Friday, October 17, 2008

This Meme Needs to Be Spread

AROUND FAR AND WIDE

When Democrats try to compare their welfare-state plans to Robin Hood, they need to be brought up short.

The facts of the matter (if facts can be applied to a myth) are that Robin Hood and his merrye band stole not just from the rich, but from the government. (And from churchmen operating as quasi-governmental entities.) And they then redistributed their gains to those from whom it was stolen by said government.

Robin Hood was a tax-cutter.

If the Democrats are analogous to anyone in the Robin Hood legends, it is to the oppressive government, embodied by the evil Sherriff of Nottingham and Bad King John. The government taxed the English into penury to support a vast network of public works -- roads and military fortifications, mostly -- and an opulent life-style for a few chosen elites. IF any of their ill-gotten wealth did manage to trickle down to the poor, it was spent in aid of keeping them in serfdom, chained to the land and the lord of it. Sort of like the way the Democrat party treats blacks.

Cross-posted at BabyTrollBlog.

Thursday, October 16, 2008

Dumbo, RIP

For the past few months, wild rumors have been flying around the Disney Studios in Hollywood, despite the best efforts of the studio to squelch them, but finally it seems that the truth is about to come out. The Indian Police will announce tomorrow that the rogue elephant that their officers shot and killed in a raid on a village near the Burmese border was, in fact, Dumbo, the star of the eponymous Disney motion picture classic.  At first, the studio denied any and all knowledge of Dumbo’s passing, but many Hollywood insiders now feel that Disney knew about their erstwhile star’s final and ultimately fatal rampage and tried to cover the matter up. 

Dumbo, the orphaned son of an elephant shot by Burmese police in the early 20th century, rocketed to stardom as a child on the basis of his huge ears and his unusual ability to fly, a skill not usually associated with elephants outside your local bar and grill.  The young pachyderm’s rise to fame and fortune was instantaneous; he was one of Hollywood’s bare handful of overnight stars; and his well-documented fall from fame and fortune into an abyss of drugs, drink, and debauchery filled thousands of inches of newspaper column space and shocked a nation.  Dumbo went from being one of the most admired to one of the most despised stars in Hollywood in the early 1950’s, although he blamed all of his misfortunes on the Communists manipulating Walt Disney and the studio.  His drunken antics, hidden carefully from the public by the Disney publicity machine, reached public notice in 1954, when he over flew the White House and tried to urinate on Mamie Eisenhower as the First Lady played hostess at a state dinner for the Prime Minister of Sweden.  Dumbo tried to dismiss the incident as a childish prank, but Disney did not renew his contract afterwards, and the young star could no longer find work in films in the United States.  He tried to work in France and in then Italy, where he carved out a small niche for himself in spaghetti Westerns, but even there, his insatiable demands taxed even the indulgent Italian film industry to the limit. 

Humiliation followed humiliation: a failed marriage, a custody fight in which his now ex-wife exposed for the first time the full extent of his sexual indiscretions, and then the revelation that he had once given money to a known Communist for a bag of peanuts ended any chance of his return to American films.  In the end, circumstances reduced Dumbo to the fourth elephant in the elephant line in a tenth rate circus touring Mexico and Central America. 

Dumbo disappeared for a few years; there were reports that he was homeless in New York, while others thought that he might still be in Latin America; and then he turned up in India, where he started, as a member of an ashram. He’d gone there in the 60’s with the Beatles, trying, as he put it in one of the last interviews he gave, to get his head together and get his life back on track.

For a while, it seemed to work. There was talk at Disney of inviting Dumbo back for a sequel to the film that made him a star, but that idea eventually fell through.  The old demons that haunted Dumbo from his youth reappeared and he turned to drink, raiding villages along the coast for rice beer with a gang of younger bull elephants who went out of their way to egg the now aging star on to ever more outrageous behavior, behavior that led, in the end, to a drunken rampage on a hot summer’s night and a policeman’s bullet.  In a strange coincidence, on the day of his death an Indian court threw out Dumbo’s lawsuit against the estate of George Orwell for the wrongful death of Dumbo’s father, citing the fact that, while Burma at the time of the star’s father’s death, was a part of Britain’s Indian empire, along with what are now the states of Pakistan, India, and Bangladesh, Burma no longer was a part of India, and so the court had no standing to hear a case that occurred in a foreign country. Dumbo was nearly 70 at the time of his death, and he left no survivors, his only son having died in an automobile accident in 1969. 

(You can find pictures of hot girls in skimpy outfits here. Don’t tell anyone I sent you.)

Tuesday, October 14, 2008

My Nightmare Scenario

Elections are, like the criminal and civil justice systems, a substitute for combat. If you injure me, whether or not it is physical, I can take you to court for redress. In extremis, I can petition the Congress for redress. This is to prevent me from killing you because you wrecked my car and would not pay for it, or whatever the issue might be. If there were no civil justice system, disputes would often escalate to violence, and only the strong would have justice, as they saw it, done. The same is true for victims and their families in regards to the criminal justice system. And something similar happens in elections: because we have elections, politicians don’t have to kill each other (or their supporters kill each other) to get power. But this rests on a shared willingness to accept the results when they go against us, and thus on a shared belief in the essential fairness of the underlying institutions.

After the 2000 elections, a not-insignificant fraction of the Democratic party — most notably including the so-called netroots — lost confidence in the essential fairness of our electoral system. Apparently, the 2006 elections were not enough to restore that confidence, because there is still much wailing and gnashing of teeth over the Republicans allegedly working to steal the presidential election. This is not helped along by polls that show Obama clearly ahead, but have achieved that result largely by stating the number of Democrats in the population at up to a third larger than has been historically the case. If McCain wins, a large fraction of the Democrats are going to be convinced that it was only by stealing the election that this could have happened. The anger will be beyond anything I’ve seen in my lifetime, and I expect, at a minimum, riots in Detroit, LA, the South side of Chicago, and DC.

Yet this year, as in several recent elections, it is a Democratic group called ACORN that is provably trying to steal the election. Fraudulent registrations are being made in numbers sufficient to overwhelm those charged with assuring that registrations are valid, and in at least one case, a person has already been caught trying to vote early using one of the fraudulent registrations. It appears that this is being done with the tacit approval of the Obama campaign, and possibly in part with Obama campaign funds and possibly in coordination with the campaign. All these are possibles, because it takes long enough to prove them that it won’t be until after the election that everything can be truly sorted out.

