation of federal law -- and citing Webber's decision in the Valley Park case.

The American Civil Liberties Union predictably opposed tougher immigration law enforcement in both the Hazleton and Valley Park cases. The ACLU needs US courts to have sovereign power to make decisions that the ACLU wants and yet the ACLU fights for outcomes that ultimately will destroy American sovereignty.

But the losers in the Arizona case are going to appeal as well.

The employer and immigration-rights groups said they would appeal to the 9th U.S. Circuit Court of Appeals. They had been expecting Wake -- who was openly critical of their arguments in court hearings in December -- to rule against them.

By Randall Parker 2008 February 10 12:42 PM  Immigration Law Enforcement
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Bush And McCain Ally On Iraq And Immigration

George W. Bush's ideal successor is now slated to become the Republican nominee for President in 2008 and Bush is working to line up conservative support for McCain.

In the same hotel ballroom where conservative activists greeted John McCain with a mix of cheers and boos just 16 hours earlier, President Bush tried to calm his party's base yesterday. Without naming McCain, Bush assured the group that the eventual Republican nominee will "carry a conservative banner" to the White House.

Eight years after they battled it out for the presidency, Bush and McCain find their fates linked again by history, but this time they are on the same side. With McCain virtually guaranteed the Republican nomination to succeed Bush, they head together into a general election campaign depending on each other. McCain needs the president to help reunite their splintered party, and Bush needs the senator from Arizona to validate his presidency and carry forth its strategy in Iraq.

Bush gets double bonus points with a McCain nomination: Iraq and immigration amnesty. McCain wants to keep fighting in Iraq and McCain has tried very hard to get immigration amnesty passed. Even now McCain has only backed off on immigration to the point of saying that border enforcement comes before amnesty. But McCain and Bush just want to make it easier for Hispanics to enter legally. They are not for immigration restriction. They are for immigration increases.

We are approaching my nightmare scenario: John McCain versus Barack Obama. Who is worse?

By Randall Parker 2008 February 10 11:26 AM  Politics American Presidency
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American Apparel Prefers Obama On Immigration Stand

A Los Angeles garment maker, American Apparel, employs large numbers of Hispanics to make t-shirts and other apparel. American Apparel has come out and publically supported Barack Obama over Hillary Clinton because Obama supports drivers licenses for illegal aliens.

Four decades ago, the chairman of General Motors proclaimed: "What's good for GM is good for America." Today we're saying, "What's good for American Apparel is good for America."

American Apparel is another company that believes in socializing costs while privatizing profits. Bring in the workers who are cheap to employ and foist the cost of their education, health care, police, justice system, prisons, and other costs onto the net taxpayers.

We urge voters to consider Obama on the Democratic side.

We urge voters to consider McCain on the Republican side.

Why? Because of their honesty on the issue of immigration, the most significant civil rights concern the country has faced in 50 years.

Why Not Clinton?

We appreciate Senator Clinton's campaign on many fronts, but when it comes to the issue of immigration she has not shown the same strength and conviction as Obama. This was clear during last week's California debate. While he supports driver's licenses for undocumented workers, she is opposed "at this time." Tell that to a mother of three in East L.A. driving her children to school every day. Obama has also pledged to accomplish immigration reform in his first year; Clinton has not made such a commitment. Immigration is the most critical issue that faces the United States, California, and Los Angeles today-we appreciate the Obama campaign's clear voice on it. We also applaud his refusal to scapegoat immigrants for political gain, as some other candidates have.

Hillary opposes drivers licenses for illegal aliens in part because when New York liberal Democrat Governor Eliot Spitzer tried to implement drivers licenses for illegal aliens the opposition was so intense in liberal New York that he had to drop his proposal. I think Hillary got the message. Obama is to the rhetorical Left of Hillary on immigration.

You have to wonder how many illegal aliens does American Apparel employ.

Some immigration experts criticized the advertisement and said it amounted to an admission that American Apparel uses illegal immigrants.

“It is self-serving propaganda to perpetuate cheap labor policies that are in violation of American law,” said Vernon M. Briggs Jr., a professor emeritus at Cornell who specializes in immigration policy. “This is not ‘apartheid.’ This is simply law-breaking. ‘Apartheid’ is an emotional term that is designed to inflame the issue.”

American Apparel needs irrational reactions since rational analyses of personal interests would lead most people to oppose immigration of low skilled and low IQ workers.

Update: On immigration will Obama or Hillary do more to help Mexicans move to the United States? Contra American Apparel, most Latino voters prefer Hillary.

Last week's primaries were dubbed "Hispanic Super Tuesday," and indeed the Latino vote proved pivotal to Hillary Clinton's gains. She received an overwhelming majority of Latino votes despite Barack Obama's last-ditch efforts to differentiate his position on immigration.

The support Obama had enjoyed in Illinois' Latino communities even slipped significantly since the last time he ran for office.

Hispanics/Latinos feel less need to prove they aren't racist. Some of their voting probably reflects the dim view they hold of blacks.

