Was Eisenhower the last President to understand Opportunity Cost

From a Quote taken from post by  Bob Higgs:

The worst to be feared and the best to be expected can be simply stated.

The worst is atomic war.

The best would be this: a life of perpetual fear and tension; a burden of arms draining the wealth and the labor of all peoples; a wasting of strength that defies the American system or the Soviet system or any system to achieve true abundance and happiness for the peoples of this earth.

Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed.

This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals.

It is some 50 miles of concrete highway. We pay for a single fighter with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people.

This, I repeat, is the best way of life to be found on the road the world has been taking.

This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron.

This is true of all Government spending whether it is under the guise of defense or “Social Justice.” The money has to come from somewhere, and that somewhere probably had a drastically different use for it.

Politicians will always try to have it both ways.

“If we recklessly cut taxes for the wealthiest 2 percent, then Obamanomics will look an awful lot like Reaganomics,” Jackson said in a statement.

Jesse Jackson Jr. (D-Ill.) said this to appease his base. That should be obvious. So what happens when the tax extension starts to produce some growth, unsustainable but still some growth. Well he’ll just say it was because all that reckless spending of course, the good Keynesian answer.

This is the problem with economics in general. There is no controlled experiment. The Keynesian approach has been tried and failed to produce any significant results. The CBO’s most recent report says:

• They raised real (inflation-adjusted) gross domestic product by between 1.4 percent and 4.1 percent,
• Lowered the unemployment rate by between 0.8 percentage points and 2.0 percentage points,
• Increased the number of people employed by between 1.4 million and 3.6 million, and
• Increased the number of full-time-equivalent (FTE) jobs by 2.0 million to 5.2 million compared with what would have occurred otherwise. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers)

No doubt the Keynesians will say told ya so….of course they won’t read the rest of the post that tells the limitations.

Those reports, however, do not provide a comprehensive estimate of the law’s impact on U.S. employment, which could be higher or lower than the number of FTE jobs reported, for several reasons (in addition to any issues concerning the quality of the reports’ data):

• Some of the jobs included in the reports might have existed even without the stimulus package, with employees working on the same activities or other activities.
• The reports cover employers that received ARRA funding directly and those employers’ immediate subcontractors (the so-called primary and secondary recipients of ARRA funding) but not lower-level subcontractors.
• The reports do not attempt to measure the number of jobs that were created or retained indirectly as a result of recipients’ increased income, and the increased income of their employees, which could boost demand for other products and services as they spent their paychecks.
• The recipients’ reports cover only certain ARRA appropriations, which encompass about one-fifth of the total either spent by the government or conveyed through tax reductions in ARRA; the reports do not measure the effects of other provisions of the stimulus package, such as tax cuts and transfer payments (including unemployment insurance payments) to individual people.

Consequently, estimating the law’s overall effects on employment requires a more comprehensive analysis than the recipients’ reports provide.

Hmmm I wonder if they are using the same models that failed to keep unemployment under 9% with the Stimulus. You know the reason for the Stimulus in the first place?

So now, Obama is going to cave into a non-sustainable tax extension that will produce some growth. Companies will at least know what their tax rates for the next two years and they will plan accordingly. Showing that Higgs’ Regime Uncertainty has some merit. If the economy grows it will be because of investment not consumption.

All that won’t matter to politicians like Jackson Jr. They will pick and choose what ever explanation fits better to their a priori ideals. They want the stimulus to work, it gives them a reason to spend money on things that no sane person would spend money on like Trains to Nowhere. It gives them reason to give out pork to the people who fund their campaigns. Both parties do it, Jackson Jr.  and Bush both really want/wanted stimulus to work.

The reason politicians can get away with all these shenanigans is because economists will never be able to prove one theory over the other. The economy is far too complex for even the most sophisticated mathematical model. With modern economist obsession with math, which I don’t see changing anytime soon. The state of modern economics is much the same as the state of politics, they’ll all just pick and choose which explanation fits their priors better. A Liberal economist will choose the Keynesian answer, because it fits their ideology better. A Conservative will pick a supply-side or monetarist answer and hopefully Independents will pick more of an Austrian answer.

