Arnold Kling tells it like it is.

Now, there are rumors that the Democrats plan to re-appoint Paulson as Treasury Secretary. This American Mussolini has captivated Washington by demonstrating the exercise of raw power.

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Is your politician promising you a fish? Or a pole?

Steve Sailer takes a step back.

Ayers is a funnier, livelier writer than Obama. I can’t imagine a ghostwriter producing anything as dull as Obama’s Dreams.

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Cole and Ohanian calculate that NIRA and its aftermath account for 60 percent of the weak recovery. Without the policies, they contend that the Depression would have ended in 1936 instead of the year when they believe the slump actually ended: 1943.

“The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes,” Cole said. “Ironically, our work shows that the recovery would have been very rapid had the government not intervened.”

Of course, if you’ve been paying attention you know this already.

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I am not making this up.

Bet you she drops a lot of that weight….

David Friedman, son of Milton, who has forgotten more about economics than all four of the current candidates ever knew, explains it in simple terms.

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A very entertaining explanation of fractional reserve banking and why it’s so fragile.

This illustration is a microcosm (with very conservative levels of lending) of what happened before the banking world stopped turning. In the same way that Bank A borrowed £1,000 from Mr P and turned it into £2,600 of spendable cash for the other people in the chain, so when banks borrow millions they turn it into many millions more of lending. Any snapshot of the amount of money in the world economy reflects not just the real money but also the additional money “created” by commercial lending.

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Over these years we had violent financial crashes of various types, bank panics, piles of recessions and a huge depression, many foreign wars and one enormous domestic war, had a central bank and didn’t, were on the gold standard and weren’t, had governments topple in scandal and multiple leaders assassinated, and what did it all amount to in the medium to long run? In per-capita income terms: Nothing. The overall trend does not bend or shift. Every bad year was followed by a good year that returned us to trend.

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Towns not on interstates cannot make it we are told, towns that are not hip and exciting are dead. And so, our young people leave — with at least a casual observance that those left behind are falling to the drug culture. In a recent focus group of young males in one eastern Kentucky town one participant stated, “Sure I sell drugs — it’s easy money and I don’t have the connections to get a job even at Wal-Mart.”

A lot of it, I think, is convenient transportation. In the Good Old Days, it was difficult to move, so people stayed put. Nowadays it’s easy to move, so people staying put is surprising. I was born in one town in Indiana, and my parents moved us to another when I was too young to remember. I stayed in that town until I was 9, then my parents moved us back close to where I was born, where we stayed until I joined the Navy. I was therefore on the leading edge of the “let’s move if it might be better over there” trend. it never even occurred to me that I might stay in the small town (45,000) where I went to high school. I suspect that people just don’t have that expectation any more. Our communities are not where we live but those we share interests with through politics or hobbies or other connections — I’m closer to people I went to college with 20 years ago than whoever it is that lives next door to the house I’ve been in for the last 10 years, whom I’ve never met.

Steve Sailer is always worth reading.

This suggests that there is no way to avoid disasters permanently. That’s no doubt true. But we can make them rarer and less catastrophic just by being less stupid. Consider two economies, both of which either grow 5% per year or shrink 5% per year. The first economy is more bubble-prone, so it grows for seven years then shrinks for three years. The second economy grows for ten years, then shrinks for two years. Over the course of sixty years (six cycles for the first economy, five for the second), the second economy will end up over twice as big.

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When social order declines through bad leadership, common sense is not to best on the past — the social order that just failed — but to bet on the future, which is getting your pile of cash away from the idiots before they screw it up again. I think that’s why people who are older and wiser and accustomed to this system have not really blinked at this bailout. Waste all your money keeping the system going? Of course they did — they do it with every single thing they do, every day. When society is ruled by popularity, it tends to deny social order, because individuals don’t want to be obligated. They want to be free. As a result, it creates decaying situations in which anyone with a brain would do as those Wall Street traders did — raid while the raiding’s good, because soon the idiots will destroy the rest of it with another well-intentioned, unrealistic plan. Civilization is its own enemy.

Read it.