By Randall Parker 2008 February 10 11:22 AM  Immigration Politics
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2008 February 09 Saturday
Americans Embrace Heroes Of Suffering Over Those Of Accomplishment

Steve Sailer reports an observation by Gregory Cochran that heroes of suffering have been elevated over heroes of accomplishment.

Greg Cochran points out a profound change in American culture: from celebrating and promoting heroes of accomplishment to doing the same for heroes of suffering. Consider two war heroes-turned politicians. Dwight Eisenhower got the 1952 GOP nomination because of his accomplishments even though he didn't suffer much for them -- he was never in combat in his life. But organizing D-Day and managing the Anglo-American coalition suggested he had what it takes to perform well the day-to-day work of the Presidency during a particularly scary part of the Cold War. In contrast, John McCain is likely to get the 2008 GOP nomination in large measure because of his tremendous suffering during the Vietnam War, although he never accomplished all that much in the military.

Hillary Clinton and Barack Obama are granted Honorary Heroes of Suffering status because of their being non-white males. Moreover, Hillary attained Presidential Timberhood by suffering through her husband's public infidelity.

Similarly, Obama's autobiography is pure emo rock: Yes, I know, sitting on the beach in Hawaii smoking dope may sound like a pretty soft life to you, but it was hell to me because of my"story of race and inheritance." The drugs were just “something that could push questions of who I was out of my mind . . .”

Why this change? One hypothesis: The most accomplished no longer serve as role models because they are too unlike the masses. The most accomplished come from higher social classes and the masses can't identify with their accomplishments. Whereas the masses can identify with those who suffer and imagine themselves as great heroes of suffering. In an earlier era people from very modest backgrounds such as Henry Ford (who grew up in a small farm house) and Thomas Edison achieved great works. Common folks could point at the most accomplished and tell their kids they too can grow up to achieve at the same level. But nowadays the most accomplished are much more likely to come from elite backgrounds (e.g. Ivy League educations and parents who are high status professionals or executives) that remind the masses that the highest levels of accomplishment are not open to most of them.

Another hypothesis: Leftists have discredited real accomplishment. Decades of leftist politics have aimed at discrediting accomplishment as just exploitation by capitalists at the expense of the masses. The very idea of heroes of accomplishment has become suspect as those most accomplished in business are seen as victimizers in proportion to their accomplishments. People who can lay a claim to the status of sufferers then become recognized as heroes who supposedly prevailed against those who rise to the top in business and in other important institutions.

Still another hypothesis: Histories of suffering suggest greater feelings of empathy for suffering by others. This development could be a part of the feminization of politics. Women want to see that potential leaders have empathy. Histories of past suffering could be seen as suggesting a greater capacity to recognize and respond to suffering in others. Therefore people who claim to have suffered seem better bets to count on to be guided by feelings of empathy and to try to help lower status sufferers.

By Randall Parker 2008 February 09 09:41 PM  Civilizations Decay
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Iraq War Reduces European Support In Afghanistan

A helpful reminder: The 9/11 attackers were trained in Afghanistan. The Pakistani government contained (and still does to a lesser extent) supporters of the Taliban and fans of Al Qaeda. If the United States government was not fighting a war in Iraq then the US would have plenty of troops for Afghanistan. That much is already obvious. But the US Defense Secretary admits that winning European support and troops for Afghanistan is made harder by the US military effort in Iraq.

MUNICH — Defense Secretary Robert M. Gates said Friday that many Europeans were confused about NATO’s security mission in Afghanistan, and that they did not support the alliance effort because they opposed the American-led invasion of Iraq.

“I worry that for many Europeans the missions in Iraq and Afghanistan are confused,” Mr. Gates said as he flew here to deliver an address at an international security conference.

“I think that they combine the two,” he added. “Many of them, I think, have a problem with our involvement in Iraq and project that to Afghanistan, and do not understand the very different — for them — the very different kind of threat.”

So the war in Iraq undermines the war against the Taliban and Al Qaeda along the Afghanistan-Iraq border.

Why does this matter? The frontier area between Afghanistan and Pakistan is still a terrorist training ground and Western Muslims are streaming into Pakistan for Jihad training.

"Al Qaeda has had difficulty in raising funds and sustaining itself," perhaps due to disaffection among Saudi Arabian contributors, said Director of National Intelligence Michael McConnell at a House hearing Thursday.

The bad news is that a new influx of Western recruits – including American citizens – are being trained in Al Qaeda camps in Pakistan. These recruits would be able to more easily enter and move about the US than foreign operatives.

"Al Qaeda is improving the last key aspect of its ability to attack the US: the identification, training, and positioning of operatives for an attack on the homeland," wrote Mr. McConnell in prepared Congressional testimony.

The Iraq war is hobbling our ability to fight the war against the targets that matter: Al Qaeda in Afghanistan and Pakistan and Jihadist Muslims living in the West. The Jihadists aren't just helped by policies put in place by George W. Bush and the neocons. The support of useful fools in the West help to strengthen Islam in the West as well.