It will be interesting to see that when grow and unemployment start to pick up, as companies start to invest again, what stories differing ideological camps choose to tell.

Surprise, guess where that Tidal Wave of outside Cash is coming from?

If you guessed Republicans you’d be wrong. According to the Wall Street Journal, most of that cash is coming from Unions to Democrats.

The American Federation of State, County and Municipal Employees is now the biggest outside spender of the 2010 elections, thanks to an 11th-hour effort to boost Democrats that has vaulted the public-sector union ahead of the U.S. Chamber of Commerce, the AFL-CIO and a flock of new Republican groups in campaign spending.

You all remember the Citizens United SCOTUS ruling and you should remember Obama finger waging at the SCOTUS saying that a “Tidal Wave” of cash will threaten democracy. Well he is kinda right. The only thing that threatens democracy are Democrats who try to make decisions for the populous. Think Soda Tax, Smoking Tax, blah blah blah.

The 1.6 million-member AFSCME is spending a total of $87.5 million on the elections after tapping into a $16 million emergency account to help fortify the Democrats’ hold on Congress. Last week, AFSCME dug deeper, taking out a $2 million loan to fund its push. The group is spending money on television advertisements, phone calls, campaign mailings and other political efforts, helped by a Supreme Court decision that loosened restrictions on campaign spending.

President Barack Obama has criticized the Supreme Court decision that opened the door to more spending by corporations and unions. When asked about AFSCME’s ramped up campaign efforts following the court’s decision, the White House focused on largely anonymous campaign spending by what it termed “special interests.”

As usual the Democrats are not the honest ones here.

Government Eployees are better than you.

How else can you explain why they get all the perks?

The biggest expense uncovered in the audit was $30 million in unjustified bonuses to employees and management in 2008 and 2009 without consideration of performance.

One example was paying employees overtime for removing snow and working holidays and then giving additional “snow removal bonuses” and “holiday bonuses.”

The Comptroller’s Office audit released Tuesday says taxpayers also paid $430,000 for free E-ZPass transponders for employees to get to work and nearly $90,000 in scholarships for workers’ kids.

The audit shows turnpike authority employees got bonuses and overtime for working their birthdays and holidays.

Comptroller Matt Boxer says tolls are set for another increase in 2012.

“While tolls are going up, the Turnpike Authority is overpaying its employees, overpaying its management, overpaying for its health plan and overpaying for legal services,” Boxer said in a statement.

Public money was also used to cover costs for a toll operators event that none of the authority’s employees actually attended.

The real question is why do we still have toll booth operators? Could it be that they are part of the sacred cow, the Teamsters Union?

Krugman out smarted by his commenters.

This article at American Thinker is wonderful. It’s like Christmas came early!

For six months, they made Krugman’s blog one of the more informative and interesting places to hear economics debated. In part, this was because they gave Krugman a serious run. Their posts were long, near the 5,000-character limit set by the New York Times. They were reasoned. They were knowledgeable. They carried citations to economic science literature that one might expect in a Ph.D. dissertation.

And so their rebuttals were often decisive.

For example, when Krugman a month ago drew one of his famous “trend lines” based on a single point, a blogger named rjh immediately responded, “These trend lines you are drawing all over the place. Pardon my French, they are complete garbage.” And nearly half of Krugman’s commenters joined to point out that Krugman was arguing junk. Krugman was forced to make two defensive replies; both were immediately refuted.

Responding to Krugman’s praise for the high taxes in Europe and his repeated denial that tax cuts might stimulate an economy enough to make up for revenues lost, a European posting under his initials jg pointed out that the low Reagan-Clinton tax rates made “being an entrepreneur interesting again. All those internet startups like eBay, Amazon or Netscape would probably never have been created if it weren’t possible for the inventors to get rich.” This anti-progressive notion that the “evil rich” might actually create growth if they were not taxed — on his “personal” blog, no less — must have made Paul spit up his morning coffee.