So here is my nightmare scenario:

1. Obama wins the election, very narrowly.
2. It turns out after the election that one state, say Ohio, might have had its results tainted by vote fraud.
3. The checking begins, but meanwhile the electoral college meets and elects Obama.
4. In fact, it turns out that the number of votes cast by fraudulently-registered voters exceeds the margin of victory.
5. Obama is sworn in.
6. It is proven that the election was fraudulently won in that state, thus making the national outcome wrong: Obama should not be president.
7. A lawsuit is filed, and makes it to the Supreme Court. After this point, it probably does not matter what happens (the likely outcome is that the Supreme Court would refuse to take the case, after the criticism they got for the 2000 election); at this point it’s probably too late.
8. The Supreme Court orders the House to seat the correct slate of electors from Ohio and have the electoral college revote, which would presumably result in Obama being removed from office and replaced by McCain.
9. The House refuses.

At that point, would rebellion be avoidable? Would armed insurrection occur? I assume that McCain would try to stop proceedings at some point early on, unlike Gore, but I’m not sure he could do so. I am fairly sure that if it got to that point, the House would not only refuse the Court’s order, but would talk down to us stupid bitter gun and religion clingers in the process. And I think that would set off a rebellion, and possibly a civil war. I think that even if the Court refuses the case, it could well set off rebellion. If we cannot trust our institutions to make violence unnecessary, we would resort to violence. And I think that is true regardless of which party feels itself wronged. If McCain wins the election and the Democrats firmly believe it was through fraud, wouldn’t they be angry enough to go to the streets? What if it were proven that they were right? Then they would certainly take to the streets.

I don’t think events will go that far, but it worries me that I can spot a plausible scenario by which they might.

France, like a cur dog.

I am fond of the image of a dog lying on its side and raising its legs to expose its belly as a metaphor for surrender.  That is what the West is mad, crazy to do these days.  To surrender to its inferiors, that is. 

It once was a strength of the West to tolerate aberrational thinking because we understood that it can sometimes illuminate important problems or open new doors of scientific understanding.  We also simply decided to value freedom as an end in itself and permit others to enjoy it short of the destruction of the established order or conduct that would scare the horses. The resulting diversity we understood contributed to variety and nuance and was often a welcome relief from Levittown sameness.  So what if someone wanted to build a pyramid of bottles, discarded tires, and railroad ties? Maybe you wouldn’t hire the guy to tutor your kids in social studies, true, but then the project could be seen as a healthy outlet for someone whose energies might be devoted to unhealthier ones if his freedom to use his own property were interfered with.

Think Democrat Party politics.

Correctives existed in the form of zoning laws, association bylaws, ridicule, avoidance, or, in the case of misguided intellectual experimentation and trail blazing, debunking.

Think global warming.

But what can you say about a great nation like France that turns this upside down and embraces aberration as though it were the Blessed Sacrament itself?

Much as I am given to periodic frustration and amazement at France’s policy choices that seem to come straight out of a house of mirrors or an advanced degree program in how to goad Americans, I could never imagine the president of such a country in fact surrendering so abjectly to something so debased as Islamic civilization, loosely speaking.

Nicolas Sarkozy, Président de la République, has called Arabic the “language of the future, of science and of modernity” and believes that “investing” in this language “brings with it one of the oldest and most prestigious civilizations of the world.”

The fact that Islamic culture has been noted only for its military conquest, elimination and subjugation of non-Muslims and women, its theocracy and total incompatibility with self government and free inquiry, and its near total failure to discover, invent or produce anything of value throughout its history seems not to have been noticed by Sarkozy.

More likely, he knows this but calculates that keeping the peace with millions of Muslims foolishly permitted to take up residence in France will avoid an immediate upheaval, the inevitable later one to be dealt with by some schnook successor.

The British once seriously considered between WWI and WWII that France was its principal antagonist. The most crazed tea-drinking, scone-biting, Yorkshire pudding-nibbling officers of the Imperial General Staff who pushed that seemingly odd idea have come close to being vindicated by events.  That their own government itself would adopt similarly pusillanimous policies that would put Britain at risk is an irony they would not have found bearable.

”Sarkozy: ‘Arabic Is the Language of the Future.’” By Tiberge, Brussels Journal, 10/14/08.

Fundamental Constitutional Errors

It happens that I am very interested in organizations and governance. This plays out in both my hobby of studying constitutions (particularly our own) and in my job, which is very heavily involved with taxonomy (naming) and ontology (connections) — essentially, understanding and manipulating organizational structures. I have been thinking lately about the problems with our Constitution. Not the niggling things like separation of Church and State, or government seizure of property, but the foundational problems. I see a few.

First, it seems to me that the Bill of Rights was a mistake. It converted a single-purpose document (organizing the governing structures of the country) into a dual-purpose document (the former in addition to specifying what rights and freedoms should be protected explicitly). This has created fundamental confusion; it’s not merely that Hamilton’s fears were well-grounded, but that people have assumed further that rights and government are not associated by the government protecting pre-existing rights, but by the government granting those rights in the first place. Amendment IX has proven remarkably powerless to stem the incursions of government on every aspect of our lives not narrowly protected in the Bill of Rights or subsequent amendments, and comes as close as possible (well, with the possible exception of Amendment X) to being a nullity in effect. Indeed, Amendment IX’s only notable use of which I am aware has been in contraception and abortion jurisprudence, via Justice Goldberg’s concurrence in Griswold v. Connecticut. In any event, the net effect of the Bill of Rights has been to create the perception that government is the source of rights granted to the people (as in the notion of civil, vice natural, rights) and that therefore it is the government’s purpose not merely to create a space, secure for coercion or fraud, in which a society may develop according to the joint preferences of its members, but indeed to determine and enforce the direction in which that society must develop. We would have been better, I think, with two documents; the first being the Constitution, creating the structure and enumerating the powers of the government; and the second being a declaration of rights and principles, to expand on the Declaration of Independence and by doing so enshrine the foundational principles of the society in a governing document. Indeed, this latter would function as a meta-constitution, providing the ability change the structure and powers of government wholesale while not endangering the rights and governing principles (such as separation of powers, the enumerated powers doctrine, and the concept of the primacy of citizens over government) on which people depend. Were we to do this over at some point, I would highly recommend we separate the two.

Another fundamental error is the combination of the powers of government and state in one head. Fundamentally, the government exists to make and enforce laws and regulations necessary to the secure and orderly functioning of society, to protect the liberties of its citizens, and to manage the government’s resources to those ends. The state, on the other hand, exists to provide not merely a ceremonial figurehead (as Britain has evolved to), but also the actual instruments of collective sovereignty with regards to other states. By conflating the two, we have done real damage to the understanding and function of both. Part of this damage lies in the loss of sovereignty by the citizens to the government; after all, with the government collectively representing our sovereignty abroad, does it not also embody our sovereignty here at home? It’s a socialist argument, but a powerful one. Moreover, foreign policy has become political, and entangled with domestic affairs, largely because of this lack of separation; this endangers the state’s ability to act as a coherent entity speaking on all our behalves with a single voice. Finally, both history and the current election cycle have shown that it is rare indeed to find a leader gifted and experienced both at affairs of state and affairs of government.