By Randall Parker 2008 February 09 08:32 PM  Mideast Iraq Exit Debate
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Mickey Kaus: John McCain Has Contempt For Many Republicans

Mickey parses John McCain and the results are not pretty.

2) McCain said that "only after we achieved widespread consensus that our borders are secure" would he pursue the semi-amnesty part of his immigration reform. This non-trivial concession would be more reassuring if proponents of that reform didn't righteously claim a 'widespread consensus' in its favor in 2006 and 2007. ( "[A]national consensus has formed around what the president calls 'comprehensive' immigration reform."--Fred Barnes, May, 2006.)

3) McCain said he had "respect" for opponents of his immigration plan (which he didn't renounce) "for I know that the vast majority of critics to the bill based their opposition in a principled defense of the rule of law." Not like those others who base their opposition on bigoted yahoo nativism! McCain's semi-conciliatory words aren't what you say when you really respect your opposition--then you say "I know we have honest disagreements." Not "I know most of you aren't really racists." Even his suckup betrayed how he really feels. Which I suspect is sneering contempt! (See his former campaign manager and informal adviser Mike Murphy, who--writing under cover of a pseudonym--likened Tom Tancredo to the "Bund"!). .... 10:49 P.M. link

I liked Reagan because he didn't hate the Republican base.

Mickey also thinks Obama is very far left.

Remind me again, what is the evidence--in terms of policies, not affect or attitude or negotiating strategy--that Obama is not an unreconstructed lefty (on the American spectrum--a paleoliberal or a bit further left)? For example, would he roll back welfare reform if he could? ... P.S.: One way to know Obama isn't the black Gary Hart: He's been endorsed by Gary Hart. .... Update-Reminders: Obama "fails to denounce" free trade. OK, that's one. ... More: This site, featuring anonymous posts on what he was like as a law prof, is worth monitoring. Most troubling post so far:

I took his Voting Rights Class at UChicago Law at the crack of dawn. His class was still packed. He was incredibly charasmatic and engaging, but is really, really, far-left liberal in the socialism completely rocks kind of way.

This is why I'm hoping Hillary gets the Democratic Party nod. Obama really looks to be left of Hillary. Of course Hillary is left of her husband Bill. In addition to pining for the fjords I also pine for the day when the major Presidential candidates were well to the right of our remaining 3 contenders.

Note that during a recession the party in power always loses. There's no exception to this rule in the post-WWII era that I'm aware of. So in theory whoever wins the Democratic nomination wins the Presidency. Hillary's weakness against Obama might just be setting us up for putting a guy in the White House who is further to the left than any President in the post-WWII era. We'll be at most risk in the first 2 years of Obama's presidency. Then the Republicans will probably win back the House in 2010 due to a backlash against Obama's policies. After that he won't be able to get what he wants through Congress.

On the other hand, if McCain could bring himself to take positions he doesn't really agree with he could create a big enough contrast with Obama to have a chance of winning. He could, for example, attack Obama for supporting drivers licenses for illegal aliens. Can McCain bring himself to take such a position given his general lax attitude toward illegal immigration? Maybe. He has shifted toward border enforcement before amnesty. Can he go even further and support interior enforcement before amnesty?

Audacious Epigone sees a leftward shift of the Supreme Court as the biggest downside of a Clinton or Obama win.

I'm mixed on a best-case scenario. The major hangup I have with a McCain defeat is what it will mean for the Supreme Court. Justice Stevens will turn 90 during the next President's term. There has only been one other nonagenarian judge in the Court's history, and he (Oliver Wendell Holmes) left within the year of becoming one. Scalia, Ginsburg, and Kennedy are all in their seventies. With Democratic control of both the Senate and the Whitehouse, that could spell a drastic leftward shift in the court, especially if Scalia retires.

But the worst-case scenario doesn't seem as cloudy. Obama versus McCain, with McCain winning, strikes me as the least desirable outcome of all. The GOP's performance among Hispanics would be maximized, possibly eclipsing the 50% mark, as Hispanics otherwise tending to support the Democratic candidate would be unenthusiastic about voting for a black. Many would stay home, and others would 'defect' to McCain and his pal Juan Hernandez. If you think the WSJ bilge over the essentiality of the Hispanic vote as garnered through support for open borders is nauseating now, just wait.

I think McCain is worse than Hillary on immigration because McCain has co-sponsored and actively worked for immigration amnesty bills. Also, immigration is more important than the Supreme Court. Demographic damage is very long lasting, much more so than Supreme Court appointments.

By Randall Parker 2008 February 09 09:49 AM  Politics American Presidency
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2008 February 07 Thursday
Archbishop of Canterbury Supports Sharia Law For British Muslims

The Archbishop of Canterbury should be stripped of his British citizenship and deported along with British Sharia supporters.

The Archbishop of Canterbury says the adoption of certain aspects of Sharia law in the UK "seems unavoidable".