When you first come across some obscure cultural artifact — an unknown indie band, organic skate sneakers or wireless headphones from Finland — you will want to erupt with ecstatic enthusiasm. This will highlight the importance of your cultural discovery, the fineness of your discerning taste, and your early adopter insiderness for having found it before anyone else.

Then, a few weeks later, after the object is slightly better known, you will dismiss all the hype with a gesture of putrid disgust. This will demonstrate your lofty superiority to the sluggish masses. It will show how far ahead of the crowd you are and how distantly you have already ventured into the future.

No, this isn’t a proto-entry in Stuff White People Like, but an actual column in the New York Times.

The name “David Brooks” does not usually jump to mind when one is searching for the names of humor writers, but apparently he’s attempting to broaden his career path. I wish him luck.

Cringely thinks that my chosen career field, database development, will be going away soon.

Perhaps I ought to retire soon.

Steve Sailer is always worth reading.

One off the things I’ve been trying to explain is that the late mortgage bubble was so crazy because, unlike most bubbles, it was not a bet on the rich getting richer (as in the Internet Bubble). Betting on smart young people to invent new Internet stuff wasn’t nuts — they actually did invent a whole lot. The nutty part was that there weren’t many ways to use an open system to achieve a quasi-monopoly and earn above normal returns on investment.profit from the inventions.

But the housing bubble was a bet on the increasing ability to pay of the part of American society — the working class and lower to middle-middle class, primarily — that has been getting the fuzzy end of the lollipop since about 1973.

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Repeat after me: “multi-centered metropolitan region.” This is the model that characterizes most city/suburban regions in the US, where the urban core is just one of several nodes of development or centers of economic, residential, office, industrial, educational and recreational facilities and life. This is the model that, planned or unplanned, has evolved in the United States. It works, we like it, we’re keeping it.

Steven E. Landsburg, a professor of economics at the University of Rochester in Rochester, New York.

We are embarking on the most radical transformation of the American economy since the New Deal, committing hundreds of billions in taxpayer money to save banks and other financial institutions from the consequences of their own bad investments. This, we are told, is the cost of averting a crisis. But I sure wish someone would explain to me exactly what crisis we’re trying to avert.

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Arnold Kling explains it all to you.

Even better than the distributed knowledge of professors is the distributed knowledge of markets. It is not just efficiency at issue. There is a fundamental moral issue. If my broker gives me bad market advice, I don’t have to take it. (Actually, I have never taken advice from a broker, and I never will.) But if Henry Paulson thinks that there is a profit opportunity in risky mortgage securities, I have no choice but to invest. Moreover, even though I think that Barney Frank’s affordable housing loans are bad for borrowers, bad for lenders and bad for the country, I am coerced into funding those loans.

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Well, some people need help. Futher deponent sayeth not.

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Somebody who has spent his entire professional life writing about economics dumps on somebody who made millions of dollars as an investment banker. Which do you trust?

Megan McArdle is so cynical that it warms my heart.

Alex Tabarrok is always worth reading.

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Nearly two decades have passed since the enactment of the landmark Milwaukee Parental Choice Program by the Wisconsin legislature. The program and its many supporters had hoped this experiment in school choice would lead the way in transforming American schools. But it is by now clear that aggressive reforms to bring market principles to American education have failed to live up to their billing. It is time to find out two things: What happened? And what comes next?

David Friedman discovers media bias.

When the stock market crashed in 1929, Herbert Hoover was President; FDR wouldn’t get the job until 1933. Television as a mass medium was a decade or so in the future. The first president to appear on TV was (I think–corrections welcome) Truman in 1946. If Palin had said it, it would be taken as proof positive of her lack of education. It is hard to see any explanation for Biden’s statement other than striking historical ignorance.

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The obvious interpretation seems more believable – as with high school class presidents, we care about policies mainly as clues to candidate character and affiliations.  And to the extend we consider policies not tied to particular candidates, we mainly care about how policies will effect which kinds of people will be respected how much.