Were there to be two executives, a head of government and a head of state, each with its own particular levers and scopes of power and responsibility, the confusion would be ended, our freedom enhanced at home, and our security further ensured against foreign threats. The state would essentially control the Defense Department, the State Department, the foreign intelligence agencies, the Commerce Department, and Veterans Affairs. It would exist for the purpose of regulating international trade, foreign affairs, and the military. But its resources would be provided by the government, which would function as one check on its power. Other checks would be necessary as well, and other powers granted to the head of state. (For example, the head of state should have absolute power to hire and fire employees and officers, without even the consent of the Senate — though subject to impeachment — because of the need to have a single voice on foreign affairs.) The government would have everything else, and the head of government would essentially function largely as an executive extension of the legislature, as is done in parliamentary systems, but holding independent office, so that the legislature could not bring down the government except through impeachment. I think that this division of powers, giving broad authority to the head of state but no ability to act in domestic affairs, and narrow authority to the head of government, but the ability to act in domestic (and not international) affairs, would be a much better ordering of the government. Perhaps were we still a small nation, this would not be needed, but given our size and power, I believe it is.

A third really fundamental weakness arises from questions of citizenship and franchise. I believe that the Founders limited the franchise to property owners primarily because they wanted to ensure that citizens have a stake in the long-term outcome of their votes. By expanding the franchise too far — some even propose expanding the franchise to convicted felons, who have already demonstrated a stake in undermining society! —, we have increased the odds of sacrificing long-term stability and good governance for short-term placations. Indeed, the recent history of governance, since the direct election of Senators and the income tax were instituted, has increasingly been one of vote buying, pandering and sacrificing long-term public good for short-term political advantage. But limiting the vote overmuch, as I believe the original Constitutional formulation did, has its own problems. First, there are more ways to have a long-term stake in the country than owning property. Owning equity in a business, having children, and having a record of service to the country are all important indicators of commitment, as important I think as ownership of non-mobile property. Also, it would not be a good idea, in terms of getting good societal effects, to exclude people based on income or education. Yet we also want to ensure that voters understand the issues on which they are voting and the very nature of our system — indeed that is the major legitimate reason for public education, though it has failed miserably at the purpose.

I think that a better system would divide the people of the world into four groups. The first group is foreigners: people who live elsewhere and owe their allegiance elsewhere. The second group is residents: people who live here, but owe their allegiance elsewhere. The third group is nationals: people who live here and owe their allegiance here, but otherwise have no stake in the future of the society. The fourth group is citizens: those who live here and owe their allegiance here, and have a demonstrated commitment to the future of the society. To the first group, nothing is owed by the government and country but common human decency and the right to become residents or nationals by following procedures established by law. To the second group, as our guests, we owe the basic protections and rights of free expression and association, protection from coercion and fraud, the right to earn a living by their own labor, protection from unreasonable search and seizure, due process of law and the like. We also owe them the right to become nationals by following processes established by law. We owe them no government services, including unemployment and retirement protections, or free medical care. (For humanitarian and practical reasons, I suspect we would want to provide emergency care without first trying to determine the status of the person being cared for.) Residents owe us, in turn, payment of incidental taxes (sales and use taxes, for instance), conformance to the law, and not operating against our government or institutions (for example, as a spy or saboteur). To nationals we owe all of what we owe residents, as well as protection from foreign aggression, such government services and privileges we collectively decide to provide, and the ability to become citizens by established processes, about which see below. Nationals are essentially just like citizens today, but without the right to vote. The fourth group would have all the privileges and rights of nationals, but would be able to vote.

Dividing the latter two groups is a bit tricky, because it depends on determining whether a person has a long-term commitment to the society, or is just here because they were born here, or came for a better life and a good job. Moreover, the last thing we want to do is put government in charge of deciding who can be a citizen and who cannot; that is an easily-abused power, the only effective response to the abuse of which is rebellion or insurrection. But there is a pretty easy compromise. What we are really trying to get to in the last group is self-sacrifice in favor of the country, taking responsibility for both one’s self and one’s country. I would simply make citizenship an option that nationals could decide on at any time. You can become a citizen, and vote, by just registering appropriately with your state government. Similarly, you can resign your citizenship the same way. But there would be opportunity costs both ways. Nationals would pay taxes and get government safety nets, but have no duty of service to the country and no vote. Citizens would not pay taxes, other than incidental taxes like sales and use taxes, or property taxes if they own property, and would get no safety net services from the government, but would owe the country labor in such positions and at such times as they were called forth and would get to vote in exchange. (This would include duty as a member of the military, an officer of government, a jurist, or whatever was needed.) So that’s it: a voluntary agreement to undertake service as needed in exchange for the vote, and to forego and not paying taxes, and whatever compensation was otherwise provided by whatever position of service was filled. There would have to be, to prevent abuse, some limitation, such as after revoking your own citizenship, a period of say 10 years would have to pass before you could again take it up. But I think that this would divide people rather nicely into those who just want to live here and those who have a stake. And it would make the voter pool much more likely to vote based on the long-term good of the nation.

A fourth fundamental problem is the determination of who has the final word on the Constitutionality of an act of government, a law, or what have you. The Constitution leaves this undefined, with the apparent intent that the interplay of the legislative, executive and judicial branches would act to produce interpretational agreement over time, much as the decisions of various courts over time act to produce the common law. The Supreme Court arrogated to itself, via Marbury v. Madison, the right to be the final word on the meaning of the Constitution. This extends their power beyond the cases immediately before them, in a way that essentially moots the amendment process. It’s easy, nay trivial, to amend the Constitution by judicial fiat, but difficult to do so by ordinary means. To get a feel for what this means in real terms, the annotated Constitution maintained for the use of Congress is over 2400 pages long, not counting court decisions made since 2002. This document contains discussion on the meaning of court decisions covering every adjudicated part of the Constitution, and in reality is the Constitution we follow; the original Constitution, as written and amended, is only a small fraction of the Constitution that is in effect. I think that it is far, far past time for the Congress and President to stop tacitly accepting Marbury v. Madison‘s arrogation of powers to the Court. In particular, if Congress rules that the Court cannot decide on an issue, the Congress and the President need to not only refuse to honor any decisions on that issue, but also refuse to even show up at the Court to argue the case. Similarly, if the President undertakes an action he finds clearly Constitutional, and absent a law from Congress prohibiting the act, then he should ignore the Court’s decision, other than on the case they explicitly decided, unless their reasoning convinces him that he is wrong in his interpretation. If the Court finds it reasonable to rule on every incident of the general principle, well and good. Otherwise, their decision should not have standing. This is specifically in regards to such emanations and penumbras of judicial stupidity as Kelo and Dred Scott. To solve this structurally, if we were starting over, I would create a separate Court whose only purpose was to interpret the Constitution. Its decisions would be non-binding, and any citizen (or national if adopting the above decisions) could bring an issue before the court for adjudication. The idea would be to have a well-informed, well-reasoned opinion that could be cited for or against any particular policy, without being coercive as to the meaning in particular cases.