Dr Rowan Williams told Radio 4's World at One that the UK has to "face up to the fact" that some of its citizens do not relate to the British legal system.

Dr Williams argues that adopting parts of Islamic Sharia law would help maintain social cohesion.

For example, Muslims could choose to have marital disputes or financial matters dealt with in a Sharia court.

He says Muslims should not have to choose between "the stark alternatives of cultural loyalty or state loyalty".

If you want to maintain social cohesion then don't let in incompatible cultures and religions. If you think that the potential exists for such disloyalty that parallel legal systems even come under consideration then you have a very deep problem that must be solved at its roots. A parallel legal system is just a step on the road toward deeper divisions and greater segregation into parallel societies in the same physical territory. Why inflict that upon yourselves unless you are a sadist or a masochist?

There's another way to avoid the conflict between cultural loyalty and state loyalty: Deport the foreign culture.

Balkanization leads to civil war. Lebanon is once again skirting the edges of possible civil war. Britain can become another Lebanon or perhaps a Kosovo. Or Britain can expel the incompatible religion and culture.

Not all cultures are mutually compatible. Not all religions are compatible. Loyalty to a culture can and does often mean disloyalty to the larger society. Why live in a society so divided and distrustful? Why let your country become divided up into separate incompatible cultures?

By Randall Parker 2008 February 07 07:54 PM  Civilizations Clash Of
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2008 February 05 Tuesday
Bad Press Coverage As Soon As McCain Sews Up Nomination

Once John McCain's winning of the Republican presidential nomination becomes certain watch for a big change in media coverage of him. When he was running against other Republicans for the nomination the media treated him pretty favorably because he was seen as the most leftward leaning Republican candidate on many issues. But once he is only running against Hillary Clinton or Barack Obama he will be the most rightward leaning candidate still in the race and then the media will likely go much more negative on him.

In spite of the fact that I'm rightward leaning myself I'm looking forward to this coming change in the tone of McCain press coverage. I think Republicans will be better off if McCain loses. Republicans will find it much easier to oppose a given set of policies if Hillary Clinton advocates those policies than if John McCain does. Well, I want to see Republicans oppose immigration amnesty and the continuation of the war in Iraq and other foolishness. With a Hillary presidency the intensity of Republican opposition to bad policies will rise.

By Randall Parker 2008 February 05 08:47 PM  Politics American Presidency
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2008 February 04 Monday
Republicans Better Off If Hillary Beats McCain?

John O'Sullivan thinks conservatives will be in worse shape in the long run if John McCain wins the US presidency and I'm inclined to agree.

Many conservatives believe that the key question in this election is: Are there to be two multiculturalist open-borders parties or one? If McCain’s election were to make the GOP fundamentally similar to the Democrats on immigration, bilingualism, racial preferences, and all the National Question issues, that would be a resounding historical defeat for conservatives.

The willingness of a President McCain to cooperate with the Democrats would give such issues as an immigration amnesty a better chance of passage than under a President Hillary or Obama even against strong GOP resistance in Congress. Opponents of such policies, despite enjoying majority support among the voters, would find themselves politically marginalized. On the other hand, a united Republican opposition might well stop a Democratic White House from passing these measures because its party would be nervous of finding itself on the wrong side of a popular issue in the next midterm elections.

And there is another factor this time. Any bill similar to the senator’s “comprehensive” immigration reform would accelerate the GOP’s relative demographic decline by creating new voters overwhelmingly likely to vote Democrat in a quicker time scale. This dominant Democratic majority would emerge fully only after a hypothetical President McCain left office, but its approach would cloud the future of every other Republican incumbent.

Hillary will stimulate more right wing opposition than McCain will. So she'll be more constrained in terms of what damage she'll even try to cause.

But what if our choices are Obama versus McCain? Who would cause more damage?

By Randall Parker 2008 February 04 09:54 PM  Immigration Societal Decay
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Frugality And Thrift Make A Necessary Comeback

Washington Post personal finance columnist Michelle Singletary joins a sudden flurry of writers promoting a return to frugality as a response to uncertain and worsening economic conditions as she promotes an author on "Enoughasaurus".

With so much bad economic news coming out almost daily, you may be feeling overwhelmed. You may feel there's nothing you can do to prevent your own household from crumbling financially.

But you can do something. You don't have to wait for the official word that we are in a recession to start shoring up your own financial house. And this is true whether you are in a time of plenty or of economic woe.

Now may be the time to embrace frugality. It might be a good time to say, "Enough is enough." That is one of my personal mantras. It's also one that Jeff Yeager has lived by for most of his life.

Yeager has conquered what he called "Enoughasaurus."

The Daily Telegraph in the UK joins in this trend with an article by Eithne Farry entitled The shift to thrift.

Given the economic climate - spiralling personal debt; share prices plummeting - 2008 could be the year to embrace these make-do-and-mend virtues. Jonathan Loynes, the chief economist at Capital Economics, warns:"We're about to be hit with a triple whammy. Basic things like food, petrol and energy will cost more.