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Yes, the gains of the very rich have increased the fastest. But that is in part because of a statistical illusion. When poor people earn more over time, they move into the middle class or the upper class and are no longer  classified as poor. Consider someone who was earning $20,000 a year and saw her income move to, say, $50,000 as she moved up the career ladder. That 150 percent gain in income isn’t apparent, because we no longer categorize her as poor. But every penny of income gain by a rich person is counted, because there is no higher income class she can move into.

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Government is the problem, not the cure: An illustration.

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Perhaps the spirits just don’t like Muslims.

Neal Boortz puts it in words even a Democrat can understand. They won’t admit it, of course, but then, they never do.

OK .. so we all know that a lot of really bad real estate loans were made. The political class would sure love for us to believe that the blame here rests squarely on “greedy” (try to define that word) mortgage brokers and lenders. The truth is that most of the blame rests on political meddling in the credit decisions of these mortgage lenders.

Political correctness won the day. Washington made it clear to banks and other lending institutions that if they did not do something .. and fast .. to bring more minorities and low-income Americans into the world of home ownership there would be a heavy price to pay. Congress set up processes (Research the Community Redevelopment Act) whereby community activist groups and organizers could effectively stop a bank’s efforts to grow if that bank didn’t make loans to unqualified borrowers. Enter, stage left, the “subprime” mortgage. These lenders knew that a very high percentage of these loans would turn to garbage – but it was a price that had to be paid if the bank was to expand and grow. We should note that among the community groups browbeating banks into making these bad loans was an outfit called ACORN. There is one certain presidential candidate that did a lot of community organizing for ACORN. I won’t mention his name so as to avoid politicizing this column.

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To find anything comparable to crowds’ euphoric reactions to Mr. Obama, you would have to go back to old newsreels of German crowds in the 1930s, with their adulation of their Fuehrer, Adolf Hitler. With hindsight, we can look back on those people with pity, knowing now how many of them would be led to their deaths by the man they idolized.

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Truth from across the pond. Britain is not totally bereft of common sense. Yet.

Megan McArdle speaks some sense.

Especially in recent years, the income of the wealthy has become more volatile than the income of the middle class and below.  In good years, their earnings soar, and Uncle Sam reaps more revenue than expected.  In bad years–particularly bad years on Wall Street, since most of that money comes in the form of some sort of security, rather than cash–tax revenues nosedive.  Incidentally, the more we focus on taxing the rich, the worse this problem will get.

Mencius Moldbug is on the case.

The great thing about being a skeptical generalist is that you trust your own ability to think about X, instead of trusting those with actual knowledge and experience in X. I am certainly no opponent of knowledge or experience, but it should be plain to everyone at this point that our financial system is, in at least one mysterious and incomprehensible way, broken.

So those who know it, know the broken thing. Worse, they believe that the dollar system is exactly what it purports itself to be – money is money, bonds are bonds, banks are banks, etc. And they have built a large superstructure of models on these understandings. Said models do not appear to be in perfect working order.

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Every now and then, the Brahmin media organs will surprise you.

As I began to finish the reporting for this article, I mentioned to an Obama aide that I was interested in the different ways that Obama presents himself to black and white audiences. The aide hit the roof over this comment, which he claimed was racially divisive, and soon I received a call from Obama’s “African-American outreach coordinator,” who apparently clarifies race issues for reporters when they are perceived to have strayed. “I appreciate what you’re saying,” said Corey Ealons, “but I think it’s dangerous, quite frankly.” He thought for a moment. “The spirit of this campaign is about bringing people together and focusing on the things that are similar about us as opposed to the things that make it different,” he said. “Barack is one of the best political communicators in our history. If you’re somehow saying that he can’t be the same person with all people, that’s certainly not the case.” He paused. “Barack Obama is Barack Obama,” he said.

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An excellent question, backed by a very common-sensical analysis.