A fifth fundamental problem arises from the electoral college: by electing the college in the same year as the president is elected by the college, and offering the college no other powers, the electoral college acts only as an aggregation of votes, increasing individual voting power. This is a worthy function in and of itself, but it undermines the intent of the college: selecting a president as the best person among us, rather than by the popular passions of the moment. This characteristic has led the electoral college to become an extension of the campaign; indeed, we vote for a candidate to choose the electors, rather than the other way around. Before I note an improvement to this situation, I would like to bring up a sixth problem, which is also solved by solving the electoral college problem. The Senate’s “advise and consent” power has become a disaster in practice. It has devolved into political gotcha games and a pathetic partisan circus. It was intended to be a way to ensure that the officers of government were people of good character and judgement, likely to advance rather than retarding the interests of the country.

The solution to both of these is to beef up the electoral college. Choose the Electors in a year that has neither Presidential nor Congressional elections, such that the electors are chosen without regard to particular candidates for office. The parties could nominate who they will, and the Electors could pay attention to the parties or not, at their discretion. (We’d have to change the rules for selection of the Vice President, though. I suggest election by the Senators.) Moreover, though, I would also give the Electors the power to appoint government officers, such as Federal judges and cabinet secretaries. The Congress could impeach anyone who caused problems (judges and department heads, not Electors — though come to think of it, Electors as well), and the President should still be able to fire the department heads, in the event that no working relationship could be established.

A seventh fundamental problem relates to the Electoral College as well, but indirectly: there are too few Representatives. One hundred Senators could certainly ably represent the interests of fifty states (back to the repeal of Amendment XVII again), but 435 Representatives cannot ably represent three hundred million citizens. The House should be much larger, because it should be possible for any average citizen to get in personal contact with his Representative; that’s what they’re there for. I would recommend a rule (and this could be done by law, without the need to amend the Constitution) that no Representative could have more than fifty thousand constituents, which would increase the size of the House dramatically and thus increase the range of opinions and skills available. This would also help with an eighth fundamental problem: partisanship based on creating a coalition large enough to win elections under our voting system. By increasing the size of the House, combined with state-based party-ticket voting, it would be possible to win seats at the table with only a few per cent of voters’ support. (For example, estimating (naïvely) 6000 Representatives, California would have about 730 of them. About one tenth of one per cent of the vote would be sufficient to get a member of your party into the delegation.) This would increase the diversity of views presented, and require much more multi-party coalition building and consensus building to get bills passed. Not only would this decrease the amount of legislation able to be passed (a positive good on its own), it would ensure that the resulting bills were more acceptable to a broader proportion of the population at large. And since we do not have a parliamentary system, where the executive serves at the pleasure of the legislature, we would not thereby be bringing on the mess that Italy, for example, has often been, where the governments fall as fast as they can be established.

A ninth fundamental problem is that there is no protection against creeping expansion of government. To some extent, fixing the third and fourth issues would take care of this. But a better, a far better, solution would be to reimpose the political constraints (by repealing Amendment XVII) and the fiscal constraints (by repealing Amendment XVI) on the Federal government that were included in the original Constitution. Further, I would suggest that we would do well to have an additional protection against expansion, by requiring that the Congress pass all regulations having the force of law, rather than fobbing such duties off on the bureaucracy, and that laws and equivalent acts have an expiration date of no more than 10 years, after which reauthorization by roll call vote would be required. It would also be a good idea to prohibit the Congress from passing laws that automatically vary future spending without the express vote of the Congress at that time, and to limit the number and size of laws, or require that the laws be understandable to an educated layperson.

Finally, a tenth fundamental problem is that there is no provision for citizens of territories to be represented. This is particularly an issue in the case of DC, which somewhat annoyingly (and somewhat accurately) has the slogan “taxation without representation” on its license plates. While I’m firmly against making DC a state, it is nonetheless true that having so many of our citizens here and in territories unable fully to participate in the political process — in particular, having no representative of their interests, but being subject to the laws that are passed — is problematic. I don’t really know what to do about the territories, except perhaps to have a time limit after which they must elect to become a state or disassociate from the Union, but DC is easier. DC was created by taking some land from Virginia and some from Maryland. The idea was to create an entity under direct Federal control so that no state could use its control of the government’s physical facilities and even persons to force the government to favor it. This notion is, of course, ludicrous given the state of the Federal government now. Indeed, the reverse — the Federal government controlling so much state land as to have an undue influence — is the normal state of affairs in most of the West and Alaska. The part of DC that was taken from Virginia at some point reverted to Virginia. Rather than making Dc a state — an odious notion —, we should have the Maryland parts of DC revert to Maryland. As residents of a city in Maryland, Washingtonians would get to vote. At the very least, even if DC remains under Federal control, the residents should be counted with and vote with Maryland in Federal elections.

A few, um, minor proposals there, but I think the fundamental problems are real, and it would be in all of our interests to fix them.

Monday, October 13, 2008

Assorted Asseverations From Canandaigua

Apologies for the lack of a Rumination yesterday. It was a day filled with many things, among them quite a lot of driving and wine, and it left me without the wherewithal to blather. But if this miscellany of maunderings should strike you as Ruminationish, now you'll know why.

***

Western New York State is underappreciated. The region possesses many beauties, is economically more vital than most persons are aware, and is filled with the most genial, civilized people anywhere in this grand country of ours. I'd move here, if it weren't for my trade, which isn't practiced here, and the unusually cold and snowy winter weather, which I'm no longer able to endure.

The town of Canandaigua itself is remarkable. Yes, it's a bit of a tourist trap, but so what? We have them on Long Island, too. The architecture is old New World; the ambiance is relaxed; the food is unprepossessing and quite good; the traffic is light and easily negotiated; and the people are uniformly pleasant and accommodating. If you simply must have a city, Rochester and Buffalo are both within easy reach. And the wineries...ahhh, the wineries...

Well, I mustn't allow myself to be sidetracked. I asked a young woman in Hammondsport, a village at the southern tip of Keuka Lake, what the area was like in winter. Her response: "Boring." Hm. Small towns often strike those who dwell in them yearlong as a bit stodgy and stultifying. Perhaps the tourist's viewpoint isn't all that reliable. But all the same, this is a wonderful place to spend a short vacation.

There'll be a few pictures of the more scenic spots posted later today or tomorrow.

