2010 December 30 Thursday
Seeing Women As They Really Are

Notorious Pick-Up Artist Roissy, despised by many feminists, reacts to a commenter who says reading Roissy has made him less misogynistic.

Would that the army of tards who occasionally spill into this exclusive estate reflect on the fact that the underlying message is in reality a romanticist hymn to the unique and abiding attributes of women, warts and all, and to the good that can come from seeing women as they really are instead of as what we wish they were, there would be more love in the world.

That's not just true about women as sexual beings. It is true of humans in general. The truth about humans can seem ugly to people raised on myths. But the myths set people up for heartache and disappointment. If you live in fantasies then reality keeps intruding in jarring ways guaranteed to anger or depress. Reality becomes easier to deal with if you give up fantasies about it.

By Randall Parker 2010 December 30 10:40 PM  Human Nature Mating
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2010 December 29 Wednesday
Republicans And Democrats Play Game Of Chicken?

Megan McArdle suspects both political parties will not face up to the need to balance the budget until the system reaches a crisis. (my bold emphasis added)

I assume that at some level, Republicans understand that cutting taxes will make it that much more wrenching when we finally have to cut the deficit.  I assume that at some level, Democrats knew that passing the health care bill would make it harder to balance the budget, because we used up the easiest, most obvious tax increases and spending cuts on expanding health care coverage, instead of using them to bring revenues and spending into roughly the same ballpark.  But I think they view this as a way to improve their initial position in the final showdown, meaning that overall, we'll end up with [lower taxes/higher spending] than we would if they just left well enough alone.

Despite Ross Douthat's optimism, I am very much afraid that this we are headed for a terrible crash. Game theorists tell us that the way to win a game of chicken is to make a highly credible committment: rip off the steering wheel, and throw it out the window.  They do not tell us what to do once you have thrown it--only to realize, in horror, that the guy in the other car has just done the same thing.

I hold this view as well. Watching state-level fiscal crises get far worse than I originally expected (not just California - but also Illinois, New Jersey, and others) I no longer think the center is big enough or either party dominant enough to force thru a compromise. At the federal level we will have to reach a point where the markets begin to price US debt as highly risky before both big spending cuts and big tax increases become feasible. Absent need to stop a panic I do not expect anything resembling fiscal sobriety. An irrational faith in American exceptionalism has combined with political divisions to make it impossible to admit to our limits.

Update The rise in spending which led us to this crisis was caused in part by giving women the vote.

This paper examines the growth of government during this century as a result of giving women the right to vote. Using cross-sectional time-series data for 1870–1940, we examine state government expenditures and revenue as well as voting by U.S. House and Senate state delegations and the passage of a wide range of different state laws. Suffrage coincided with immediate increases in state government expenditures and revenue and more liberal voting patterns for federal representatives, and these effects continued growing over time as more women took advantage of the franchise. Contrary to many recent suggestions, the gender gap is not something that has arisen since the 1970s, and it helps explain why American government started growing when it did.

The welfare state that women vote for feeds the rise in divorces. Women initiate most (somewhere between two thirds and three quarters) of all divorces. They'd be far less likely to file for divorce if the state did not help them out with social programs. So more social programs lead to more divorce which translates into more support for social programs. Meanwhile, the married people and the singles without children pay more taxes to support those with unstable relationships. Part of the stand-off between tax increasers and spending cutters is a fight over marriage and social obligations. I am on the side of spending cutters because I do not want to pay to raise the children of others.

By Randall Parker 2010 December 29 07:26 PM  Economics Sovereign Crises
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2010 December 27 Monday
Man Prosecuted For Reading Cheating Wife's Email

A guy figured out his wife's GMail account because he suspected she was cheating on him. Well, she was. Plus, he was her third husband. Hey, if you really must marry don't marry a woman who has already been married 2 times previously. So then what happens? He's at risk of 5 years in jail for gaining access to her email account.

Prosecutors, relying on a Michigan statute typically used to prosecute crimes such as identity theft or stealing trade secrets, have charged Leon Walker, 33, with a felony after he logged onto a laptop in the home he shared with his wife, Clara Walker. If convicted in the trial that begins Feb. 7, he could be sentenced to five years in prison.

Our criminal justice system is telling you guys to pass on marriage. It is not like you have a right to ensure your spouse is faithful. The law sees each member of the marriage as totally distinct and with no right to the details of the other's behavior (at least if the other is a woman). So what's marriage? Just a big legal risk. She's already divorced him.

So on a hunch I went looking for whether the prosecutor was male or female. Female prosecutor takes side of unfaithful wife. Click on this link for the salient details.

Prosecutor Jessica Cooper dismissed Walker's claims that he had used his wife's password to log on to the computer.

She said Walker was nothing but a "hacker" who used his skills as a computer technician to gain access to his wife's email account.

If you aren't married in the first place you won't feel a need to get into your spouse's mail to find out if they are cheating. I realize the collapse of marriage is speeding the collapse of our civilization. But you should not sacrifice yourself for a dying civilization.

Update: Be especially fearful of marriage in community property states where she can dump large debts on you even after you separate for divorce.

By Randall Parker 2010 December 27 08:22 PM  Cultural Wars Marriage
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2010 December 26 Sunday
US Government Counties Highest Paid

A new US Census Bureau report provides more evidence for how well our rulers get paid. 5 of the top 10 counties for household median income are situated around Washington DC and the top 3 are DC suburbs.

Falls Church city, Va. — $113,313
Loudoun County, Va. — $112,021
Fairfax County, Va. — $104,259

No Silicon Valley county (or any California county) makes this top 10 list. New Jersey occupies a few spots. I wonder if this is in part due to smaller counties. Another federal county: Los Alamos County New Mexico (where the US government runs a big weapons lab) makes the top 10 list. You can understand why the Democrats want to swell the ranks of government workers: It will raise the incomes of those who get government jobs. There's an obvious scaling problem with trying to apply this strategy to the whole country though.

This is probably a sign that the cognitive elite are increasingly co-locating.

“The dispersion of income is larger than it’s ever been,” said Douglas Besharov, a professor at the University of Maryland’s School of Public Policy. “There used to be a much wider spread of incomes within geographic areas than there is now. There’s much more of a clumping together.”

One of the selling points for super dense New York City is supposed to be shorter distances to work,right? Some NYC boroughs have the highest commuting times in the nation.

Four counties, all in New York, had mean travel times to work in excess of 40 minutes: Richmond, Queens, Kings and Bronx.

So pay really high taxes and spend 400 minutes per week commuting.

Update: When the US and state governments reach crisis stage with their debts the knowledge that government workers have it better than most private sector workers is going to bring out extremely unsympathetic reactions from the body public. People aren't going to support the very large tax increases needed to keep public sector pension funds solvent. We are witnessing the early stages of a slow moving fiscal train wreck. It is going to get quite dramatic as it unfolds.