"There is a slow-down in the housing market, which makes everyone feel less confident financially. And credit will be harder to come by. We should all be tightening our belts."

It's not quite as onerous as it sounds. Recession thinking tends to be practical but prosaic: switch off the lights when you leave the room; turn the heating down and put on a jumper; take your shoes to the mender rather than throwing them away.

Writing in the New Zealand Herald Nicola Shepheard also joins in with an article entitled Shift to thrift - downsize your spending

So what better time to join the shift to thrift and revive some of our grandparents' pennywise tricks?

The war and post-war eras saw thrifty living as a way of life, before the consumer society intervened and waste became both a corporate by-product and corporate industry.

The call to budget and eco-consciousness can sound like a sentence to dullness and self-denial. Many frugal habits are prosaic and require a little self-discipline: turning off lights, not taking the car for short trips, buying refills.

But thrifty living doesn't have to equal homespun naffness and wowserism. Thrift can be rewarding, creative, sociable. Thrift can even be hip.

One moneysaving, eco-friendly trend that's already swept Britain and the United States is swapping clothes, or swishing.

Auckland speech therapist Polly Newton started throwing clothes swap parties with a friend five years ago when they were poor students.

Now she does it for original pieces that you couldn't buy, the re-using ethos, and fun. Up to 20 per cent of her wardrobe is from clothes swaps.

Writing for the New York Times Peter Goodman reports we may have reached a cultural inflection point away from living on credit. Geez I hope so.

But now the freewheeling days of credit and risk may have run their course — at least for a while and perhaps much longer — as a period of involuntary thrift unfolds in many households. With the number of jobs shrinking, housing prices falling and debt levels swelling, the same nation that pioneered the no-money-down mortgage suddenly confronts an unfamiliar imperative: more Americans must live within their means.

“We don’t use our credit cards anymore,” said Lisa Merhaut, a professional at a telecommunications company who lives in Leesburg, Va., and whose family last year ran up credit card debt it could not handle.

Today, Ms. Merhaut, 44, manages her money the way her father did. Despite a household income reaching six figures, she uses cash for every purchase. “What we have is what we have,” Ms. Merhaut said. “We have to rely on the money that we’re bringing in.”

The shift under way feels to some analysts like a cultural inflection point, one with huge implications for an economy driven overwhelmingly by consumer spending.

The American trade deficit is not sustainable and has enabled many people to live beyond their means. The down turn in housing prices, the decline in the dollar, and the recession might finally cause a turning point where people have to start living on what they earn.

By Randall Parker 2008 February 04 09:47 PM  Economics Family
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China Expected To Use Half Of World Minerals Soon

While Europe's elites try to convince America's elites to reduce fossil fuels usage to prevent global warming and while American elites argue about how best to waste massive sums of money in a pointless war in Iraq at the same time the Chinese are on course to make the Americans and Europeans steadily less important in the world. While we distract ourselves with foolishness the Chinese are busy creating an industrial civilization and burning through coal, minerals, and other natural resources at a rate that makes Western usage pale in comparison. In many categories the Chinese are soon going to use more than half the world's output.

The rapid industrialisation of China’s economy means that it is likely to consume a majority of the world’s supply of all the major metals and minerals, potentially leading to clashes with other countries over access to resources. Rio Tinto, the world’s second-largest miner, said last week that China already accounted for 47 per cent of all iron ore consumption, 32 per cent of aluminium and 25 per cent of copper.

Tom Albanese, Rio’s chief executive, has predicted that within the next couple of years this will move to 58 per cent of all iron ore, 45 per cent of aluminium and a third of all copper. He said: “Even with the assumption that the current growth intensity will slow, we are looking at China consuming a higher percentage of global supply.”

The only raw material the United States uses more of than China is oil.

The Chinese are doing deals to ensure their access to raw materials.

Back in the UK, Anglo American, which has its own iron ore businesses, announced a surprise strategic partnership with China Development Bank, the state-owned finance house headed by Chen Yuan which is bankrolling Chinalco's stake-building in Rio Tinto. Anglo and the bank will develop a range of mining projects together, primarily in Africa, where the Chinese have had significant success in convincing governments to favour Chinese companies over Western rivals. The Chinese have invested heavily in countries such as Angola, throwing in free infrastructure on top of very favourable terms to secure their energy supplies.

But sources close to the Anglo-China Development Bank tie-up say the Chinese have had considerable production difficulties and that the link-up with Anglo will give them access to the company's mining and logistics expertise.

Major mineral extraction companies are feeling the effects of Chinese business clout. The Chinese are busy pursuing access to minerals around the world.

BHP Billiton, the world's largest mining company, has rebuffed an approach from Chinalco to discuss the Chinese company's acquisition of a 12 per cent stake in Rio Tinto.

The state-owned aluminium producer is understood to have written to Don Argus, the BHP chairman, “hoping to open a dialogue” after blocking BHP's £65billion bid for Rio.