***

It's hard to get as jacked up as is customary for me over the national news when I'm up here. In part, that's because of the tenor of the area, but in equal measure, it's because that's what vacations are for: to get away from one's habitual engagements. In a slightly detached way, I'm still quite as troubled over the direction of our politics and economy as ever. (Listen to yesterday evening's production on BlogTalkRadio if you doubt me.) But having removed myself from the Sturm Und Drang of my normal existence, I've also managed, for the nonce, to put my politico-economic anxieties at arm's length.

Is that a good thing? I think so. Everyone needs to decompress now and then, and aging Curmudgeons are no exception. But you needn't worry, Gentle Reader; vacations don't last forever, particularly not the sort I allow myself. I'll be back up to full pressure and ready to burst a dozen blood vessels at a stroke as soon as I'm back in New York Metro.

However, the four cases of wine and mead I'll be bringing back with me should do a bit to cushion the transition. I must somehow contrive to make them last through the election.

***

If memory serves, I've already emitted a paean to St. Mary's Church, on Route 332 in Canandaigua. Still, it deserves a second run.

The building itself is beautiful: a huge, old-style vaulted cathedral design, but without a transept. The stained glass is intricate and exquisite, as are the many items of statuary and carvings that grace the walls. As fond as I am of my home parish, St. Louis de Montfort in Sound Beach, St. Mary's throws modern church designs into the shade.

But that's the building, not the church -- or the Church, as I've frequently been at pains to emphasize.

There was a movie some years ago, Stigmata, starring Patricia Arquette, Gabriel Byrne, Jonathan Pryce and Rade Szerebedgia, that attempted to draw a distinction between the church hierarchy and the actuality of Christianity. It very nearly succeeded in doing so, though in the process it conferred undue authority upon a suspect bit of history, a supposed gospel variously known as the Gospel of Jesus and the Gospel of St. Thomas.

The thrust of the movie is that the key element of Christianity is love and obedience of God, most especially love and obedience of God in the Person of Jesus, the Son. To the extent that the church hierarchy assists in conserving Jesus's teachings and promulgating them, it's a positive force. To the extent that it obstructs those things, it betrays its sacred mission, conferred upon St. Peter by Christ Himself during His ministry in Judea.

There have been eras when the church hierarchy was the greatest of all threats to Christianity. The bad behavior of Catholic prelates in those years brought about the many schisms of the late Renaissance centuries, causing the divisions among Christians that exist today. The efforts of recent ecumenists such as John XXIII to dismantle the walls among Christians of differing denominations have been only partly successful.

You couldn't tell in Canandaigua. The people of this region are both deeply Christian, according to their several chosen denominations, and utterly relaxed with one another. The churches and ministries nestle close to one another, with no tension nor rancor among them. Worshippers of different denominations go to one another's doors to exchange Sunday greetings and benedictions. They bring to life the true essence of the Church as the Mystical Body of Christ, of which each Christian believer is an essential part, no more and no less important than any other.

Would that it were so everywhere! That the interdenominational slander-slinging might cease forever, that we might concede to one another that the denominations exist for good and sufficient reasons, and that our sincerity is not to be questioned merely because some of us occasionally fail of our standards in Christian faith or fellowship. That we might truly enact the will of the Prince of Peace, by acting as His Hands here on Earth. It would go a long way toward healing the ills that beset the world.

But I must remember that to wish for changes in others is to ignore that which is the only thing truly under my control. I must remember that society is the most volatile of all abstractions, changing in a million dimensions with each moment as individuals make their decisions and adjust their attitudes toward one another. I must remember the words of Albert Jay Nock: "There's only one way to improve society. Present it with a single improved member: yourself."

With that, it's time to head back to Long Island. May God bless and keep you all.

Sunday, October 12, 2008

Eternity Road On The Air

The next segment of this adventure will air this evening, Sunday, October 12, 2008, at 7:00 PM New York time. It will be a fifteen-minute show, followed by text chat for those interested in commenting. Tonight’s topic is our encirclement by predators. Click the button below:

...to link to the program. If you miss it in “real time,” it will be available from the BlogTalkRadio archive shortly afterward.

REMEMBER:

From now to the end of the year, Eternity Road On The Air will air Sunday evenings at 7:00 PM New York time, not the original 6:30 PM time at which the first few segments aired.

Saturday, October 11, 2008

Where’s the outrage?

I haven’t had much passion for writing lately.  The national political and economic news has been depressing, and the vast majority of the mainstream media is unreadable for me.  That, and I broke up with my girlfriend (in case you wanted to know).  So, a certain feeling of depression and ennui has characterized my mood for the last week or so.

But today, I’m angry.  I’m angry because the media are flagrantly violating their responsibility to inform the public, and they’re doing it in the service of the Obama campaign.  In terms of reportage on the economic crisis and Obama’s utter complicity with Democrats’ efforts to force bad loan practices on American banks, that’s old hat.  The media have been running interference for Obama on that issue since September, and there is good evidence they are deliberately manipulating the partisan breakdowns of their polls to inflate Obama’s numbers nationally and in the swing states.  That’s old hat too - media “polls” have predicted Kerry crushing Bush in 2004, Gore crushing Bush in 2000, and had Reagan losing to Jimmy Carter in 1980.

All of those things have been frustrating me, but they were mostly with the norm of general media idiocy and pro-Democratic water-carrying.  But I have been reading some low-flying stories (from Ace of Spades HQ and the quite interesting pro-Hillary blog HillBuzz) that are truly frightening in their implications if Obama wins.  Start here. Note particularly this passage:

There IS a RICO investigation of ACORN and the Obama campaign underway - this has now been established by the mainstream media. Right now it’s rumored here in Chicago that Patrick Fitzgerald is heading it (confirmation on that has not come yet). There is a lot of activity in Chicago right now, with a lot of IRS agents looking into the finances coming in and out of this city, and across state lines (this was established on Monday when the GOP issued emergency press releases that much of Obama’s campaign contributions could very well be illegal foreign contributions - what appears to be deliberately poor record keeping designed to hide the true identities and monetary sources of online donors is at issue here). We see in 15 states now that ACORN is being busted for attempted voter fraud, and for fraudulent, illegal voter registratons in the hundreds of thousands, if not a million. The article below states, and we have confirmed this with people who know for sure, that the people who gathered evidence of Obama’s fraud and voter intimidation techniques during the primaries against Hillary Clinton are sharing everything they have with the Republican Party and the federal government.