I don’t comment on Krugman on his blog because my comment have barely made it past the censors. I’m quite happy to see this level of criticism get past the censors, so much so that Krugman has to specifically address his commentor’s criticisms.

Things then got still worse. When Krugman repeated his claim that Bush’s tax cuts had “caused” the deficit and damaged the economy, commenters first taught Krugman how to count. They then cited two papers by the Romers showing that tax cuts help economies. Christina Romer is, of course, the chief economic advisor to President Obama.

When Krugman repeated one of his “debt is good” posts, posters linked to the economic science from Reinhardt and Rogoff showing that high debt is inimical to economic recovery.

Occasionally, Krugman attempted a reply. For example, he dissembled that Reinhardt and Rogoff had “highlighted” a single postwar American experience, which he dismissed as “spurious.” The commenters did not let him get away with it. Within 24 hours, Sean had pointed out that Reinhardt and Rogoff had found similar effects of debt in six countries on three continents over four decades, including Canada, Japan, Greece, and Belgium. Krugman then struggled to find something “spurious” about each of these. Sean‘s rebuttal showed that Krugman was refusing to meet any burden of proof. Still worse, Samuel showed that Krugman’s reasoning, if applied generally, would forever insulate Krugman’s ideology from any refutation of any kind.

…Which is perhaps what Paul Krugman wants, but it is not economic science.

Anyone that doesn’t drink from the Krugman Kool Aid Keg, knows that what Krugman produces isn’t science. It’s political propaganda. It’s propaganda of the worst kind, the kind wrapped in the rhetoric of science, but holds itself unaccountable from any form of refutation. Hayek had a word for it, Scientism.

I also found it interesting that Krugman has never even bothered to read any literature on Public Choice. It isn’t surprising. He’d have to admit that his Big Government policy proscriptions would cause more harm than good.

Krugman’s blog commenters were especially relentless in pointing out his inconsistencies. In one post, Krugman admitted that “politicians will always find ways to shield the powerful.” Posters piled on, pointing out that Krugman’s universal policy prescription gave politicians more power under the assumption that they would defend “the proletariat.” Krugman replied that he was “sure that there’s a large literature” on government cronyism and corruption. Secure in his big-government ideology, he admitted that he had never read that literature. But like the ideologue that he is, Krugman then expressed his faith (the only word appropriate) that “bureaucracy will do a heckuva job” if it is not “downgraded and devalued.” Bloggers responded by citing the latest economic science showing the impossibility of Krugman’s “utopian dictatorship-by-bureaucracy.”

So what is Krugman or his liberal Kool Aid drinkers to do, when they get rebutted with facts? They censor them of course.

By July, Krugman had lost his “Battle of the Blog.” On July 23, Latrina commented, “Who is this Sean from Florida? He takes everything that [the] Professor [says] and shreds it, piece by piece. He shouldn’t be allowed to post his comments on this blog since he seems to be winning all the debates. We progressives need to stick together and embellish our talking points without someone from the outside pointing out fallacies in our ideology.”

Krugman had also had enough. On July 23, Krugman showed that he was clearly no longer “in love” with his commenters. Now he called them “ranters” and “trolls.” On July 28, Krugman changed his comment moderation policy. Claiming that “ranters … say the same thing every time,” Krugman announced that he was going to throw away posts longer than “three inches.” His thinking must have been thus: Three inches are sufficient to write “Krugman is brilliant,” but not sufficient to present a documented and persuasive rebuttal to whichever of Krugman’s standard arguments he was peddling that day.

Do you really need anymore proof that Liberals don’t do economics? Facts hurt their worldview to much.

You know Obama is not doing so hot when Krugman’s support goes away.

It’s more of a complaining piece than anything else. Yet, Krugman’s column should give Obama some pause.