BHP received the faxed letter on Friday, as Chinalco's £7.1 billion share raid was being announced. The Chinese are not thought to have received a reply.

When Chinese resource companies buy stakes in international resource companies the Chinese government becomes the real owner.

What does Chinalco want? BHP will hope it is merely motivated by industrial logic as an aluminum producer. Were Chinalco thinking only along those lines, it might encourage a Rio Tinto-BHP tie-up. Its shareholding could then be a front-row seat at the talks, with which it might buy cast-off assets, and catapult itself into the global mining mega-league.

But such thinking looks naive. Chinalco is a state-owned firm being bankrolled by a state-owned lender in the most ambitious country in the world. From a political perspective, a BHP-Rio Tinto deal is highly undesirable. China's steelmakers worry BHP and Rio Tinto would use their combined 35% market share to crank up iron-ore prices. That might fuel the inflationary pressures that worry Chinese politicians, too. A politically motivated interloper might prefer to block BHP's bid, or launch its own.

America is wasting precious time, energy, money, and lives in the Middle East. The war in Iraq is a very bad investment. While the Chinese concentrate on business we have dissipated our energies on war, financial shell games, and feeding of an unsustainable welfare state. We need to wake up and snap back to reality.

By Randall Parker 2008 February 04 08:10 PM  China
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2008 February 03 Sunday
A Further 25% Housing Price Decline Coming?

Look for more housing price drops according to some analysts.

While a 25% decline is unprecedented in modern times, some economists are beginning to talk about it. "We now see potential for another 25% to 30% downside over the next two years," says David A. Rosenberg, North American economist for Merrill Lynch (MER), who until recently had expected a much smaller slide.

Shocking though it might seem, a decline of 25% from here would merely reverse the market's spectacular appreciation during the boom. It would put the national price level right back on its long-term growth trend line, a surprisingly modest 0.4% a year after inflation. There's a recent model for this kind of return to normalcy after the bursting of a financial bubble. The stock market decline that began in 2000 erased most of the gains of the boom of the second half of the 1990s, leaving investors with ordinary-sized returns.

Why might housing prices plunge violently from here? Remember the two powerful forces that pushed them up: lax lending standards and the conviction that housing is a fail-safe investment. Now both are working in reverse, depressing demand for housing faster than homebuilders can rein in supply. By reinstituting safeguards such as down payments and proof of income, lenders have disqualified thousands of potential buyers. And many people who do qualify have lost the desire to buy.

Bargains! Housing bargains await us.

One problem: Will a rise in housing material costs driven by rising oil prices and rising commodities prices keep the price of new housing construction high enough that the long term cost of housing will rise above the old trend line? If the marginal cost of building a new house gets high enough I expect the marginal price to eventually equal that cost.

By Randall Parker 2008 February 03 08:54 PM  Economics Housing
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Recession Assures Republican Presidential Defeat In 2008

The war in Iraq already works against the Republicans. So I think a Republican victory unlikely if Hillary Clinton is the Democratic nominee even before we consider the economy. But the economy is the biggest factor in a Presidential election. Hillary Clinton will be able to beat John McCain (assuming they are our sorry choices) because the economy in a recession works against the incumbent party.

Economists forecasting the 2008 race have given a slight edge to the Democrats. Global Insight, a Massachusetts-based forecaster, was predicting that the Republican nominee will garner 49 percent of the vote in November, based on recent income growth, unemployment and the power of incumbency. With yesterday's jobs report, that forecast will slip to as low as 47 percent, said Nariman Behravesh, the firm's chief economist.

The GOP contenders "are far enough away from the Bush administration where they won't be completely tarred by the Bush brush," he said. "But, nevertheless, there will be a tendency to see Republicans as responsible for this mess."

Obama and Sen. Hillary Rodham Clinton (D-N.Y.) pounced on the jobs data. Clinton proclaimed "a second Bush recession," while Obama blamed the news on "seven years of George Bush's failed economic policies."

But of course Hillary lies by referring to the 2000-2002 period as a Bush recession. On whose watch did the dot com boom happen anyway?

The incumbent party always loses in a recession. Always.

If so, Republicans will have a hard time outrunning Bush's shadow, said Ray C. Fair, an economist at Yale University who has modeled the economy's impact on elections for decades. Because of slow economic growth, Fair had already predicted that the Republican nominee -- weighed down by voter demands for change after eight years of GOP control -- could hope for only 48 percent of the vote. If growth turns even barely negative, the share drops to 46 percent, he said.

"There's no case in history in which we've had a bad recession and the incumbent party has won," he said. "Never."