By Randall Parker 2010 December 26 06:47 PM  Economics Demographic
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Immigration Reduces Integration

An unsurprising result. Yet clueless academics at an Ivy League school express surprise.

PROVIDENCE, R.I. [Brown University] — Despite increased racial and ethnic diversity, American neighborhoods continue to be segregated, and some of the progress made toward integration since 1980 has come to a halt this decade, according to a new report by Brown University sociologist John Logan. The report, co-authored by Florida State University sociologist Brian Stults, marks the launch of the US2010 project, a program of research on changes in American society, supported by the Russell Sage Foundation and Brown University.

"This is a surprising result," said Logan, director of Brown's Initiative in Spatial Structures in the Social Sciences and director of US2010. "At worst, it was expected that there would be continued slow progress. The growth of the black middle class, the passage of time since fair housing legislation was enacted, and the evidence from surveys that white Americans are becoming more tolerant of black neighbors all pointed in that direction."

The cessation of immigration in the 1920s caused integration to accelerate. Ties to the old country were cut off. No new supplies of immigrants to keep neighborhoods pure immigrant with non-English speakers talking only to each other.

If you want immigrants to integrate then bring them in in smaller numbers and do pauses that last decades. John Logan should talk to George Borjas at Harvard about how a multi-decade immigration pause would accelerate integration.

By Randall Parker 2010 December 26 05:27 PM  Immigration Identity
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NY Times On Deeply Indebted States

The editors of the Gray Lady take note of the perilous condition of Illinois state finances and the big debts of some other states.

For most of this year, the state of Illinois has lacked the money to pay its bills. Some of its employees have been evicted from their offices for nonpayment of rent, social service groups have laid off hundreds of workers while waiting for checks, pharmacies have closed for lack of Medicaid payments. Faced with $4.5 billion in overdue payments, Illinois has proposed a precarious plan to sell its delinquent bills to Wall Street investors in exchange for cash, calculating that the interest it must pay the investors will be less than the late fees it owes.

Attempts to push the reckoning off have not succeeded. The future is here.

But that future is not so distant, and the crushing debt has made recovery far more difficult to achieve. As The Times reported, Illinois, California and several other states are at increasing risk of being the first states to default since the 1930s. The city of Prichard, Ala., has stopped sending out its pension checks, breaking state law and shocking its employees.

The Times editors predictably argue for higher state taxes and more federal aid to the states. But the states need to learn to get by on much less. High oil prices are on course to go higher still until they trigger the next recession. The states need to adjust now to a poorer future. Business As Usual is not in the cards.

You might wonder how could not just California, but Illinois and New Jersey get into far more dire straits than they acknowledge (the numbers at that link are incredible btw). To understand these failures of governance what's needed is an unromanticized view of democracy such as is found in Bryan Caplan's The Myth of the Rational Voter: Why Democracies Choose Bad Policies. I say blame the ignorant, uninterested, not sufficiently intelligent voters. Okay, now what?

We need bigger cuts in spending. But cuts and even tax increases probably won't be enough when Peak Oil causes the next recession. Debt holders and especially government retirees are going to have to take haircuts. I am firmly with those who argue that Euro states and American states need legal structures for bankruptcy so that they can go bankrupt with a minimum of resulting chaos.

Update: Here's a list of US cities running big budget deficits. Stay away from them. Some are cutting police staffing in a big way.

Update: Mish Shedlock is doing a great job blogging on the government debt disaster. For example, see his post Pensions Eat 70% of Decatur, Illinois' Budget; New York City's $76 Billion Shortfall; Houston Mayor Wants Pension Benefit Cuts. The Decatur, Illinois budget shows where other cities and states are headed.

By Randall Parker 2010 December 26 11:36 AM  Economics Sovereign Crises
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2010 December 25 Saturday
Happy Holidays Or Merry Christmas?

OneSTDV asks Is there a "War on Christmas"? I think the answer is clear: Yes.

What we see is a weird inconsistency. Everyone I know (Christian or not) says "Merry Christmas". Yet tons of big businesses put up signs and advertisements that say "Happy Holidays".

What the hell? On the one hand, the businesses are incredibly keen selling you stuff that you will give as gifts on Christmas. No, those are not Kwanzaa gifts. No, they are not New Year gifts. They are Christmas gifts. Yet too many large corps pretend there's no such thing as Christmas.

I resent the double standard: Deny a thing and yet try to make money off it.

Your elites are at war with you.

By Randall Parker 2010 December 25 09:29 PM  Cultural Wars Religious
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US Industry Scared Into Silence By Chinese Mercantilism

If we want to know how much the Chinese government tilts the playing field in favor of its industry you won't hear about it from the cowed Western multi-nationals.

No American company would seem to have more to gain than General Electric from the Obama administration’s decision on Wednesday to accuse China, in a World Trade Organization case, of providing illegal subsidies to Chinese wind turbine makers.

...

But with so much to potentially gain from the administration’s W.T.O. case, what was G.E.’s reaction? Total silence. The company said it would have no comment on the matter.

G.E.’s silence is part of a broader Western corporate reluctance to criticize Chinese policies, particularly in public. So eager are multinationals for continued access to the world’s fastest-growing market that they are loath to cry foul even amid evidence that China may be flouting international trade laws.

Transfer your technology to your future competitors or you do not get to play.

But Gamesa has learned the hard way, as other foreign manufacturers have, that competing for China’s lucrative business means playing by strict house rules that are often stacked in Beijing’s favor.

Nearly all the components that Gamesa assembles into million-dollar turbines here, for example, are made by local suppliers — companies Gamesa trained to meet onerous local content requirements. And these same suppliers undermine Gamesa by selling parts to its Chinese competitors — wind turbine makers that barely existed in 2005, when Gamesa controlled more than a third of the Chinese market.

But in the five years since, the upstarts have grabbed more than 85 percent of the wind turbine market, aided by low-interest loans and cheap land from the government, as well as preferential contracts from the state-owned power companies that are the main buyers of the equipment. Gamesa’s market share now is only 3 percent.

A few months ago a ministry in the Chinese government floated a requirement for foreign car companies to transfer electric car technology to Chinese companies or else be locked out of the Chinese electric car market. Did that regulation take effect too?

The Chinese force technology transfers and then grow up companies that wipe out foreign competitors. China's wind turbine makers have nearly half the global market and now theya re building up their presence in the United States. So US tax credits for wind power, paid by US taxpayers, will subsidize Chinese wind turbine makers.

The United Steelworkers Union fight where multi-nations fear to tred. It is an argument for industrial unions.