But progressive disillusionment isn’t just a matter of sky-high expectations meeting prosaic reality. Threatened filibusters didn’t force Mr. Obama to waffle on torture; to escalate in Afghanistan; to choose, with exquisitely bad timing, to loosen the rules on offshore drilling early this year.

Then there are the appointments. Yes, the administration needed experienced hands. But did all the senior members of the economics team have to be protégés of Robert Rubin, the apostle of financial deregulation? Was it necessary to install Ken Salazar at the Interior Department over the objections of environmentalists who feared, rightly, that his ties to extractive industries would make him slow to clean up a corrupt agency?

This has to be the first piece I’ve read from Krugman that didn’t explicit blame Bush for all that’s wrong with the Obama administration. Krugman has tried that for almost 2 years now, and only highly partisan Democrats, like himself, actually bite at that anymore. Everyone knows that Obama didn’t have any business being in the White House. The Democrats were blinded by rhetoric and a candy coated surface. Just goes to show how “smart” they really are.

O.K., I don’t really know what’s going on. But I worry that Mr. Obama is still wrapped up in his dream of transcending partisanship, while his aides dislike the idea of having to deal with strong, independent voices. And the end result of this game-playing is an administration that seems determined to alienate its friends.

Imagine that, politicians not liking independent thought. Imagine a populace that doesn’t drink the Kool Aid, that probably frightens Krugman and the rest of the Democratic party leadership more than any Republicans gains this November.

SEC vs Goldman: A look back at my Bootlegger and Baptist prediction

Now that “Historic Financial Regulations” are about to be signed into law, wouldn’t you know it, the SEC and Goldman have settled on that pesky investigation in to Abacus. Some people might think it just mere coincidence, not me. I see it as all part the plan. First take a look at what I said back in April.

Bootleggers: Goldman Sachs

• What do they care about image anyway right?
• Unlimited Bailouts at the discretion of the POTUS, whom they already bought.
• More than likely, the SEC charges will not amount to any fine, or if there is a fine, it will be minuscule compared to what they made over the last year, thanks to Fed money.

Baptists: Obama and the Democrats

• They get to appear tough on Wall Street.
• They want to pass the Dodd bill, which wouldn’t have stopped the crash from happening if it would have been passed 5 years ago.
• They get to appeal to the emotions of their base, Democrats would think Obama sold them out, maybe stop some of the hemorrhaging of support.
• They will try to campaign on the Dodd bill instead of Healthcare, because of Obamacares horrible approval numbers.

They get to use this to write lots of new regulations to help their buddies. This isn’t capitalism, it’s Mercantilism.

Bailouts

First things first, what about bailouts? Well the new bill gives the FDIC new powers to break up big financial institutions if they are deemed a systemic risk. Does it actually do that? Not really.

The FDIC will take over big troubled financial firms. It will then do whatever it must to both stabilize the financial system and maximize the value of failed firms’ assets, so to minimize the costs of the resolution process. In order to achieve financial stability, the FDIC will have to cover many of the big firm’s obligations. After all, that’s kind of the whole point. Consequently, these counterparties, customers, creditors, etc. will prefer to do business with companies that fall under the resolution authority’s umbrella. That should provide these big regulated firms a competitive advantage over smaller ones.

So what really happens is that the resolution process instead of bankrupcy is going to be a politically run operation. I don’t think anyone will argue that regulators are already politicized. Liberals complained about it during the Bush years, and conservatives complain about it now. So being already politicized, which creditor do you think will get priority during the resolution process? Remember how the GM and Chrysler bankruptcies went? That’s right the more politically connected groups will get first cut at any money coming from the FDIC.

This is nothing more than a lobbyist wet dream come true. That just gravy though, does it really end to Big to Fail? Again not really. By giving these big firms even more competitive advantage over smaller firms, by giving them monopoly power, thanks to the Federal Government barring entry of smaller firms, they only get bigger. As they get bigger and make more and more money, they give more and more money to various politicians that govern the financial regulatory boards. If the FDIC regulators start to think that a certain firm, (*cough Goldman Sacs*) is getting too big, a call from powerful Senator will curb their fears, not doubt about it. We’ve seen this play out with Fannie and Freddie already. How long before we have Rep. Bawwny Frank up berating people for questioning Goldman’s balance sheet, like in 2003?

