Archive for the ‘Regulation’ Category

Romney is a Keynesian

January 27, 2012 Leave a comment

I posted this on a Legal Insurrection thread but thought I’d post it here as well.

Newt can’t say it but everyone else should be saying it. Romney is not a Reagan Republican, he is a Bush Republican. Romney is a progressive, he like all progressives believe that Govt (if run by the right people aka himself) will bring a better society. His tell is when he talks about Regulations. He talks about “smart regulations” like all progressives do. Romney says that the free market needs regulations, which show how good a Keynesian he really is just like Bush.

Govt doesn’t create jobs. It can only give the right environment so that markets can create jobs. I’ve heard Newt talk about that, I’ve never heard Romney say anything like that. Romneynomics = Bushonomics = Obamanomics = Keynesian clap trap that caused this whole mess…the idea that our betters are the ones that should make the decisions. Newt at least is taking the good parts of Paul (Fed, economics (Reagan was an Austrian)) and leaving the bad parts of Paul. Romney would never touch the Fed.

I’m posting this on my Xoom so Ill add some links and videos to add some evidence for me claims later.


If you don’t like the results, sit on it for 2 years.

January 21, 2012 4 comments

That’s what happened to a new (old) study that showed that selling junk food to kids in school doesn’t lead to overweight kids. According to a study by Penn State sociology professor Jennifer Van Hook, Competitive Food Sales in
Schools and Childhood Obesity: A Longitudinal Study

Employing fixed effects models and a natural experimental approach, they found that children’s
weight gain between fifth and eighth grades was not associated with the introduction or the duration
of exposure to competitive food sales in middle school. Also, the relationship between competitive foods
and weight gain did not vary significantly by gender, race/ethnicity, or family socioeconomic status, and it
remained weak and insignificant across several alternative model specifications (bolded for emphasis)

The real travesty is that Prof. Van Hook sat on the data for almost two years.

Van Hook said that the findings surprised the researchers so much that they held off publishing for nearly two years “because we kept looking for a connection that just wasn’t there.”

This is a problem with a lot of junk science now. A lot of researchers fall victim to Belief Bias. They attribute the validity of the research based on what they believe the valid conclusion should be. In this case, Dr. Van Hook had already made up her mind that junk food in middles schools should lead to more overweight kids. When the data fails to show a correlation, they person simply thinks that there is an error in the data, not an error in themselves. They then try to tease (more like torture) the data to try and fit the preconceived paradigm. In this case, they couldn’t torture the data enough to find anything that fits what they think ought to be true. The opposite is also very true in Academia, when they have one piece of data that confirms their bias, they tout that data as proof positive that their hypothesis is right.

There is nothing wrong with this. This is how science is done. You make a hypothesis, form an experiment, look at the data to see if it fits with your hypothesis. Three things can happen; the data can fit your hypothesis, in which you try different experiment to test your hypothesis. If repeated experiment all confirm your hypothesis, you can make a reasonable assumption that your hypothesis is correct. The second thing to happen is that the data totally refutes your hypothesis, in which case you reject the hypothesis and try again. The third thing to happen (which is common) is that some sort of systemic error occurred in your experiments that makes the data inconclusive. The only thing to do is try to reformulate your experimental procedure to get rid of the error. That is what should happen.

The problem now is what to do with all that legislation that was passed aiming to help the children? Policies were put into place based off of bad science. They made the assumption that junk food in schools WERE the cause of obesity, before any data could be looked at. This is the central fallacy of most Statist (Paternal) solutions to societal problems. They are never really based on any actual science. They same can be said for cell phone bans around the country, when there is no evidence that banning cell phones while driving actual does anything?

The other thing about this junk food study, is that it shows once again that the conventional wisdom is usually wrong. It shows that Academics are the easiest people to fool. It shows the depths to which people will hold on to their beliefs when the data is staring them in the face telling them they are wrong. I do have to give credit where credit is due. The research, Dr. Van Hook, actually published the study. A lot of researchers get so married to their pet hypothesis, they will not publish anything that might refute it.

I highly recommend listening to this Econtalk podcast with Gary Taubes.

Gary Taubes, author of Good Calories, Bad Calories, talks to EconTalk host Russ Roberts about what we know about the relationship between diet and disease. Taubes argues that for decades, doctors, the medical establishment, and government agencies encouraged Americans to reduce fat in their diet and increase carbohydrates in order to reduce heart disease. Taubes argues that the evidence for the connection between fat in the diet and heart disease was weak yet the consensus in favor of low-fat diets remained strong. Casual evidence (such as low heart disease rates among populations with little fat in their diet) ignores the possibilities that other factors such as low sugar consumption may explain the relationship. Underlying the conversation is a theme that causation can be difficult to establish in complex systems such as the human body and the economy.