The United Steelworkers, which had protested the Chinese wind power fund as part of a larger, 5,800-page trade complaint it filed with the American government on Sept. 9, said the administration’s decision was only a first step in addressing a “vast web of protectionist policies” by Beijing.

Also see my post Rapid Knowledge Spread Lowers Western Growth. The future has arrived. As a nation that thrives off the intellectual property we produce what are we going to do about it?

By Randall Parker 2010 December 25 07:36 PM  China Mercantilism
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2010 December 24 Friday
Elena Carletti: Fast Euro Default Mechanism Needed

Elena Carletti, a professor of economics at the European University Institute in Florence, Italy, says sovereign defaults need to be set up so they can occur very quickly.

A sovereign default would need to be done very quickly, otherwise it would trigger enormous capital flows in the euro area from countries perceived to be weak to those seen as strong, such as Germany.

Of course, the biggest problem with this quite reasonable suggestion is that the Euro mandarins do not want to admit the high probability of eventual sovereign default. So they won't act fast enough now, before the acute severe crisis is upon us, to set up all the mechanisms needed for a lightning fast default.

The same holds with a country exiting from the Euro currency union. It has to be done fast. But that means governments, banks, and businesses need to be set up to handle the transition.

There is an alternative to sovereign default in the euro area: A country could simply leave the currency union, possibly temporarily. This would also need to be done quickly to avoid massive capital outflows.

Think of all the back office accounting systems that would need to know about a new currency distinct from the Euro. Think of all the businesses that do Euro transactions in from their home bases in Greece or Ireland or Italy both in their home country (where the currency would change) and abroad (where the currency would remain the Euro. They'd suddenly need to start doing their local payroll and utilities and local services in a new currency while doing some of their business transactions in Euros. The accounting costs and frictions would be high. An article in The Economist also argues for the need for a rapid transition when reinstating an old currency.

I do not expect the Euro zone countries to be saved from default by economic growth. If the price of oil continues its ascent then we'll head back into recession long before indebtedness begins to shrink and government deficits will hit levels that will guarantee default.

The United States faces a similar need for a default mechanism (without the need for a way to exit the US dollar) due to the financial troubles of states like Illinois and California. Massive unfunded government employee retirement liabilities and other costs make the eventual need for bankruptcy a real possibility. Reihan Salam points to a a recent piece by David Skeel on the need for a national law on state-level bankruptcy. Given the precedent of long established law for municipal bankruptcy it should not be hard to come up with an equivalent for states.

One can imagine something like a liquidation sale for cities and even states. Indeed, in the early 1990s, professors Michael McConnell and Randal Picker proposed that Congress amend the existing municipal bankruptcy chapter to allow just that. They argued that many of a city’s commercial, nongovernmental properties could be sold in a municipal bankruptcy, and the proceeds simply distributed to creditors. (They also suggested that municipal boundaries could be dissolved, with a bankrupt city being absorbed by the surrounding county.) Although California has taken small steps in this direction on its own—it recently contracted to sell the San Francisco Civic Center and other public buildings to a Texas investment company for $2.33 billion—it seems unlikely that Congress would give bankruptcy judges the power to compel sales in bankruptcy. Nor could it do so with respect to any property that serves a public purpose. Liquidation simply isn’t a realistic option for a city or state. (The same limitation applies to nation-states like Ireland and Greece, whose financial travails have reinvigorated debate about whether there should be a bankruptcy-like international framework for countries.)

Again, it is better to create a legal framework before a crisis reaches an acute stage. Skeel and Reihan think it cruciall to get this reform enacted before the US government decides to start bailing out states. But after Skeel points out the need for bankruptcies to enable rewriting of union contracts Reihan points out why passing this law will be so difficult:

Simply put, this is the reason why bankruptcy for states is so vitally important, and why it will prove an extremely tough political fight. State governments need to be given the option of preserving core public services even if it means forcing creditors to take a haircut and forcing public sector employees to accept the kind of retiree health benefits and pensions offered to comparable workers in the private sector.

Even with the Republicans in control of the House I give such a reform poor odds of passing. But I'm a little more optimistic that the US government won't bail out states. First off, California is so not a Republican state any more that Republicans in Congress will oppose a bail-out. Also, when the big federal fiscal crunch reaches a crisis stage in a few years (helped along by rising oil prices which will bring on another recession) the federal government will not have the money to bail out states. It'll be every government for itself. Then the states will do battle with their public employee unions.

Update Mish Shedlock says the state pension funds of New Jersey, California, and other states are in far worse shape than reported. He's right. These pension funds assume unrealistically high rates of return for their investments. They need high rates of economic growth that probably aren't in store. The fiscal crack-ups that are coming are epic in scope.

By Randall Parker 2010 December 24 10:19 PM  Economics Sovereign Crises
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2010 December 22 Wednesday
Rapid Knowledge Spread Lowers Western Growth

Michael Mandel blames rapid knowledge dissemination to developing countries for slowing US and other Western economic growth. The value of our intellectual capital is depreciating more rapidly.

The value of knowledge capital depends, in part, on how rare it is. The more companies or countries that possess the same knowledge (say, about how to make a commercial airliner), the less valuable that knowledge is. This is just Economics 101, applied to intangibles. Over the past 10-15 years, the strengthening of information flows into developing countries meant that knowledge capital was being distributed much more quickly around the world. As a result, the normal process of knowledge capital depreciation greatly accelerated in the U.S. and Europe–beneath the radar screen, because no statistical agency constructs a set of knowledge capital accounts.

This makes sense to me. Certainly consistent with my work experience.

Tyler questions globalization as the cause. But I think Tyler's focus on cultural products as compared to technological products misses where the wealth comes from. Cultural products are what you can afford if you can sell your technological products for a lot of money.

I agree with the conclusion but I am not sure that globalization was the mechanism.  I sometimes think of an imaginary economy with two sectors: music and bathtubs.  I believe that my bathtub is over thirty years old, yet for me it works fine and I have no desire to buy a new one.  When it comes to music, most people want to listen to what is new and hot, not Bach's B Minor Mass.  Furthermore, even within the music sector, acts seem to have declining longevity, in part due to the decline of the iconic album, the rise of the iTunes single, the fall of entry barriers, and the proliferation of genres.  The Rolling Stones are still around, or U2, but more rapid turnover is the trend. 

We rise and fall on our technology-producing industries, not on our culture-producing industries. That has always been the case. In the bigger scheme of things Hollywood was always small. Rapid copying of data has further reduced its value. But we did not lose that much wealth from that copying as compared to copying of technology.

By Randall Parker 2010 December 22 08:18 AM  Economics Globalization
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2010 December 21 Tuesday
Social Security Solvency And Retirement Costs

Reflecting on the recent tax cut deal that reduces Social Security taxes for a year (and makes the Social Security Trust Fund even more underfunded) Brett Arends points out that average life expectancy for those who reach 66 is so high that buying annuities purchased at age 66 to fund retirement would cost too much for the overwhelming majority to afford.