“These two entities—Fannie Mae and Freddie Mac—are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

So when it comes to ending Too Big to Fail, this bill falls short, especially considering it doesn’t even attempt to do anything about Fannie and Freddie!

My April prediction: 1

Goldman: 1

Taxpayers: 0

SEC Fine

That’s got to be the biggest joke of them all. $550 million? Are you kidding me? Goldman earned $13.39 billion in profits in 2009. So taking the $550 million and dividing it by the $13,390 million it made last year alone and you get a laughable 4.1% Oh it gets even better, from the same Post story, Goldman gave out $16.7 billion in compensation, most of that was bonuses. So now the fine amounts to 3.3% of its bonus packages. HA HA HA nice try.

My April prediction: 2

Goldman: 2

Taxpayers: 0

Baptists: Democrats

They pretty got almost everything I had predicted. They passed their bill, thanks to demagoging the same firms that this bill protects. And just like the Health Care Bill, we don’t know how it’s going to work!

The bill, completed early Friday and expected to come up for a final vote this week, is basically a 2,000-page missive to federal agencies, instructing regulators to address subjects ranging from derivatives trading to document retention. But it is notably short on specifics, giving regulators significant power to determine its impact — and giving partisans on both sides a second chance to influence the outcome.

As I said before, this is a lobbyist wet dream. Thank you Dodd, Frank and Obama!

Now the only question is will this pay off. Will the Democrats be able to use this for November? They are claiming victory over the Goldman settlement, using it to push this financial regulatory bill. Will it pay off? Kim Strassel says, maybe not.

That’s because, like stimulus and health care, Democrats turned the financial regulation bill into a monstrosity. What started as a promise to streamline and modernize the financial system turned into 2,300 pages of new agencies and new powers for the very authorities that fomented the financial crisis. The bill is laden with uncertainty and brimming with costly regulations on small businesses. Sen. Chris Dodd and Rep. Barney Frank made it easy for Republicans to pronounce their bill more Obama Big Government—a “Main Street takeover”—and to justify their votes against it.

Those votes were made easier by the knowledge that, like stimulus and health care, this is legislation that has overpromised. The bill does nothing to address the root causes of the crisis. Yet Mr. Obama recently assured the nation that it not only fixes the system’s problems, but was “good for businesses, it’s good for the entire economy.”

So tell me what you think, how did I do back in April? I think my predictions were spot on. Although I should have added in the Bootlegger part, that the end result, the Financial Regulation Bill, gives Goldman an even bigger slice of the pie by making the new regulations so hard and so costly that only the Too Big to Fail firms are the ones that are able to comply. So score another on to Goldman.

That $550 million will go down as the cheapest multi-billion dollar investment ever.

Democrats: 3 for 4, not bad.

Update: From Charles Rowley on the Federal Reserves role.

The Federal Reserve will become the primary regulator for large complex financial firms of all kinds, as it adds the responsibility for maintaining financial stability to its existing responsibilities for promoting price stability and maximum sustainable employment. To make sure that the Federal Reserve is completely politicized, the new legislation will  require it to obtain the prior agreement of the Department of the Treasury before using its extraordinary authority to lend to almost anyone and to force any large company, bank or non-bank, to boost its capital and its liquidity in accordance with transient Fed impulses.

As further evidence of its receding independence from the Executive Branch, the Fed will be assigned an additional vice-chairman,  responsible for supervision, and to be chosen by the White House, no doubt as the enforcer of its comprehensive financial and industrial policies.

Almost without a whimper from Wall Street, and with an embarrassing silence from the media, the United States economy is being propelled irreversibly away from laissez-faire capitalism, to the crony capitalism of  national socialism.

