The Stupidest Housing Crash Idea

The most distressing part of the housing crash is how everyone is willing to throw away capitalism, over a crisis which hasn't even caused a recession yet. Having caused this crisis largely through idiotic government policy encouraging lenient lending standards, politicians now claim to be our saviors. Even they have not approached the idiocy of this idea though.

Napoleoni said that in Islamist finance, banks do not charge interest for loans and that this encourages entrepreneurs."

Money has to be invested," she said. "It has to be invested in the real economy, and through real growth, they can produce more money. This system could help us to get out of the current crisis."

Charles Kalm, a graduate assistant from the International Studies Institute, said Americans need to heed the advice of economists like Napoleoni."I think that we can all agree that our economic system is malfunctioning," he said.

"There are a number of things that are going to have to happen to help the average guy, all of the working people, the banks and to help with the main problem, which is faith in the economy."

Yeah, and exactly how well has this financial vehicle worked out for the Islamic world? Even with all of their oil resources, the UN has to do special reports on the economic disaster that is the Arab world. Despite all this wealth, their financial insitutions are a joke. For example:

With few exceptions, the region is plagued by corrupt, state-dominated economies, excessive regulation and bureaucracy, and poorly constructed legal and regulatory frameworks that hinder private sector development, foreign direct investment, and job creation. The 280 million people of the 22 Arab countries combined have a gross domestic product less than that of Spain; 25 percent of Arabs live below the poverty line; foreign direct investment rose everywhere last year, except the Middle East; total nonfossil fuel exports from the entire region amount to less than the total exports of Finland; the Arab world has witnessed a near zero percent growth rate over the past 30 years, while all other developing countries grew at 2.5 percent per annum.

Racist!

It is no surprise that the New York Times should endorse Obama, this is the newspaper that sponsors Paul Krugman, Maureen Dowd and Bob Herbert after all. But could they at least have the class not to make up fake claims of racism while doing it?

In the same time, Senator John McCain of Arizona has retreated farther and farther to the fringe of American politics, running a campaign on partisan division, class warfare and even hints of racism. His policies and worldview are mired in the past. His choice of a running mate so evidently unfit for the office was a final act of opportunism and bad judgment that eclipsed the accomplishments of 26 years in Congress.

Of course, while calling Governor Palin as unfit for office, they claim that Obama is, endorsing Obama's own circular logic that running for office itself is the primary qualification.

As tough as the times are, the selection of a new president is easy. After nearly two years of a grueling and ugly campaign, Senator Barack Obama of Illinois has proved that he is the right choice to be the 44th president of the United States.

In other news, the New York Times has been downgraded to junk status this week...

Unbelievable.

More On The Moron

The idiotic thing, his warning of a Obama presidency wasn't even the stupidest thing he said in that speech.

"I've forgotten more about foreign policy than most of my colleagues know, so I'm not being falsely humble with you. I think I can be value added, but this guy has it," the Senate Foreign Relations chairman said of Obama. "This guy has it. But he's gonna need your help. Because I promise you, you all are gonna be sitting here a year from now going, 'Oh my God, why are they there in the polls? Why is the polling so down? Why is this thing so tough?' We're gonna have to make some incredibly tough decisions in the first two years. So I'm asking you now, I'm asking you now, be prepared to stick with us. Remember the faith you had at this point because you're going to have to reinforce us."

I would agree that he has forgotten a lot, this is the guy after all, who thinks that we kicked Hezbollah out of Lebanon.

"Joe the Dumber" Speaks

Earlier I asked just how dumb Joe Biden is, Joe apparently didn't realize that was a rhetorical question.

"Mark my words," the Democratic vice presidential nominee warned at the second of his two Seattle fundraisers Sunday. "It will not be six months before the world tests Barack Obama like they did John Kennedy. The world is looking. We're about to elect a brilliant 47-year-old senator president of the United States of America. Remember I said it standing here if you don't remember anything else I said. Watch, we're gonna have an international crisis, a generated crisis, to test the mettle of this guy."

OK, so if we elect this young an inexperienced guy, that will guarantee an international incident on the scale of the Cuban Missile Crisis? And this is supposed to a reason to vote for him?

More on Krugman

The Wall Street Journal has an excellent article on what praises Herr Kruggy deserves, and doesn't deserve:

In his popular writing, Paul Krugman is at his best when defending free trade. My favorite is example is his "Ricardo's Difficult Idea," published in the mid-1990s, in which he shares a frustration many of us economists have felt -- that the vast majority of noneconomist intellectuals don't understand David Ricardo's famous insight about free trade almost 200 years ago.

Ricardo grasped that people will specialize in producing the goods and services in which they have a comparative advantage. The result is that we never need to worry about low-wage countries competing us out of jobs; the most they can do is change those goods and services in which we have a comparative advantage. For example, though you can rake leaves faster than the teenager next door, it still makes sense to hire him because you have a comparative advantage in writing software programs. Mr. Krugman points out that most noneconomist intellectuals are unwilling to take even 10 minutes to understand this. But that doesn't stop them from writing about trade as if they're informed.

Don Luskin, however, resurrects the Krugman Truth Squad, with the cleverest line:

More likely, the Nobel committee decided deliberately to overlook Krugman’s political extremism, just as it chose to overlook John Nash’s schizophrenia in 1994. That’s not to say Krugman is crazy, though he has stated: “my economic theories have no doubt been influenced by my relationship with my cats.”