If your Social Security payments are scaled back, or worse, what would it cost you to buy something similar in the private sector?

We can do some math.

According to ImmediateAnnuities.com, a 66-year-old man would have to pay $128,000 for an annuity providing him with income of $10,000 for life. A 66-year-old woman would have to pay even more, about $138,000.

That's for an income of $10,000 a year. If you think you'll need $40,000 a year to live on, naturally you'd need to set aside four times as much, or about $550,000.

And this would only be for a straight annuity, with absolutely no inflation protection at all.

But an inflation-adjusted $10k annuity at age 66 would cost $180k. To sustain a $40k income until death would cost $720k. Think about that. This also helps explain why Social Security is in financial trouble. For a $14k/year average Social Security benefit (which isn't much, btw) what fraction of the population has paid, say, $252k total in Social Security taxes by age 66? The overwhelming majority hasn't. Hence, Social Security is a pyramid scheme and its future benefits have to be cut somehow.

Then there's Al Gore's famous Social Security Trust Fund lock box. The Trust Fund is really imaginary.

From the mid-1980s through last year, Social Security was a cash cow for the federal government thanks to tax increases and benefit cuts adopted after the Greenspan Commission's 1983 report. Social Security collected more in taxes than it paid out in benefits, turning the surplus over to Treasury, which used the cash to meet various obligations, and gave the trust fund securities in return.

The fact that Social Security was funding the rest of the government to the tune of trillions of dollars gave beneficiaries a moral claim on the trust fund, economically useless though it is.

The US government will have to run a huge surplus in other forms of revenue to be able to afford to pay back the money it borrowed from the Trust Fund. To do that will require a sustained healthy rate of economic growth as well as large cuts in other areas of spending.

It does not appear that Americans either collectively or individually look at the future with time lines sufficiently long enough to drive savings accumulation or spending restraint. The costs of an aging population will have to be paid for by making them work more years.

Support for raising retirement ages seems to be building with the US deficit reduction commission, Sen. Tom Coburn (R., Okla.), and House Republican Leader John Boehner (more here) support an age hike. The American Academy of Actuaries came out for a 2 year increase in retirement age in 2008.

By Randall Parker 2010 December 21 12:06 AM  Economics Retirement
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2010 December 18 Saturday
Dominican Republic Revokes Birthright Citizenship

The Dominican Republic has revised its constitution in a way that the US needs to do: children born to illegal aliens are no longer entitled to Dominican citizenship.

The constitutional change came two weeks after the earthquake in Haiti, which makes up the western portion of the island of Hispaniola. The Dominican Republic is on the eastern portion. The change denies citizenship to children born to undocumented residents.

Haiti is certainly a tragic mess. But it would be better to improve conditions in Haiti than move its citizens elsewhere. What Haiti needs is foreign rule. The political class is hopelessly corrupt and inept. Effectively it needs to be put into a form of receivership. It won't become a great success story. But it can be made quite a bit less bad.

By Randall Parker 2010 December 18 06:49 PM  Immigration Policy
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Dominican Republic Revokes Birthright Citizenship

The Dominican Republic has revised its constitution in a way that the US needs to do: children born to illegal aliens are no longer entitled to Dominican citizenship.

The constitutional change came two weeks after the earthquake in Haiti, which makes up the western portion of the island of Hispaniola. The Dominican Republic is on the eastern portion. The change denies citizenship to children born to undocumented residents.

Haiti is certainly a tragic mess. But it would be better to improve conditions in Haiti than move its citizens elsewhere. What Haiti needs is foreign rule. The political class is hopelessly corrupt and inept. Effectively it needs to be put into a form of receivership. It won't become a great success story. But it can be made quite a bit less bad.

By Randall Parker 2010 December 18 06:49 PM  Immigration Policy
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Immigration Nightmare Act Dies In Senate

Yet another elite push for immigration amnesty has died in the US Senate.

The House had passed the bill, but on Saturday a Senate vote to cut off debate failed 55-41 on a largely party-line vote, essentially killing the legislation for this year. (Sixty votes were needed to end floor debate.) And with Republicans taking over the House and gaining seats in the Senate as a result of the recent midterm elections, prospects for the DREAM Act have dimmed considerably.

This is a great relief. The incoming Republicans are far less likely to let thru an immigration amnesty. So we dodged a bullet.

Meanwhile at the state level the current is flowing toward more immigration law enforcement.

Massachusetts State Police will join a controversial federal program early next year to help the US government detect and deport illegal immigrants arrested for crimes, a sharp departure from Governor Deval Patrick’s 2007 decision barring troopers from enforcing immigration laws.

It says a lot (nothing good) about elite left-liberal views on immigration that a Governor of a very liberal state would actually oppose deportation of criminals.

By Randall Parker 2010 December 18 02:46 PM  Immigration Politics
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2010 December 17 Friday
For Raising Retirement Ages

A USA Today editorial argues for raising retirement ages. I see this as necessary and inevitable. Politicians could do us all a favor by acting sooner to give people more time to plan for this inevitability.

So it's notable that inklings of a bipartisan consensus are forming about one highly contentious issue — the age at which workers should be able to collect Social Security benefits.

House Minority Leader John Boehner, R-Ohio, supports gradually raising the retirement age for full benefits to 70 from the current 66. A number of key Democrats, most notably House Majority Leader Steny Hoyer, D-Md., have miffed liberals in their party by saying that some unspecified increase should be on the table.

Since people are living longer they are going to have to work longer. This is already happening. In spite of a huge dip in overall employment the labor force participation rates for 55 and over are rising.

The approaching sovereign debt crisis will force an acceleration in the rise of labor force participation for those in their 60s and 70s. If you want to avoid this for yourself you've either got to get rich or lower your living standard so low you can afford to save more.

By Randall Parker 2010 December 17 12:12 AM  Economics Entitlements
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2010 December 14 Tuesday
Married Parents Pay More College Expenses

If you want to go to college your odds are better if your parents are still married to each other.

College students whose parents have remained married to each other are faring better financially than their peers with divorced or remarried parents, according to new research from Rice University and the University of Wisconsin.

The study, published in the December Journal of Family Issues, found that divorced parents contributed about a third of what married parents contributed to their children's education even though the divorced parents' incomes are about half as much as their married peers'; remarried parents contributed about half of what married parents contributed, despite having incomes similar to those parents who have stayed married.

The researchers discovered that married parents contributed about 8 percent of their income to their child's college costs and met 77 percent of their children's financial needs; divorced parents contributed about 6 percent of their income and met only 42 percent of their children's financial needs; remarried parents contributed only 5 percent of their income and met 53 percent of their children's needs.