Market Failure vs Government Failure

I’ve been going back and forth with Prof. Hutchinson at Dissenting Justice on the Progressive blogging thread I wrote about earlier. It’s nice to have a civil discussion on a liberal blog again.

It got on the subject of market failures and Prof. Hutchinson makes some good points. I think that he, being a liberal, plays down the anti-capitalistic views on the Left. Then talks about how Government intervention rests on “market principles.”

As far as the rest of your post, I am somehwere in the middle on these things like regulation. Many liberal economists are as well. I would not say that everyone on the Left (or even most persons on the Left) favor government over markets. That just is simply untrue — at least when you think of liberal economists (i.e., people who know something about economics).

I strongly believe in the concept of a market failure. Sometimes, correcting a market failure requires government intervention, but usually, this intervention rests on market principles. So, for example, the polluter does not internalize the costs to society of pollution. The market intervention should force the company to take these costs into consideration. This is a simplistic example, but it shows collaboration between market and private among the Left.

I think his view is indicitive of the Left. Yet, he makes no mention of Government failure, which is also indicitive of the Left. Why do liberals only talk about Government failure when the other team is in charge? (Bush and Katrina, Iraq, Global Warming, etc ad nauseum)

Here’s my response.

I see your point. I just think it’s indicative of more than just his double standard.

I agree markets do fail. But how they fail and to what extent is largely subjective. We probably will agree on the margin but not on average, on what constitutes a market failure. For example, you may or may not think the financial crisis was a market failure, while I see it as a government/regulation failure. I think a lot of the cause of it was due to past government actions, institutional moral hazard (ie Too Big to Fail, Russ Roberts has a good essay on it)

I think the big place we might differ is on solutions to market failures. I think the predominant though among the Left is that Government needs to step in. I disagree, due to Public Choice concerns. I see government action as being the worse of any possible solutions in a lot, but not all cases.

I think another place we differ is on your assertion that “intervention rests on market principles.” I take the Hayekian view that markets are a very dynamic and random phenomena. We can’t predict what 1000 people are going to do tomorrow, yet the market is explicitly dependent on what those 1000 people do. The incentives for each actor might be exactly the same, but each of those 1000 might do totally different things, that might be perceived by an outside observer to be totally random or worse, go against “market principles.” (I’m assuming that when you say market principles your talking about rational choice theory)
When your say that Government intervention rests on market principles, I see that as an oxymoron. The Market is decentralized, and by imposing top down centralized rules, your not going to get the results you want. I liken it to a mad scientists working in a lab, saying that evolution isn’t working fast enough, so he is going to help it along. How does he know which path evolution was going to take? Same with intervention resting on market principles. How does the central planner know what the market was going to do?

While you say the government will force the company to internalize externalizes, I say buy doing that your distorting what the market was going to do. How do we know the market wasn’t going to bankrupt that company from the get go?

Think about the BP spill. If it wasn’t for Government rules and regs that restrict entry into the drilling business, who’s to say Transocean, Halliburton, or BP wouldn’t go bankrupt over their actions? Or what about Goldman Sachs. Government intervention, bailouts, kept Goldman in business. The market would have bankrupted all those Wall Street firms that had a part in crisis, but it was government interaction that keeps them in business now, against market principles.

I could go on, but I’ll stop. I think it’s enough to say we will probably never agree, but I don’t see that as a bad thing.

Oh one last thing. Re: “I would not say that everyone on the Left (or even most persons on the Left) favor government over markets.”

That’s your opinion and I respect that, but we don’t have any hard data on that. At least I couldn’t find a poll that explicitly asks “Do you favor Government over Markets?” The best we can do for data is use a proxy. The Public option is a good proxy, I think. We can probably bicker on the percentages of Liberals that want a public option, depending on the pollster, but I think we can both agree that it the majority. Right?
Also there is this old Rasmussen poll (Which liberals usually don’t like, I don’t know your take on Rasmussen) that says 30% of Democrats prefer socialism to capitalism (39%). Either way Capitalism aka markets are in the minority.

http://www.rasmussenreports.com/public_content/politics/general_politics/april_2009/just_53_say_capitalism_better_than_socialism

We’ll see what the response will be. It’s nice to be able to have a good conversation and not be called any ad hominems. Kudos to Prof. Hutchinson, I wish liberals were more like him.