Whatever the committee was thinking, the only remaining question is what the living Paul Krugman will do with his $1.4 million prize. Will he pay taxes on it at the low rates established in 2003 by George W. Bush, a president and a policy that Krugman has worked so assiduously to discredit? Or will he voluntarily pay at the higher rates he advocates?

It's the End of the World as We Know it...

Well Paul Krugman, yes that Paul Krugman has won a Nobel Prize. As I have mentioned before he is a bit of a tragic character right out of Shakespeare, the young ambitious bright economist turned idiot by a former oilman from Texas. His early work was good, and he probably deserves the award for that, it is just a tragedy for all this money ($1.4 million) to go to someone who has become such a no-talent hack. A Michael Moore with an MIT degree. Have any Nobel Prize winners been so thoroughly debunked by a bunch of nobodies on the Internet, including me? Well, there is Jimmy Carter of course...

The Debate

I am just amazed at how bad of a speaker Barack Obama can be. Maybe he is the one going senile?

BROKAW: We've run out of time. We have this one-minute discussion period going on here. There are new economic realities out there that everyone in this hall and across this country understands that there are going to have to be some choices made. Health policies, energy policies, and entitlement reform, what are going to be your priorities in what order? Which of those will be your highest priority your first year in office and which will follow in sequence?

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Obama: Health care is priority number two, because that broken health care system is bad not only for families, but it's making our businesses less competitive.

And, number three, we've got to deal with education so that our young people are competitive in a global economy.

Education?

And we can do it, but we're going to have to make an investment. The same way the computer was originally invented by a bunch of government scientists who were trying to figure out, for defense purposes, how to communicate, we've got to understand that this is a national security issue, as well.

The military created the computer in order to communicate?

Despite all that, I was able to go to the best schools on earth and I was able to succeed in a way that I could not have succeeded anywhere else in this country.

What is wrong with the rest of the country?

We haven't been doing enough of that. We tend to be reactive. That's what we've been doing over the last eight years and that has actually made us more safe.

An interesting endorsement of the Bush administration.

Now, Senator McCain suggests that somehow, you know, I'm green behind the ears and, you know, I'm just spouting off, and he's somber and responsible.

Green behind the ears?

Economists on the Bailout

As I mentioned yesterday regarding congressman Brian Baird, I am right and he is wrong. Now what is this guy doing in congress?

All the economists criticized the government-mandated accounting rules, so-called “mark to market.” While these rules were reasonable in principle, they were applied to situations that they weren’t meant to apply to. Paul Evans, an economics professor at Ohio State University, explained that you run into real problems when “someone trades a tiny fraction of a particular type of asset at a very low price to clear it off the books. It is then used to estimate the price of all these other assets.”

The Root of the Problem

I agree that this financial crisis is a problem, but don't have much faith in the wisdom of our leaders to handle it correctly. One example is Congressman Brian Baird from Washington State:

“You’ll be screwed,” Baird said, drawing a nervous laugh from his audience.

Business loans, home loans, car loans — and, of course, college student loans — would dry up immediately, the Vancouver Democrat told students.

“The whole (lending) chain is frozen up” because lax regulation has allowed shady accounting practices that have massively overstated the value of assets now gone bad, Baird said.

Except he has this completely backwards. From a rather good editorial in this morning's Wall Street Journal:

OK, get out your NoDoz and let's wade in. Under current interpretation of accounting rules, banks can be obliged to value loan holdings based on their liquidation or fire-sale value, even if (as now) the fire-sale values are lower than might be suggested by the cash flow and payoff prospects of the underlying assets.

Now recall that accounting is a language of abstraction. In the normal case of a public company, whatever method it uses to value its assets, it merely provides a benchmark for investors to make their own judgments. Nobody takes accounting values as the final word.

Banks, though, are subject to regulatory capital standards and therefore can be rendered insolvent overnight based on an accounting writedown. At the moment, many banks are clinging to "market" values for loans that are higher than probable fire-sale values, and doing so on tenuous grounds. In kibitzing over the Paulson plan, indeed, one knotty question was how Treasury could buy such loans at a price "fair to taxpayers" without propelling the sellers into federal receivership.

Because of all this, the regulatory state finds itself in a somewhat absurd position --
its own rules could render many financial institutions insolvent in a manner inconvenient to the state.

The Spin of Michael Moore

Now I am not usually impressed with the intellectual arguments of Michael Moore, but even by his standard this spin is pretty lame:

A lot of people are wondering why the right wing of the Republican Party joined with the left wing of the Democratic Party in voting down the thievery. Forty percent of Democrats and two-thirds of Republicans voted against the bill.

Here's what happened:

The presidential race may still be close in the polls, but the Congressional races are pointing toward a landslide for the Democrats. Few dispute the prediction that the Republicans are in for a whoopin' on November 4th. Up to 30 Republican House seats could be lost in what would be a stunning repudiation of their agenda.

The Republican reps are so scared of losing their seats, when this "financial crisis" reared its head two weeks ago, they realized they had just been handed their one and only chance to separate themselves from Bush before the election, while doing something that would make them look like they were on the side of "the people".

So apparently the Democrats aren't even concerned about looking like they are on the side of the people...

In better news, an American Carol, which is a virtual parody of Moore, comes out this weekend, I look forward to seeing it.