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.

    Welcome to the Peoples Republic of San Francisco

    July 9, 2010 1 comment

    Experience should teach us to be most on guard to protect liberty when the governments’ purposes are beneficent. Men born to freedom are naturally alert to repel invasion of their liberty by evil-minded rulers. The greatest dangers to liberty lurk in insidious encroachments by men of zeal, well-meaning but without understanding.
    -Justice Louis Brandeis

    Think about that as you read this article from our friends in the Peoples Republic of San Francisco.

    Sell a guinea pig, go to jail.

    That’s the law under consideration by San Francisco’s Commission of Animal Control and Welfare. If the commission approves the ordinance at its meeting tonight, San Francisco could soon have what is believed to be the country’s first ban on the sale of all pets except fish.

    So why exempt fish? 
    Categories: Liberal, Libtard, Regulation

    Does Obama have a CEO problem or is Fareed Zakaria just not as smart as he thinks he is?

    July 6, 2010 2 comments

    Judging by Zakaria’s latest column, Obama’s CEO problem, I’m going with the second.

    Now I’m not a fan of Zakaria. I find his analysis pedestrian at best. In his column Zakaria notes, correctly:

    Actually, there is a second stimulus that could have a dramatic effect on the economy — even more so than government spending. And it won’t add to the deficit.

    The Federal Reserve recently reported that America’s 500 largest nonfinancial companies have accumulated an astonishing $1.8 trillion of cash on their balance sheets. By any calculation (for example, as a percentage of assets), this is higher than it has been in almost half a century. Yet most corporations are not spending this money on new plants, equipment or workers. Were they to loosen their purse strings, hundreds of billions of dollars would start pouring through the economy. These investments would probably have greater effect and staying power than a government stimulus.

    …that “stimulus” is investment. Investment is what drives growth, innovation and productivity. I really don’t like how Zakaria uses the word “stimulus” for investment. Investment is the blood that drives the economy, it’s not some caffeine fix that gets things going. Investment has no stimulating effects, it is the whole damn thing.

    The simple Keynesian equation that “models” the economy is C + I + G + NV = Y. Every time you hear a squirmy head on TV talk about aggregate demand, they are almost always talking about C, consumption. Their “solution” is more G, thanks to some fancy hand waving that says the multiplier is greater than 1.

    Using that Keynesian framework, a “stimulus” of $800 billions should, in theory, give some real quantitative results, in jobs and GDP. So why is GDP still going down? Zakaria makes the same insane arguments that DeLong and Krugman make. That the solution is more “stimulus.”

    To be clear: There is a strong case for a temporary and targeted government stimulus. Consumers and companies are being very cautious about spending. Right now, government spending is keeping the economy afloat. Without a second stimulus, state and local governments will have to slash spending and raise taxes, which will produce a downward spiral of higher unemployment, slower growth, lower tax revenue and a larger deficit. Joel Klein, the New York City schools chancellor, told me that when the stimulus money runs out at the end of this year, he will be forced to lay off 5,000 teachers. Multiply that example a thousand times to get a sense of what 2011 could look like.

    The only correct thing in that whole paragraph is in bold. There is not “strong case” for a second round of stimulus, since the first didn’t produce any result. Neither did Bush’s “stimulus” rebate checks. The reason why it doesn’t make a dent in GDP is in bold. The real question Zakaria should be asking is why are people, consumers and producers, scared? He did, but he fails to connect the dots. (Didn’t I say his analysis was pedestrian?)

    So why are they reluctant, despite having mounds of cash? I put this question to a series of business leaders, all of whom were expansive on the topic yet did not want to be quoted by name, for fear of offending people in Washington.

    Economic uncertainty was the primary cause of their caution. “We’ve just been through a tsunami and that produces caution,” one told me. But in addition to economics, they kept talking about politics, about the uncertainty surrounding regulations and taxes. Some have even begun to speak out publicly. Jeffrey Immelt, chief executive of General Electric, complained Friday that government was not in sync with entrepreneurs. The Business Roundtable, which had supported the Obama administration, has begun to complain about the myriad laws and regulations being cooked up in Washington.

    The answer is Regime Uncertainty. Anyone who reads this blog should know about regime uncertainty and Robert Higgs by now. So there’s your answer to why businesses aren’t investing and why the economy is still in the crapper. They are scared to invest because they don’t know what Obama is going to do next.

    Most of the business leaders I spoke to had voted for Barack Obama. They still admire him. Those who had met him thought he was unusually smart. But all think he is, at his core, anti-business. When I asked for specifics, they pointed to the fact that Obama has no business executives in his Cabinet, that he rarely consults with CEOs (except for photo ops), that he has almost no private-sector experience, that he’s made clear he thinks government and nonprofit work are superior to the private sector. It all added up to a profound sense of distrust.