What’s keeping stocks up?

I’m a pessimist when it comes to stocks. For the life of me I can’t figure out why the Dow is still going up.

I know the conventional wisdom says it’s because of green shots, fundamentals or that housing sales are going up. Yet, it’s imperative to remember this is the same conventional wisdom that said housing prices could never fall. That the bubble (before it popped) was sustainable and based on market fundamentals. Needless to say, I think they are wrong. I don’t think that the economy is anyway near being any better than it was before 2008.

The housing market is still over inflated, thanks to numerous government interventions that distort the real economic picture. The only reason that the housing number, for April, were any good is because of the rush to buy and still get the tax credit. Expect May, June and July’s numbers to be “unexpectedly” low. Of course there is nothing unexpected about it, the MSM had pretty much resigned itself to a propaganda machine for the administration.

So what is keeping the Market up?

I think a reasonable expectation, given Higg’s Regime Uncertainty theory, is that the Market is waiting for November.

If you think about it, it does make some sense. The Obama administration has, to a high correlation, played this recession the same way FDR did in the 30s. Obama has taken over some private firms, instituted numerous regulations and passed very business unfriendly laws. Business doesn’t know what’s next.

You have the FCC trying to take over the internet (Yes yes I’m being overly dramatic here, only because this hasn’t gotten nearly as much press as it needs, probably because the News media will hit the jackpot when this goes through.) You have new regulations, that pretty much no one has read, on the financial sector. Even though finance has taken a drubbing from the public, they still provide the cash that’s necessary for business to get off the ground. You have new health care laws that severely negatively impact hiring new workers. And who knows what’s next, which is the essence of regime uncertainty.

The only way to really tell is to wait till November. If the market has a huge rally, when Republicans win big, then we may know a little bit. Yet, it important to know that even then we won’t know the answer. Many people might wait to see if the Republicans do what they say they are going to do; cut spending, bring in the deficits and decrease government control of the economy. If they don’t do any of those things, I think a lot of people will continue to stand on the sidelines until we actually get someone in office that will cut down the government.

GM Ponzi Scheme

Here’s a great little piece from Hotair.

The backers of the bailouts to General Motors cried with triumph this week when the automaker announced that they had repaid their bailout loans ahead of schedule.  That amounted to proof of the wisdom of government intervention, the argument went, and wondered aloud why bailout critics didn’t acknowledge their errors.  Perhaps it’s because the government essentially got paid off with even more government money:

Here’ s how the game goes. GM takes TARP money to balance it’s books. GM has to pay back that money. So it uses another line of credit from the Treasury, to pay the Treasury for the original TARP payments. Sounds like the Goldman case from my other post doesn’t it? Call it what you want, I call it a Ponzi scheme. I’m sure the SEC is looking into that as I write, right?

Instead, GM seems to be using TARP funds from an escrow account at Treasury to make the debt repayments. The most recent quarterly report from the Office of the Special Inspector General for TARP says “The source of funds for these quarterly [debt] payments will be other TARP funds currently held in an escrow account.” See, Office of the Special Inspector General for TARP, Quarterly Report to Congress dated April 20, 2010, page 115.

So why are Liberal hell bent on giving these idiots more power and control over the economy and our finances? I’m not sure. I have a few hypothesis. Maybe they think this time will be different? Maybe they think they know better know? I don’t know what it is. It’s Liberal Logic and I’m just baffled by it.

Anyway, great last line from Ed Morrissey:

Instead, we have another good reason for government to refrain from bailing out private companies. It makes them act like government when it comes to transparency about their finances. This claim really does prove that GM now stands for Government Motors.