I see this as yet another research report that is necessary in order to prove disputed yet obvious truths. You might think this result entirely unsurprising. After all, divorced parents have to maintain the costs of two households. Also, if Mom gets custody but Dad makes more then Dad has less daily contact with the kids and emotional bonds weaken. Yet some liberals still try to deny the value of marriage.

Since so many parents get divorced - or never get married in the first place and split up more easily - the rising costs of higher education are an even heavier burden for a very large fraction of kids whose parents are divorced. Short of putting Humpty Dumpty back together again and returning to much older attitudes toward marriage what to do? Automate and accelerate education.

By Randall Parker 2010 December 14 09:26 PM  Education
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Large Security Zones In Cities Due To Terror Fear

Security zones are like small police states in cities.

DENVER (Dec. 14, 2010) – A decade after the 9/11 attacks, significant parts of America's most prominent downtowns remain largely sealed off as `security zones,' but a newly published study by University of Colorado Denver professor Jeremy Németh says this has led to blighted landscapes, limited public access and a need for a new approach to urban planning.

"Our most open, public cities are becoming police states," said Németh, assistant professor of planning and design whose study was recently published in Environment and Planning A. "While a certain amount of security is necessary after terror attacks, no amount of anti-terror architecture would have stopped the 9/11 attacks, or the Madrid or London subway bombings. And by limiting access and closing off space, we limit the potential for more `eyes on the street' to catch possible acts in the process."

This is a cost of both Muslim immigration and government reactions to it. The proper place to stop the threat isn't up close in cities. Better to draw the line at national borders or beyond.

Gotta have the proper clearance.

Németh's study, the first to compare public and private security districts in more than one city, looked at areas of downtown Los Angeles, New York City and San Francisco and found that while each city values and protects potential targets equally, what is deemed off-limits varies widely.

For example, 35.7 percent of New York's civic center district is within a `security zone,' meaning it is accessible only to for those with proper clearance, while only 3.4 percent of San Francisco's civic center area has the same designation. Meanwhile, 23-acres of public space in Los Angeles sit in a `security zone.'

I watch old TV shows and movies and feel nostalgic for the days when people walked into airports to greet people just as they get off of airplanes and where people could just walk into all public buildings. What a great open society we lost.

A new style: architecture of fear. Why not use castle motifs so that when people look at these security zones they think of knights and princesses? Castles might lighten the mood, give cities more of a Disneyland feel.

Németh said the zones not only affect the appearance of landmark buildings but also reflect an 'architecture of fear' as evidenced, for example, by the bunker-like appearance of embassies and other perceived targets.

By Randall Parker 2010 December 14 08:29 PM  Terrorists Western Response
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USAF Pretends To Block Leak Info

What a joke the USAF is making of itself:

WASHINGTON — The Air Force is barring its personnel from using work computers to view the Web sites of The New York Times and more than 25 other news organizations and blogs that have posted secret cables obtained by WikiLeaks, Air Force officials said Tuesday.

How ridiculous. If you are an American: Your tax dollars foolishly at work. The Office of Management and Budget goaded the USAF and other US government agencies into doing this. How much was wasted on this pointless exercise?

I hate mindless IT rules that do not apply to a situation and just get in the way of getting work done. But IT people are chosen for their willingness to enforce rules which are irrelevant to a situation. So is the case with the USAF.

Computer network specialists within the Air Force Space Command last week followed longstanding procedures to keep classified information off unclassified computer systems.

Of course this web site blocking will just cut off useful sources of news of what is going on in the world. It is pointless. The Chinese and Russians and other world powers will read thru every detail of the leaked cables. Meanwhile the USAF enlisted personnel and civilians can just read at home what they can't read at work. The only usefulness of blocking these sites is that government employees will have fewer ways to distract themselves from work. But remaining distractions on other web sites are so huge in number that this exercise won't even improve productivity.

By Randall Parker 2010 December 14 06:16 PM  Politics Absurdity
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2010 December 11 Saturday
Muslim Bombing In Stockholm Sweden

The Swedes let in lots of Muslim immigrants and those immigrants did not exactly assimilate to Swedish culture and values. Why do the Swedes need to find out the hard way that this result is inevitable? Well, in any case, they are having to find out the hard way that Muslim immigration is a mistake. Blasts in a busy Stockholm shopping district killed at least one bomber and injured at least 2 other people. The bombers wanted to punish the Swedes for tolerating blasphemy against Islam. How dare they.

An editor at the Swedish news agency Tidningarnas Telegrambyra, Dan Skeppe, said the agency had received an e-mail minutes before the blasts; it was also addressed to Sweden’s security police, and included a sound recording addressed to “Sweden and the Swedish people.” Mr. Skeppe said the recording cited Swedish “silence” over cartoons of the Prophet Muhammad drawn by the artist Lars Vilks, criticized Sweden’s 500-soldier military contingent in northern Afghanistan and threatened attacks on Swedes.

“Now, your children — daughters and sisters — will die like our brothers and sisters and children die,” it continued. “Our actions will speak for themselves. As long as you do not end your war against Islam and the insult against the prophet and your stupid support for that pig Vilks.”

If you are like me and can't keep up on all the artists and writers and film makers that Muslims want to kill then it helps to read the Wikipedia page on the Lars Vilks Muhammad as a dog cartoon controversy. Of course Muslim hot heads are still not over it.

On 11 June 2007, Vilks was invited to participate in an art exhibition on the theme "The Dog in Art" (Swedish: Hunden i konsten) that was to be held in the small town of Tällerud in Värmland. Vilks submitted three pen and ink drawings on A4 paper depicting the Islamic prophet Muhammad as a roundabout dog. At this time, Vilks was already participating with drawings of Muhammad in another exhibition in Vestfossen, Norway, on the theme "Oh, My God". Vilks, who is a known proponent of institutional art, has stated that his original intention with the drawings was to "examine the political correctness within the boundaries of the art community".[8] According to Vilks, the art and culture communities in Sweden repeatedly criticize the United States and Israel, whereas Muslim values are rarely even questioned.[9]

Even recently Vilks was threatened with death. They think God (or Allah if he's different from God) wants Vilks to die and they no doubt expect to be rewarded for killing him.

A Swedish fighter with the Shebab [al-Shabaab - Ed], a Somalian milita with ties to Al-Qaeda, has urged Muslims to kill an artist from Sweden who depicted the Prophet Mohammed as a dog, US monitoring group SITE said Tuesday.

“Wherever you are, if not today or tomorrow, know that we haven’t yet forgotten about you,” said the Shebab member Abu Zaid in a video warning to artist Lars Vilks.