One million fraudulent registrations?  One million?.  And a RICO case?  Where is the media on this?  Where is the media on Obama’s well-established working and financial relationship with ACORN?  Why in its ACORN-related stories is ACORN described as a “non-partisan organization” that is “not attached to either candidate” when Obama funneled $800,000 in campaign cash (much of it probably gathered illegally from non-existent or foreign donors) right to his ACORN buddies, and then scrubbed his FEC disclosure forms to cover it up? Speaking of Obama’s donors, where is the media on the rampant fraud in Obama’s campaign finance operations, which regularly collect millions from foreigners, the dead, and guys named Doodad Pro?  No doubt those donors will be bused to polling places by Obama’s cronies at ACORN to consummate their support come November.

What about this? Seems Obama wasn’t just milking Rezko for sweetheart real estate deals, he was also sucking off the teat of the Chicago mob in return for endorsing mob family members for high political office.  I live in Chicago and have never heard any of this.  Where is the media on this?  We’re not just talking freaks and degenerates like Louis Farrakhan, Jeremiah Wright, and Bill Ayers, we’ve now moved into the realm of certified mobsters, crooks, thieves, and extortionists.  Why is one of the most corrupt pols to emerge from Chicago in a long time getting a free pass on his “HopeChangeHope” squeaky clean narrative?

Given that, should it be any surprise that Obama’s campaign, engineered by mastermind of fraud and deceit David Axelrod, has been found to be engaging in widespread astro-turfing, sock-puppetry, and thuggery whenever anyone has so much as casually investigated its actions?.  Bloggers in pajamas and night caps are regularly scooping the media on Obama’s chicanery and the media have not a thing to say about it.  As Bob Dole used to say, where’s the outrage?  Even Michael Barone, an astute political observer but one who usually refrains from making outright partisan judgments, has noticed what this sort of campaign suggests about a hypothetical Obama administration:

Once upon a time, liberals prided themselves, with considerable reason, as the staunchest defenders of free speech. Union organizers in the 1930s and 1940s made the case that they should have access to employees to speak freely to them, and union leaders like George Meany and Walter Reuther were ardent defenders of the First Amendment.

Today’s liberals seem to be taking their marching orders from other quarters. Specifically, from the college and university campuses where administrators, armed with speech codes, have for years been disciplining and subjecting to sensitivity training any students who dare to utter thoughts that liberals find offensive. The campuses that used to pride themselves as zones of free expression are now the least free part of our society.

Obama supporters who found the campuses congenial and Obama himself, who has chosen to live all his adult life in university communities, seem to find it entirely natural to suppress speech that they don’t like and seem utterly oblivious to claims that this violates the letter and spirit of the First Amendment. In this campaign, we have seen the coming of the Obama thugocracy, suppressing free speech, and we may see its flourishing in the four or eight years ahead.

Whatever you feel about John McCain, Barack Obama must not be elected president.  He would be a disaster for the country, not just through his policies but through his character and the character of his administration.  We must not allow that to happen to this country.

Friday, October 10, 2008

Before I “Go West, Old Man”…

...here are a few links, thoughts, and heads-ups to distract you from what might otherwise be a productive Friday.

***

1. Links

First, don't miss this brilliant analytical exploration of the credit-market crisis by Jeff Medcalf. Among Eternity Road's Co-Conspirators, there are no sharper minds; we are uniquely privileged to have him. Jeff's old blog Caerdroia might no longer be a busy place, but I treasure every syllable he posts here.

Second, while World Net Daily, as we churchly types like to say, is nobody's prayer book, this report by Bob Unruh is absolutely accurate, and terrifying in its implications for American public schooling. If you're a young parent facing the decision about whether to put your chidren in a state-run school, think long and hard over the material here.

Third, the evidence continues to accumulate that the Old Media are overtly partisan. Recent years and developments have apparently caused the barons of print and broadcast "journalism" to cast off all pretense. The dethroning of Dan Rather over the "TexANG memos" forgeries probably has something to do with it, but were that entirely uninvolved, I think we'd still be seeing what we see at the link above. "Journalism" is an emotion-oriented trade -- tears and fears are what sell air time and column-inches -- and emotion is always more easily stirred by appeals from -- and to -- the Left.

Consider these your mandatory reading for the day.

***

2. Thoughts.

Politically, economically, and socially, America is in serious trouble -- and given the state of things, where America goes, so goes the world. If it did nothing else, the credit crisis has educated us to America's power to turn the world on a dime.

The election campaign has given us many reasons to fear for the future. There's a single bright spot in the political landscape: Governor Sarah Palin. But a lone Alaskan cannot be expected to rescue us from the multitude of our sins, especially from a perch in the Naval Observatory. Anyway, she's up against the same thing the rest of us must battle: "democracy."

"Democracy" has always been a false god. "Democracy" is untrammeled majority rule unconstrained by principle; it sanctifies whatever the majority might demand, even lynching, Nazism, and Communism. In a "democracy," once you've succeeded in defining the bounds of the electorate to your satisfaction, you're guaranteed to get your way. That's why so many persons are so anxious to have us bend to "international opinion" come November 4. Dare anyone suggest seriously that the legions of Obamatrons abroad, inexplicably caught up in the worship of this wholly fictitious political idol, know better how to restore America to health and strength than those of us at close range?

We had a choice between a matchless Constitution, the most freedom-affirming document ever to become a nation's foundation, and "democracy." For nearly a century, we've placed our faith in "democracy." Dare anyone contend that it has served us well?

You had faith, and now you don't have it anymore? No, my son, democracy is losing its followers. In our country everything is weakening. The money is weak. Democracy is weak and the politicians are very weak. Everything that is weak dies one day. -- Carolina Maria de Jesus

There is still time to reverse our choice.

***

3. A Heads-Up.

There is time, but perhaps not much of it.

"There is a deal of ruin in a nation," wrote Adam Smith, but that "deal" is nevertheless finite. Just as a plot of land can be exhausted of nutrients by over-cultivation, a nation's psyche and pocketbook can be spent bare by too-frequent extension. Our federal debt approaches our annual Gross Domestic Product. The Treasury is about to double the money supply, thereby halving the purchasing power of the dollar. Our enemies abroad are multiplying. Our economy is teetering due to unwise political intervention in our credit market. Our native-born citizens are disaffiliating from the future by declining to have children, Brooke Shields's clever commercials about "German engineering" notwithstanding. Immigrants hostile to everything the country was premised on are swarming over our walls and refusing to assimilate. Our military is under intense pressure. Our politicians are almost all villains, poltroons and fools.

If there's a rescuer anywhere in sight, that rescuer is not a politician, or a financier, or a diplomat, or a foreign potentate, or a novelist, or a commentator, or a double-income-no-kids urban couple alarmed by the price of arugula. We must redirect our eyes.

We must rediscover America. America is the sole watchtower of freedom and justice remaining to Mankind. If she falls, or is traduced from within, the renascence of those things will become unimaginable.

If there's a rescuer in sight, that rescuer is us.