I see this as an perhaps a silver lining in this recession. If John McCain gets the Republican nomination we are going to have a nutcase in the White House who at least sounds as dangerous as George W. Bush. Will he govern as crazily on foreign policy as Bush has and as McCain sounds? In The American Conservative see The Madness of John McCain: A militarist suffering from acute narcissism and armed with the Bush Doctrine is not fit to be commander in chief. Also, see Pat Buchanan's The Great Betrayal

Offering more “straight talk” on the Sunday before the Florida primary, John McCain made an arresting prediction: “It’s a tough war we’re in. It’s not going to be over right away. There’s going to be other wars. I’m sorry to tell you, there’s going to be other wars. We will never surrender but there will be other wars.”

And then there's McCain's repeated attempts to pass an immigration amnesty:

On controlling America’s borders and halting the invasion through Mexico, McCain collaborated with Senate liberals in the McCain-Kennedy amnesty, which was rejected only after a national uprising.

When 190,000 Arizonans petitioned in 2004 to put Prop 200 on the ballot, requiring proof of citizenship before an individual could vote or receive welfare benefits, John McCain led the GOP congressional delegation in opposing it unanimously. Prop 200 passed with the support of 56 percent of all Arizona voters and 46 percent of Hispanics.

James Antle provides a much bigger litany of McCain's history of support for immigration amnesty:

No national Republican leader has a longer or more consistent record of advocating legal status for nearly all of the country’s 12 to 20 million illegal immigrants—not even George W. Bush. McCain’s nomination would push the politics of immigration to the left and potentially unravel the conservative consensus in favor of attrition through enforcement. “To build an immigration record that’s worse than Huckabee’s and even Giuliani’s takes some doing, but that’s what McCain has done,” immigration writer James Edwards argued. “McCain’s record is more in line with Democrat candidates.”

McCain wasn’t always so squeamish about the word “amnesty.” “Amnesty has to be an important part [of immigration reform] because there are people who have lived in this country for 20, 30 or 40 years, who have raised children here and pay taxes here and are not citizens,” he told the Tucson Citizen in May 2003. “I think we can set up a program where amnesty is extended to a certain number of people who are eligible…”

So here's my question: Are we better off if McCain or Romney loses to Hillary? I see it cutting both ways. If Romney runs against Hillary Romney will pull Hillary toward immigration law enforcement positions. If McCain runs against Hillary his defeat will tend to discredit his favored positions among Republicans.

By Randall Parker 2008 February 03 02:29 PM  Economics Political
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2008 February 02 Saturday
Popping Of Housing Bubble Crashing Canadian Lumber Towns

In some Canadian lumber towns unemployment has gone from single digits to more than half their populaces in less than a year.

Similar events are playing out across the Canadian hinterlands, where at least 139 sawmills -- many of which depend on the U.S. market for most of their sales -- have been forced to close indefinitely or reduce shifts over the past 18 months, according to Canadian government statistics.

...

In this era of interconnected economies, when globalization can take away as fast as it can give, the bite of the U.S. subprime-mortgage crisis is perhaps as visible in this Canadian town as in any U.S. community. With wood demand and prices plummeting along with U.S. housing starts, three of Mackenzie's five sawmills have shut down indefinitely, while the others have cut shifts -- propelling the town's unemployment rate from single digits to more than 70 percent since August.

That includes the loss of Mackenzie's largest employer, the two AbitibiBowater mills, which closed so abruptly Jan. 11 that thousands of felled tree logs remain piled up on its icing lot, awaiting processing by new multimillion-dollar saws that now sit dormant. Six of Mackenzie's eight logging camps, where tree cutters and haulers dined on early morning breakfasts of flapjacks before gathering wood in the sub-zero mountain air, have closed. Five of the seven town councilors or their spouses have lost their jobs. Laid-off locals cluster in Mackenzie's recreational center to tap the newly created job assistance center and debate over coffee whether to follow those who are abandoning town in search of work.

The housing boom illustrates the costs of artificial money supply inflation. As the price of oil went up the amount of money that flowed abroad and then back into the US as bond purchases skyrocketed. At the same time the Chinese took their trade surplus money and used it to buy US bonds. This lowered US interest rates unnaturally and caused an asset price inflation in the United States. That asset price inflation caused a huge misallocation of capital toward the housing industry and its supplier industries such as lumber. Much of that investment was excessive and ultimately a waste.

The costs to the lumber companies or construction companies tell only part of the story. The people who incurred expenses to move to get jobs and built housing in boom towns lost money too.

The appreciation of the Canadian dollar against the US dollar due to the Alberta oil sands boom has made the downturn in the Canadian housing industry even more severe. Canadian non-oil goods are getting priced out of the US market due to Alberta oil exports.

By Randall Parker 2008 February 02 09:10 PM  Economics Housing
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Market Responds To Fraud By Lowering Prices?

Marginal Revolutionary Tyler Cowen argues that in markets with fraud prices will drop to eliminate the cost of fraud.

Think just for a moment about what fraud means. Fraud means that the seller is lowering costs, raising revenue and enjoying higher profits.

In the short run that is bad for the customer. But in the long run it means there will be more suppliers and more competition for our business and thus lower prices.