You can check out more of his cartoons which enrage Muslims. They do not think they should have to tolerate blasphemy. To them suppression of blasphemy is more important than freedom of speech. This makes them incompatible with Western civilization. But try convincing the multicultural Left of that. Of course, their dedication to freedom of speech is also pretty weak.

Back in May 2010 Vilks did something that upset Muslims again. He didn't upset them so much as they conditioned themselves to be upset by what he did.

Swedish cartoon artist Lars Vilks, who became the target of an alleged international murder plot for his 2007 cartoons of Mohammed as a dog, again angered Muslims Tuesday by showing an Iranian film that depicts the Prophet entering a gay bar.

When Mr. Vilks showed a scene from the film at Uppsala University in Sweden, a protester charged the dais and hit him, breaking his glasses. Police were forced to detain or pepper-spray some unruly members of the crowd as other protesters yelled "Allahu Akbar" – "God is great."

The Jews in Malmö, Sweden have felt the hatred of Muslims and this has driven some to leave. The Malmö Muslims have at time acted out like the Muslims of the banlieues of Paris, burning cars and rioting. In addition that December 2008 episode there was also an April 2010 rioting episode. The Swedes brought all this on themselves.

Does industrialized civilization just get too safe and comfortable for the Left? Do they feel a need to set up conditions guaranteed to make society deteriorate? Their disastrous decisions are a constant source of wonderment to me.

Update:The suicide bomber Taimur Abdulwahab al-Abdaly was living in Britain with a Swedish wife when he traveled to Sweden to do his terrorist attack. He might have previously lived in Sweden. He studied physical therapy in Britain and was trained as a terrorist in Yemen.

An Islamic suicide bomber who attacked Christmas shoppers in Sweden at the weekend is a British university graduate and was living in this country until two weeks ago.

The article says security officials in Britain think British universities are a breeding ground for Islamic terrorism. What would Winston Churchill think of this? What would Pitt the Younger or Disraeli say? What would David Lloyd George or Arthur Balfour say to do about this mess?

By Randall Parker 2010 December 11 11:59 PM  Immigration Culture Clash
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What Muslim Terrorists Really Accomplish

How do Muslim terrorists change the world? As a result of their activities what is changing most?

  • Governments watch their citizens, non-citizen residents, and visitors more closely.
  • Governments develop computer systems to monitor credit card transactions, phone calls, airline reservations, and other data feeds.
  • Governments cooperate more closely in intelligence and police investigations.
  • Governments suppress more speech. Governments enforce more political correctness and suppress statements of the obvious.
  • Governments restrict the right of free association.
  • Governments subject their citizens to more indignities, notably at airports but in other realms as well.

So terrorists strength the power of the state and reduce the independence of individual governments. Terrorists also effectively reduce free speech by those who criticize Islam and Muslim immigration. Terrorists hasten the day when a real world government emerges and cause governments to justify losses of freedom.

By Randall Parker 2010 December 11 10:28 AM  Terrorists Western Response
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2010 December 08 Wednesday
Life In Siberia

On Dmitri Orlov's blog an ex-pat living in Siberian with his wife finds that the Siberians are very considerate and quiet with people in close quarters such as on small crowded buses. This is appealing.

The first time I climbed aboard a “gazelle” with my wife Anna, I suddenly found myself in very close quarters with about a dozen complete strangers. Keeping our heads down to avoid bashing them into the low ceiling, we took off like a shot through traffic barely before the door was closed. The other passengers took no notice of our assault on their space as we stumbled across their legs and packages to split between us the last remaining seat in the back of the van. Here, the phrase “public intimacy” takes on a new meaning: clearly, close physical proximity or bodily contact is not something Siberians shy away from—not in the gazelle, or the tram, or the bus, or the theatre. Our fellow riders seemed unfazed by their close quarters during this galloping ride through town, maintaining a stoic and formal outward appearance in the midst of this forced intimacy.

I imagined this to be a hold-over from the Soviet era when there was little expectation of privacy. People seemed to understand the importance of keeping up a dispassionate public appearance, especially in close quarters. They were unruffled by the physical proximity. But their complete lack of emotional closeness or openness in such circumstances was a bit of a surprise. As an American, my first thought upon entering the womb of the gazelle was to introduce myself, and then to apologize for interrupting their ride, but luckily Anna stopped me before I had a chance to embarrass myself. The silence was deafening, with not a word exchanged among any of the accidental traveling companions. Even speaking with the person seated on your lap is kept to a minimum because others would be forced to listen to your conversation. The erupting blast of a cell phone’s ring tone made everyone reach for their purse or pocket. The unlucky recipient answered, trying to speak softly and to end the conversation quickly.

I hate hearing the erupting blasts of cell phones ringing at work. The desk phones have less intrusive rings by comparison. Fancy cute cell phone ring tones are more distracting.

On the other hand, other aspects of Siberian culture seem thoroughly repugnant. People should respect queues.

Not only was such waiting an assault on my patience, but on my sense of personal space as well. People stand literally breathing down one another’s necks, in such close physical proximity to each other that they are very often touching. When it is finally your turn to approach the service window, other people often flank you on either side, watching everything that transpires. They might even interrupt your transaction, finding any opportunity to make contact with the person on the other side of the window before their turn. This seeming impatience, or perhaps a lack of concern for others, seemed at odds with the general disinterestedness in time’s passage that I witnessed daily, but it turns out to be another thing entirely: it's just that your time at the counter is not strictly delineated as yours exclusively but overlaps with that of others around you.

Russia is a tragedy. The central government is thoroughly corrupt. Going from the Tsarist era to the communist era even more thoroughly undermined the formation of social capital. Concern for others is an essential element of a civilized people. People must be willing to sacrifice for order or society will not work well.

By Randall Parker 2010 December 08 11:08 PM  Culture Compared
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Medieval England Higher Living Standards Than Africa Today

Better to live in Medieval England than Zaire of today. Higher living standards, the castles were in much better shape than they are today, and the population wasn't growing rapidly.

New research led by economists at the University of Warwick reveals that medieval England was not only far more prosperous than previously believed, it also actually boasted an average income that would be more than double the average per capita income of the world’s poorest nations today.

In a paper entitled British Economic Growth 1270-1870 published by the University of Warwick’s Centre on Competitive Advantage in the Global Economy (CAGE) the researchers find that living standards in medieval England were far above the “bare bones subsistence” experience of people in many of today’s poor countries.

The figure of $400 annually (as expressed in 1990 international dollars) is commonly is used as a measure of “bare bones subsistence” and was previously believed to be the average income in England in the middle ages.

However the University of Warwick led researchers found that English per capita incomes in the late Middle Ages were actually of the order of $1,000 (again as expressed in 1990 dollars). Even on the eve of the Black Death, which first struck in 1348/49, the researchers found  per capita incomes in England of more than $800 using the same 1990 dollar measure. Their estimates for other European countries also suggest late medieval living standards well above $400.