"No reason to get excited," the thief, he kindly spoke,
"There are many here among us who feel that life is but a joke.
But you and I, we've been through that, and this is not our fate,
So let us not talk falsely now, the hour is getting late."

[Bob Dylan, "All Along The Watchtower"]

Man the battlements. Make yourselves ready.

Thursday, October 09, 2008

Handling the Economic Crisis

I started to write this as a comment on Mike Gerson’s response to this Transterrestrial Musings post on the stock market’s continued slide. Mike asked what a conservative would do about the crisis, and my response got so long that I decided to move it here.

If by a conservative Mike means the Hamiltonian kind, such a one would do exactly what President Bush tried to do: pump massive amounts of money into large financial businesses. If by a conservative Mike means the small government/free market kind, he would use whatever levers the government had (including large amounts of money, if needed) to ensure liquidity in commercial paper and overnight bank loans, and would let the companies with bad investments fail.

Let me expand on that. All of these problems arise out of two fundamental issues. First, very, very bad loans for homes became a normal part of home lending. Second, financial businesses attempted both to cover the risks they had taken on and to hide those risks in increasingly poorly-understood and novel ways.

First things first: the bad home loans. These included loans to people based on their word as to what their income was, deliberately fraudulent loans which hid their true costs, loans designed so that the borrower could meet current payments (but not future payments unless the borrower got a significant raise) and loans designed so that the borrower could make the payments, but not gain any equity. (The last is essentially identical to renting the house you “bought” from your mortgage lender, while still being responsible for the taxes, maintenance and so forth. Ugh.) In terms of the financial crisis, it does not matter whether these loans took advantage of the easily pressured or economically ignorant, or if they were fraudulent in some way, or if they were otherwise predatory. All that matters is that they happened, and that they became an increasingly large part of the mortgage pool. (Had they been maintained at the level of, say, FHA loans, there wouldn’t have been much problem, but attempting to loan large amounts of money to increasing numbers of people means that you must reach deeper into the pool of those whose ability (and willingness) to repay is lower than that of people getting conventional loans. Hence, “sub-prime.” Cumulatively, the potential default rate was rising with the increasing amount of shaky home loans, and any small economic crisis could have set it off earlier — eventually, the lending got so out of control that it didn’t even require a crisis, just the end of a bubble’s expansion period, to set it off.) The profit potential of these loans was predicated on the indefinite continuation of the housing bubble; they were in effect a Ponzi scheme.

Second, the covering and hiding of risks. Mortgage lenders knew that they were taking increasing risks. Indeed, a whole new market cropped up of companies that would make a mortgage loan, particularly on refinancing existing loans, often knowing ahead of time that the borrower couldn’t afford to pay it off, then sell the loan for a small immediate profit (usually just the points and maybe a tiny bit of interest, just that paid during the few months it took to package and sell the loans). The couple portrayed recently on Saturday Night Live (the Sandlers) were apparently of this kind. In any case, in order to sell off these bad mortgages, the lenders would bundle thousands of mortgages together, some good and some bad. They would then divide the total pool into “tranches.” So let’s say that a pool contained 1000 mortgages, of which 750 were to credit-worthy borrowers who had placed large down payments, 200 were to somewhat suspect borrowers who would be OK as long as the market value of the house continued to rise or their income rose dramatically over a period of a few years, and 50 were to people who would almost certainly default within a year or two. Let’s further make up a metric, that the first category of loan has a repayment chance of 100%, the second of 80%, and the third of 50%. Then if the total amount of money lent to create the pool was P, the total value of the pool of mortgages can be approximated to 100% * 75% * P + 20% * 80% * P + 5% * 50% * P, which works out to 0.75 + 0.16 + 0.025 or 93.5% of P. That is a 6.5% expected default rate. But now divide the pool into 1000 slices, and sell a slice of the pool (that’s what the tranches are), and you can make the argument that, because these pool slices are combined with other pool slices, even if a few people do default, the value of the pool is still sound, because the person buying the tranche only loses 1/1000 of the defaulted amount. Why, at that point, you are back up to a rock solid investment. If done once. Done millions of times, you still have an overwhelming risk, arguably a much larger risk since you can guarantee that each of your tranches will lose some of their value, but that’s been hidden by the practice of pooling the mortgages and selling slices of the pools. Then, because the buyers (investment banks, money market funds and the like) realized that they were effectively gambling, and had lost some insight into exactly what their risks were, they tried to cover these risks with credit default swaps, which I don’t entirely understand. Effectively, CDS’s are a kind of hedge against risk. Except that they are so arcane that apparently even those making them didn’t understand them very well, and the result was that risks were not covered, but deepened.

Now, as long as the housing prices were rising, this was not a problem. As ARMs came due and one’s income wasn’t sufficient, one could refinance. Similarly, an interest-only loan didn’t pose a problem when you sold your house, because you were still getting equity (from the rising house price, rather than from a combination of the rising house price and paying down the principal balance of the loan). But the availability of easy credit, even for those who couldn’t repay the loans, resulted in a building boom, raising the housing supply dramatically. Demand over supply is directly proportional to price: as the supply begins to exceed the demand, the price begins to drop. In other words, the natural market forces worked predictably (so predictably that we sold our house one month after the peak of the market, and have rented since), and the housing prices started to fall. But uh oh, that means that you couldn’t refinance your ARM because you had negative equity, and you couldn’t sell your house with a principal only loan because you had no equity. (OK, in reality, this was only true on the margin, but that was enough.) The resulting rise in mortgage defaults, followed as night follows day by home foreclosures (which, tragically, increased the supply of available housing still further — instant vicious cycle), meant that the investment banks, money markets and pension funds suddenly had to calculate their real risk. But because they had sliced up, sold and resold, and covered their mortgage investments with CDS’s and other, even shakier, hedges, they could not do so. That is to say, they could not value their assets.

When a company cannot value its assets, it’s not quite the same as when an individual cannot do so. Individuals generally operate on a cash basis; companies generally operate on an accrual basis, recognizing both revenue and expenses as they are incurred, not as they are satisfied. So if a vast proportion of your assets are of unknown value, and the rules require you to mark to market, how do you value your assets? How do you know if your assets plus equity exceeds your liabilities? In other words, how do you know if you are bankrupt? Well, the truth is, you don’t. And so when Fannie and Freddie failed, Lehman realized that it was bankrupt. It had been for some time, but hadn’t known. But now that it knew, it had to (as a public company) declare it, and that triggered all kinds of mechanisms to protect the remaining assets to pay off creditors and (if money was left) shareholders. But the creditors included companies like other investments banks and insurers, so there were several high profile failures in a very short period of time.