    Of course Zakaria has to pander to Obama here a bit. He is, afterall, an editor at Newsweek. That might be the main reason why Fareed doesn’t mention Higgs or Regime Uncertainty in his column. To do so would be to expose Liberals, the kind that read Zakaria, to the idea that Government can hurt recovery. It would expose them to the theory that FDR’s New Deal policies, gasp, didn’t do anything but hurt American for most the 30s.

    To expose his readers to the idea of Regime Uncertainty, would be a terrible sin in the Church of American Liberalism. A sin almost as bad as being skeptical on Global Warming. So instead Zakaria frames his piece like an anthropologist, “Why aren’t these crazy creatures called CEOs investing?”

    This might sound like psychology more than economics, and the populist left will surely scream that the last thing we need to do is pander to business.

    It plays to liberal bias against businesses, that they are all a cabal who’s only purpose is to destroy the middle class.

    So maybe I need to change my thesis. Zakaria isn’t dumb. Quite the contrary, he is very smart. He just isn’t intellectually honest, that’s all.

    Judge tells Obama to shove his moratorium

    June 22, 2010 2 comments

    I’m glad to hear that a Federal judge has blocked Obama’s asinine oil drilling moratorium.

    Obama issued the moratorium based on a report from the MMS.

    In the Executive Summary to the Report, the Secretary recommends “a six-month moratorium on permits for new wells being drilled using floating rigs.” He also recommends “an immediate halt to drilling operations on the 33 permitted wells, not including relief wells currently being drilled by BP, that are currently being drilled using floating rigs in the Gulf of Mexico.”

    They also say that the report was reviewed by “experts.” The problem is that was a lie. Imagine that, Obama lying in order to forward his agenda?

    As the plaintiffs, and the experts themselves, pointedly observe, this statement was misleading. The experts charge it was a “misrepresentation.” It was factually incorrect. Although the experts agreed with the safety recommendations contained in the body of the main Report, five of the National Academy experts and three of the other experts have publicly stated that they “do not agree with the six month blanket moratorium” on floating drilling. They envisioned a more limited kind of moratorium, but a blanket moratorium was added after their final review, they complain, and was never agreed to by them. A factor that might cause some apprehension about the probity of the process that led to the Report.

    The Report makes no effort to explicitly justify the moratorium: it does not discuss any irreparable harm that would warrant a suspension of operations, it does not explain how long it would take to implement the recommended safety measures. The Report does generalize that “[w]hile technological progress has enabled the pursuit of deeper oil and gas deposits in deeper water, the risks associated with operating in water depths in excess of 1,000 feet are significantly more complex than in shallow water.”

    The Times reported earlier on the economic impact of the moratorium on Lousianna.

    Each rig job supports roughly four additional jobs for cooks, supply-ship operators and others servicing the industry. Together, they represent total monthly wages of at least $165 million, according to estimates by a Louisiana oil industry group…

    The securities firm Raymond James & Associates predicts that the moratorium could last well into 2011, directly jeopardizing 50,000 jobs and potentially gutting blue-collar communities that rely heavily on the economic activity that comes with deepwater work. “Just as the demise of auto plants and steel mills in the Upper Midwest devastated entire towns, an extended drilling ban could eventually have a similar effect in the Gulf Coast,” the company said in a report Monday.

    Of course when a Liberal agenda is on the line, those workers don’t matter. How much money did the Administration funnel to the Unionized GM? Chrysler?

    In suspending the moratorium the Judge said:

    If some drilling equipment parts are flawed, is it rational to say all are? Are all airplanes a danger because one was? All oil tankers like Exxon Valdez? All trains? All mines? That sort of thinking seems heavyhanded, and rather overbearing.

    The Court recognizes that the compliance of the thirty-three affected rigs with current government regulations may be irrelevant if the regulations are insufficient or if MMS, the government’s own agent, itself is suspected of being corrupt or incompetent.

    Right on. No doubt Obama will be calling the Judge in for a talk. He can’t have Government officials disagreeing with him publicly right?

    The White House made it clear Tuesday that Gen. Stanley McChrystal’s job is very much in doubt.  Press Secretary Robert Gibbs, looking grim, called McChrystal’s conduct an “enormous mistake” that angered the president.  Asked whether the general’s job was safe following his comments and those of his aides in Rolling Stone, Gibbs said “we’ll have more to say” after the President’s meeting with McChrystal Wednesday. “Everything is on the table,” Gibbs said earlier in his briefing, when asked if the President would fire McChrystal.

    This Administration is acting like a spoiled little child. At least a few Obamatrons are starting to see him for what he really is.

    What’s keeping stocks up?

    June 2, 2010 6 comments

    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.