These results provide further support for the evidence that Gregory Clark lays out in his book A Farewell to Alms: A Brief Economic History of the World. The pre-industrialization Malthusian Trap had such high death rates from disease and influences reducing fertility that human populations lived less resource-poor lives than people in Malthusian Trap nations in Africa today.

This new figure of $1,000 is not only significantly higher than previous estimates for that period in England – it also indicates that on average medieval England was better off than some of the world’s poorest nations today including the following (again average annual income as expressed in 1990 dollars).

  • Zaire $249
  • Burundi $479
  • Niger $514
  • Central African Republic $536
  • Comoro Islands $549
  • Togo $606
  • Guinea Bissau $617
  • Guinea $628
  • Sierra Leone $686
  • Haiti $686
  • Chad $706
  • Zimbabwe $779
  • Afghanistan $869

It is worth noting that the efforts of Bill Gates to cure the many diseases of Africa will increase poverty. Weakened immune systems due to malnutrition lead to more disease. If people get their diseases cured they will live longer to compete more with each other for limited food spread out over even more people. The result: lower living standards.

Africa can not rise up without huge increases in average skill levels and productivity combined with equally large declines in fertility. Curing diseases will just make the already severe poverty worse.

By Randall Parker 2010 December 08 11:01 PM  Economics Development
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IED Attacks In Afghanistan Up Sharply

The surge of US troops into Afghanistan has been accompanied by a surge in damage from improvised explosive devices.

Between June 2009 and 2010, insurgents’ use of improvised explosive devices, or IEDs, rose by 22 percent. More worrying, say senior US military officials, is that the rate of effective attacks – in other words, bombs that result in injuries to NATO troops or Afghan civilians – has increased 45 percent.

Get this: The Afghans are too primitive to make IEDs that are easy to detect. They do not have the metal needed to make IEDs that military sensor systems could detect.

Afghanistan also has such a high birth rate that the Taliban can replace its losses with plenty teenagers coming of age.

Meanwhile even those not killed or externally injured by IEDs are coming back with brain damage in large numbers. Alas, these are not even the biggest costs of empire.

By Randall Parker 2010 December 08 05:51 PM  MidEast Afghanistan
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2010 December 07 Tuesday
Social Aspects Make Religious Belief Most Rewarding

The people who make friendships in their religious congregations report the most satisfaction with their lives.

"Our study offers compelling evidence that it is the social aspects of religion rather than theology or spirituality that leads to life satisfaction," said Chaeyoon Lim, an assistant professor of sociology at the University of Wisconsin-Madison, who led the study. "In particular, we find that friendships built in religious congregations are the secret ingredient in religion that makes people happier."

In their study, "Religion, Social Networks, and Life Satisfaction," Lim and co-author Robert D. Putnam, the Malkin Professor of Public Policy at Harvard University, use data from the Faith Matters Study, a panel survey of a representative sample of U.S. adults in 2006 and 2007. The panel survey was discussed in detail in the recently published book American Grace by Putnam and David E. Campbell.

According to the study, 33 percent of people who attend religious services every week and have three to five close friends in their congregation report that they are "extremely satisfied" with their lives. "Extremely satisfied" is defined as a 10 on a scale ranging from 1 to 10.

In comparison, only 19 percent of people who attend religious services weekly, but who have no close friends in their congregation report that they are extremely satisfied. On the other hand, 23 percent of people who attend religious services only several times a year, but who have three to five close friends in their congregation are extremely satisfied with their lives. Finally, 19 percent of people who never attend religious services, and therefore have no friends from congregation, say they are extremely satisfied with their lives.

This raises all sorts of questions. Does the ability to share values and experiences with others of similar belief deliver the biggest benefit (in this life anyway) from religious belief? Do religious people who attend services regularly have more friends on average?

There's the aspect of competition between religions: How do the religious denominations and major religions compare in terms of the opportunities they create for the formation of friendships? Could a church or other religious institution compete better by adopting practices that increase social interactions? If people are all sitting there listening to the preacher they are not relating to each other.

Finally, does this result hold any useful insights for companies? Could companies have more motivated employees by forming people into work teams that encourage friendship formation?

By Randall Parker 2010 December 07 08:53 PM  Religion Appeal
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2010 December 05 Sunday
Study Finds Retirement Dates Must Shift Older

People need save a larger fraction of their incomes and work longer to be able to retire with sufficient funds.

Nyhart (www.nyhart.com), one of the nation's largest independent actuarial and employee benefits consulting firms, released their "Fall 2010 401(k) Retirement Readiness Study" today as part of the firm's ongoing look at the effectiveness of the traditional 401(k) retirement benefit.

The 6-month study reviewed nearly 10,000 retirement accounts from employees at 110 public and private companies.  The study evaluated how contributions to their 401(k), the primary retirement tool for most of these employees, would affect the age at which they could retire.

Key results in Fall 2010 401(k) Retirement Readiness Study include:

  • 81% of employees 18 or older will not be able to afford to retire by the age of 65
  • Employees above the age of 55 will need to contribute more than 45% of pay through the remainder of their career to retire by age 65.
  • The average participant, relying on their 401(k) as a primary retirement vehicle, will not be able to retire until the age of 73.
  • Most employees age 60-64 will likely need to work until the age of 75 to be able to afford to retire at their current levels of contribution to their 401(k).
  • 7 in 10 employees age 24-and-under are not expected to retire by age 65.

Future generations of retirees won't have the defined benefit retirement plans that so many current retirees have. People are not stepping up to the savings rates that they need to maintain to be able to retire before they hit their 70s. Savings rates are so low that either many future elderly will live in poverty or they will work in their 70s. We can already see a trend toward higher labor market participation rates for those over 55 years old. That trend will continue out of necessity.

The recession made things worse, especially for those nearing retirement age.

The study is also the first to reveal the impact the economic recession of 2008-2010 has had on consumers age 55 and older who may have expected to retire at age 65. Craig Harrell, a senior retirement advisor and researcher in the study said “Most employees were under-contributing before the recession. With this further dip in retirement balances, if you’re ages 60-64, you have very little time to make up the losses recently incurred. Most employees in this age category will need to contribute as much as 45% of income or plan to work until you’re in your mid-seventies to retire at the level you expected.

Reality is even worse than these number suggest because Peak Oil is near. We just hit a 2 year high in oil prices even though economic activity in the US is still below the pre-recession peak (check out this graph comparing the current downturn with previous downturns by unemployment changes). The high oil prices are delaying economic recovery. This is a sign of what is coming. Peak Oil will cause a long bear market, lower living standards, lower earnings, and higher rates of unemployment. Plus, lower incomes will mean less tax revenue. Therefore governments will cut retirement benefits including medical benefits. So you'll have to pay more out-of-pocket. My advice: up your savings rate and pay off any debts at a faster rate.