Take the proverbial cheat auto mechanic. Maybe half the time he will charge you even when he hasn’t done any useful fixing. But in the long run that extra revenue will draw about twice as many auto mechanics into the industry to compete for your money. Yes, they will be ripping you off half the time but prices will fall by a roughly proportionate amount.

In the long run, you, as a consumer, will do okay. You pay twice as often as you ought to, but as a consolation each time you pay only about half as much.

I do not buy this argument for a few reasons. First off, the fraudulent car repair shops will replace parts that aren't broke. The costs incurred do not get eliminated by lowering salaries of repairmen. Second, the new entrants into the auto industry use more capital to set up shops that is waste. All the repair shops will need to cover their capital costs. There'll be more shops and hence more total capital costs. Third, people pulled into repair are pulled away from other more productive work. Fourth, the fraudulent shops will enjoy higher profit margins than the honest (and likely more competent) shops and this will tend to drive honest shops out of business. So the problem becomes worse.

Update: In the comments "m" points out that taking your car to and from repair shops incurs additional costs that Tyler's argument does not eliminate.

By Randall Parker 2008 February 02 08:58 PM  Economics Fraud
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2008 February 01 Friday
China Inflation Spilling Into United States

For a few years now I've held the view that foreign buying of US bonds was causing a weak US currency, cheap imported consumer goods prices, the large US trade deficit, and inflation of housing and capital prices. But the conditions that caused this state of affairs are coming to an end. Prices are rising in China and causing higher prices in the US.

Soaring energy and raw material costs, a falling dollar and new business rules here are forcing Chinese factories to increase the prices of their exports, according to analysts and Western companies doing business here.

The rise was a modest 2.4 percent over the last year. But even that small amount, combined with higher energy and food costs that also reflect China’s growing demands on global resources, contributed to a rise in inflation in the United States. Inflation in the United States was 4.1 percent in 2007, up from 2.5 percent in 2006.

Because of new cost pressures here, American consumers could see prices increase by as much as 10 percent this year on specific products — including toys, clothing, footwear and other consumer goods — just as the United States faces a possible recession.

Welcome to the 1970s flashback era of stagflation.

Place this in context. For a few years Alan Greenspan has been saying he sees an eventual resurgence of US inflation on the horizon. I've never heard him say why. But put this in context. We've had a huge run-up in oil prices for a few years without a recession (at least until now). We underwent too much monetary expansion. But the monetary expansion didn't cause consumer price inflation because we were getting flooded with cheap Chinese goods and the Chinese were using their trade surplus to buy US bonds to keep their currency weak and the prices of their goods low in the US. The monetary expansion did cause an inflation in housing prices and other more durable asset prices.

Well, all that was not sustainable. Hence the recession. Economist Martin Feldstein at Harvard says the housing asset price inflation enabled American consumers to borrow against their equity to keep their buying power up even as energy prices rose.

MF: In the post-World War II period, recessions have been preceded by a combination of increased oil prices and high interest rates. And we certainly got a dose of both of those this time. The Fed raised the federal funds rate from 1 percent to 6 percent, and oil prices tripled. So yes, I would have been worried that that combination alone, driven by the high oil prices, could have turned us down. In fact, I wrote a piece in the Wall Street Journal a couple of years ago, asking: Why did the jump in oil prices (that we had then observed—from roughly $20 to $60 a barrel) not push the economy into recession? And I answered that by saying: because there was this surge in home-equity borrowing that allowed individuals to increase their consumption faster than their incomes. I concluded by saying that if energy prices continue to increase, we cannot count on that kind of offset from higher consumer spending financed by mortgage borrowing.

Feldstein says that the US recession probably isn't going to cut into China's or India's economies. This means that total world oil demand probably won't go down as much as US demand if world demand even goes down at all.

MF: I don’t think that India and China are going to be adversely affected by a slowdown in the United States, if it occurs. Now, that’s different from having them pick up the slack, to use your phrase, and provide aggregate demand for the rest of the world. I think those two ideas get confused sometimes when people talk about decoupling. India does not depend on exports to the United States. Similarly, I think the direct impact on [U.S.] imports from China would not be that large. China exports a lot, but its net exports (when you net through how much it imports in order to reexport) are not so much a driving force in their economy, and they have other ways of picking up the slack domestically. In fact, they’ve been worried about the fact that their economy has been growing too fast, and they’ve been looking for ways to dampen it. If their exports slow down, they will shift toward more domestic spending. That’s a very good thing for the Chinese economy and may make for a structural change that will reduce the future trade imbalance between China and the United States. So, I don’t think the Chinese should be that worried about a U.S. recession.

Since oil prices probably won't slacken and prices of goods from China are on the rise a recession in the US will not eliminate 1 source of inflation in the United States while inflation of goods prices from China will add another source. Plus, the US dollar will decline against the Chinese currency adding to that price inflation.

The US has been living beyond its means. This inflation of consumer prices is part of the process of lowering living standards that is needed to bring us back within our means.

By Randall Parker 2008 February 01 11:06 PM  Economics Trade
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