And because companies that held mortgages couldn’t value their assets, and thus didn’t know if they were bankrupt, prudent institutions stopped lending money. If you make an overnight bank loan of $200 million, and the bank goes under, you are out $200 million. The same goes with commercial paper (overnight loans to companies). And so the credit markets froze, not solid, but bad enough to panic investment bankers, one of which happens to be our current treasury secretary.

So up to this point, I don’t think you’d get much disagreement except on details and expansion of unclear points. All sides pretty much agree on the sequence of events and the proximate causes. The disagreement is over root causes, and specifically whether this was due to deregulation, or Congress insisting on ever riskier loans, or greed. All of these are actually implicated (though it’s not so much deregulation as failure to regulate something that wasn’t regulated before in any case). And they’re also fairly irrelevant to solving the current crisis (though not to preventing future crises).

So how to solve the crisis? The Hamiltonians look at the last link in the chain: the investment banks and other large financial institutions that are failing. And their preferred solution is to pump massive amounts of money into those institutions (both through the bailout package, and through the massive inflation that the world’s central banks are currently causing by lowering interest rates), so as to ensure that they aren’t bankrupt, so as to ensure that the credit markets (both overnight bank loans and commercial paper) keep moving. An aside, by the way, the horror stories about not being able to buy a car miss the point: individuals don’t have a problem valuing their assets and liabilities, so it’s always possible to calculate the risk inherent in lending to them; it’s only the institutional lending that is at issue (bad though that is). The socialists look at theory, and say to nationalize the financial industry. The social democrats (which is where most Democrats, at least in the national party leadership, fall) and populists (including McCain) look at the first link in the chain, and want to refinance people’s mortgages through the government, end the distasteful practices of the large institutions, and want to punish their executives. Ironically, those last are closest to the mark, of those groups that have a chance at making policy on the matter.

But a libertarian/small government/free market type of conservative looks at the problem a little differently. Given how the problem came about, the reason that loans aren’t being made is because financial companies cannot value themselves. But value is fundamentally just what someone is willing to give up to get the thing being valued. If you offered me a thousand risky mortgages and I only had to invest $100, I’d take them right now, cash. Because if only one paid anything, I’d be OK, and if none of them paid off, I’d be out only $100. If you offered me those same mortgages at more than a few tens of thousands of dollars, I’d refuse, because I couldn’t afford the potential loss. So in order to value the mortgages, and, more importantly to the issue at hand, the various securities based in some way on mortgages, you have to be able to sell them. But no one is selling them, because they think the government might just come in and buy them up (the populists’ view) or insure them (the Hamiltonians’ view) such that the institutions can make more money from the government than they could selling the securities on the civilian market. Once the securities start selling, to anyone, the market can value the assets, and thus value the financial companies holding the assets, and thus evaluate risks, and thus the credit will start flowing again naturally.

In other words, the crisis is being deepened by the government’s actions. By declaring a vast crisis, and the need for the government to massively intervene, after already intervening heavily by taking over Fannie and Freddie and stabilizing AIG, the government shut down the market for these securities precisely at the point that the credit markets were freezing up. Had the government let these companies fail, the companies would have started selling off their securities at low enough prices to clear the market (it’s that supply/demand/price thing again), and the credit market would have started up again on its own. Now, let’s cover the downsides, because the first objection to this is going to be either, “People are going to lose their homes,” or, “People are going to lose their jobs.” Actually, both of those are net positives for the economy, though painful for the individuals caught up in it.

First, there is no reason why people with sound credit and a good payment record would lose their homes. [UPDATE:] For that matter, even if someone had a bad payment record and poor credit, they would be likely to keep their home if they had any means and desire to do so. Even if someone bought up a mortgage at a serious discount, they’d still make more money with the homeowner paying on the house than with it sitting vacant. So foreclosure would only happen for those who couldn’t make their payments, hadn’t been making their payments, and had no way out of this: they would almost certainly be bankrupted. But that clears the books: they can go on to rent, reestablish their credit within their extant means, and generally get on with life. By clearing their liabilities through bankruptcy now, those who would have gone bankrupt eventually have a head start on fixing the problem, and in the meantime have not dug themselves into a deeper hole. It’s painful, but not fatal, and arguably less painful than holding on for longer and eventually going bust in any event. [UPDATE:] If you lose your home from this, one of the problems of course is the loss of equity in the house. But by definition, you are losing the house because the equity wasn’t sufficient, or at least wasn’t sufficiently liquid, to cover your housing-related or other liabilities. It’s fun to live beyond your means, but since we no longer have debtors’ prisons (thankfully), eventually you have to either pay up by handing over assets, or pay up by going bankrupt and seeing your credit tank. Next time, buy a house that you can make the payments on.

The argument for people losing their jobs is based on companies going out of business, and that’s certainly going to happen, but this too is a good thing. Companies that were risky and greedy will get wiped out, and their assets will be bought up by companies that weren’t risky and greedy. Those companies will expand, and will need workers, and so eventually all those left unemployed will be reemployed in a more productive business. The shareholders will be wiped out, true, but that is the downside risk of investing. (The upside being the tons of money made as the stock value rises. The trick is to buy low and sell high. This requires actually understanding the companies you invest in, and not being greedy or risky yourself. Don’t tell anyone.) The thing is, a lot of the investors are money markets, mutual funds, and the like, and a lot of people’s 401k’s and IRA’s and pensions will be hit by this. Well, that’s what Social Security and similar programs were made for, a retirement income of last resort. Again, painful, but next time invest in more solid ways. (Index funds are a good bet, because they’ve never lost money over a 20 year period, and when you get close to retirement, move more of your money into even safer government bonds. Don’t tell anyone.)

[UPDATE:] Of course, the government can ensure that those who lose their jobs don’t get new ones, as they did during the 1930s, and are doing in Michigan even now. (This is one of the major reasons I left Michigan: the state government was determined to kill off any vestige of the economy by taxing heavy manufacturing equipment owned by the dying auto industry in the state, and then service companies which had managed to survive the dying auto industry, at increasing rates.)

The underlying assets, the houses, are not going anywhere, and the market, left to its own devices, will recover (someone will buy those assets when the price gets low enough) with less overall pain than if the government tries to fix things so that nobody feels pain. Bankruptcies, whether personal or corporate, are how free markets move unproductively-invested capital into productive use. Otherwise, the unproductive capital keeps being unproductive. And that — keeping unproductive, risk and greedy ventures afloat — is exactly what the government is doing to all of us right now. So bend over and prepare to take it, because it’s going to get a lot worse before it gets better. The last time something similar happened was the Great Depression of the 1930s, and the government’s attempts to help apparently prolonged that one by seven years.

UPDATE: Minor spelling and grammar edits, and a couple of sentences clarified slightly. Also added two points (marked in the text) in response to an email, and a link to the government prolonging the Great Depression.