By Randall Parker 2010 December 05 09:36 PM  Economics Retirement
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Federal Reserve Lent Big To Foreign Banks And Companies

One might have the impression that during the 2008 financial crisis the US Federal Reserve forced about a dozen big US banks to take loans so that a few weak ones would not stand out and that a few financial institutions that lent for car purchases also got money to keep car sales going. But it went so much deeper and wider. Not just US banks. Not just US financial institutions. The Fed lend to foreign banks and even foreign car companies. Also, it lent in the trillions. The Fed lent $6.2 billion to BMW and $4.6 billion to Toyota during the financial crisis. Yes, the Fed lent billions to companies that compete with US car companies, which import cars from Germany and Japan. The mind boggles.

In the depths of the financial collapse, the U.S. Federal Reserve pumped $3.3 trillion into keeping credit moving through the economy. It eventually lent $57.9 billion to the auto industry — including $26.8 billion to Ford, Toyota and BMW.

$6.2 billion to BMW? How can that be justified for a small foreign luxury brand? What was the Fed trying to prevent? Did all the credit markets freeze up? If so, why did the US have to bail out companies from around the world? I dug thru lots of articles on this (just a subset linked to here) and could find no explanation. Anyone come across a real insider view on this?

The US even lent billions to European banks as Schmuck Superpower. The US Federal Reserve, yes, lent big to banks from Germany and other Euro zone members who have their own central bank.

With the news this week that the Fed pumped money into European institutions during the darkest hours of the recent and continuing economic crisis without so much as a press release or a demand for better cheese prices, it is clear that even with all those big geopolitical shifts we have been hearing so much about, the United States remains the world's sole Schmuck Superpower.

Oh sure, whoever it was that was stamping "Approved" on all those requests at the Fed's "Foreign Banks Only" teller window no doubt thought it was in the self-interest of the United States to keep the global economy from imploding. But look at all the grumbling that Europeans do when asked to help preserve their own common currency and the economic health of their own neighborhood.

The borrowing by some non-US banks was massive.

The presence of foreign banks in the program underscores the squeeze in dollar liquidity after the collapse of Lehman Brothers Holdings Inc. on Sept. 15, 2008. UBS, Switzerland’s largest bank, was the biggest borrower from the Commercial Paper Funding Facility, tapping the program 11 times for $74.5 billion.

Japanese, German, French, British, Swiss, and other foreign banks lined up for cheap money.

While the Federal Reserve helped companies that had never before received Fed assistance, including several U.S. firms that are not financial institutions, the central bank lent billions to foreign banks that operate in the U.S., including Germany's Deutsche Bank Securities, which got $290 billion in mortgage securities; London-based Barclay's, which received a $47.9 billion loan; France's BNP Paribas Securities, Switzerland's UBS Securities LLC and Daiwa Securities America, a subsidiary of one of Japan's largest brokerage houses.

Why? That's not just a rhetorical question. Also, why the Fed by itself? There are other central banks in the world.

Loans were being doled out in the trillions per bank.

B of. A’s Merrill Lynch unit tapped the primary dealer facility for $2.02 trillion, according to tabulations made by Raymond Stone of Stone & McCarthy Research Associates. Citi borrowed $2.02 trillion, and Morgan Stanley /quotes/comstock/13*!ms/quotes/nls/ms (MS 25.64, +0.03, +0.12%) used the same facility to borrow $1.9 trillion, Stone said, though Morgan Stanley’s borrowings slowed after the Fed granted the bank holding company status.

Trillions!

By Randall Parker 2010 December 05 11:47 AM  Economics Stampeding Herd
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2010 December 04 Saturday
Spanish Air Traffic Controllers In Fat City

Why Spanish airports are closed. The air traffic controllers feel sick about losing a couple hundred thousand dollars per year in overtime.

Spain's air traffic controllers have been involved for over a year in bitter negotiations with state-owned Aena over wages, working conditions and privileges.

The dispute intensified in February when the government restricted overtime and thus cut average pay of controllers from US$463,610 a year to around US$264,920.

It is absurd to have Spain or Greece or Portugal sharing a currency with Germany. It is not going to become any less absurd next year or the year after. This has got to sink in eventually.

Business people in the southern countries call it the euro bind. Oscar Turner, who runs a film company in Portugal, explained, “The euro’s great if you’re traveling around, but it’s an absurd idea to have the same currency in a country like Greece or Portugal as in Germany, which has totally different habits and culture.”

The highly indebted countries of the euro zone “can’t grow their way out of debt,” Mr. Turner said, nor can they devalue to make their exports more competitive. “No one in these countries can make the same product for a price that competes” with Hungary, let alone Turkey or China.

Different habits and culture? That's part of it. But let us boil it down to brass tacks: Labor laws make lay-offs extremely difficult and powerful unions (backed by laws even stronger than the Wagner Act which drove so many US airlines and car companies bankrupt) push labor rates up to uncompetitive levels. These countries need the ability to inflate their currencies to lower inflation-adjusted wages.

Jean-Claude Trichet, president of the European Central Bank, so totally misses the clue train.

Mr. Trichet studiously avoided singling out specific countries to blame for the sovereign debt crisis, which emerged because of creeping indebtedness. Instead, he said, a “quantum leap” was needed in the zone’s fiscal and economic governance.

Specifically, he called for a “quasi-federation — not a political federation” to better coordinate “the budgetary surveillance processes and rules that we have.”

Economic governance? What, with a central labor law? Are the Germans really so many in number that they have so many votes in the Euro Parliament to get legislation thru a more powerful European Parliament that would break the unions and undo the labor laws of southern Europe? (Um, no) There's an air of unreality to his thinking. Federation does not solve the problem because it gives the profligate control over the abstemious. Germany mixed in with Spain and Italy is Germany with more of Spain and Italy's laws and their ability to divert more money from Germany.

The only way central rule of Europe could work: Make the non-German states colonies ruled by the Germans. Then the Germans could impose labor law changes that would provide Spain, Greece, Portugal, and Italy with the lower wages, greater workplace discipline, and greater ease in worker firing that they need. You might laugh. But at an economic level Europe would perform better. The Euro elites need to understand that they can not impose German ways over the rest of Europe.

Really, the Euro is broken. The people in Spain and Italy do not want to wake up tomorrow and put away their class warfare attitudes toward the more productive. They want political power over the more productive and want to force up their wages to uncompetitive levels.

Oh, and the British should thank George Soros for helping to keep them out of the Euro.

By Randall Parker 2010 December 04 09:49 AM  Europe Monetary Union
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