The starting point must be to investigate why this bank went under. That is fairly simple, it had obligations to pay money but no money with which to pay them. Although it is dressed up as a mysterious business comprehensible only to the brilliant, investment banking is pretty straight forward. Customers hand over a lump of cash and and the bank invests it hither and yon in the hope that a profit will ensue. The customer receives some of the profit and the bank receives its cut. Everyone is happy and the world continues to turn. Of course they won’t attract many customers by saying “hand over cash and we’ll try to make it grow”, so they offer incentives such as a minimum rate of return over a given period. The customer must leave his money with them for a minimum time. At the end of that period the banks must not only make sufficient profit to be able to pay the customer his guaranteed interest they also have to repay the capital sum if the customer demands it. Some do and others decide to leave it in place for another year or two.

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These kids today….

A British perspective.

Tyler Cowan brings some economic literacy to the bailout debates. The Chattering Class, of course, would have you believe that it was a deregulated, laissez-fair, dog-eat-dog capitalism that caused the current series of crises — assuming that you aren’t paying attention to the fact that existing government regulations created or exacerbated most of them.

Read it.

Many people think that price is determined by historical cost.  Price is never, ever, determined by historical cost. Price is determined by supply and demand.  If supply or demand change then the price changes regardless of historical cost.  Last year’s fashions?  The price falls regardless of cost.  Chopped up dead sharks?  If demand is high, the price is high regardless of historical cost.  If the demand for gas were to suddenly fall, the price of gas would fall too, regardless of cost.  In the present situation the supply of gas has been reduced and the price has gone up.  Historical cost is always irrelevant.

In partcular, price of gas is determined, not by what it actually cost the supplier, but by what it will cost to replace it. There is thus no lag between a rise in the price of oil and a rise in the price of gasoline.

“Price gouging” is merely a tendentious term for “more than I want to pay”. That’s all it is — spin. if you fall for it, then you’re one of the stupid people who would vote for Hitler.

Cringely speaks some urgently-needed truth.

If your boss doesn’t understand your job enough to describe it in technical detail, that boss is in the wrong job.

If you are managing an IT shop and can’t write the code to render “hello world” in C, html, php, and pull “hello world” from a MySQL database using a perl script, then YOU are in the wrong job.

The essence of efficiency is doing only the parts that are absolutely needed and almost every shop has at least one project that everyone except the big boss knows is either pointless or hopeless. Cut it.

Tyler Cowan seems to think that we did.

(As a general tendency I find that economists vastly underrate the importance of accounting as an economic force.  I might add that many market advocates are unaware of how quickly liquidity can vanish in these markets; just look at auction-rate securities.)

How many phone calls do you think Hank Paulson has received from the Chinese central bank since August 2007?

Jerry Pournelle is rather crochety when he talks about politics, which of course makes him a favorite with me.

Full disclosure for those few who haven’t figured it out: I am no fan of McCain and I detest the Country Club Republicans who took over when Newt Gingrich left the Speaker’s Office. I was one of Newt’s advisors and while he and I have and had our differences, I think the country is very much worse off without him as Speaker, and we wouldn’t be in the mess we are in had he remained. But while I have disdain  for the the Country Club Republicans — to put a fine point on it see Exeter’s speech to the Dauphin — I have even less regard for the anti-Clinton establishment who have taken control of the Democrats. And no, that doesn’t make me an admirer of Clinton and the New Democrats; it does mean that I think the New Democrats (who have been thoroughly defeated) are more likely to pay attention to realities than crazy theories; and this isn’t true of those who are now running things. I’m a lot more afraid of the Daily Kos than I am of Bill Clinton.

And that says pretty much all that needs to be said on the subject.

Arnold Kling has the solution.

The demise of the savings and loans produced the rise of Fannie Mae and Freddie Mac. One can argue that Fannie and Freddie were more efficient and better hedged against interest-rate volatility than the savings and loans. If Fannie and Freddie had stuck firmly to the 20 percent downpayment mortgage, we would not need a mortgage czar today. But they didn’t stick to it, and we are where we are.

So the answer, as in so many areas of life, is to be conservative. Funny how well that works.

Steve Sailer is always worth reading. When he channels Tom Wolfe, it doesn’t get any better.

The inimitable Mencius Moldbug explores new ground.

The Amerikaners’ problem is that they’re governed by their enemies, the progressives, who have converted democratic politics into a reality show and rule through the extended civil service. The civil service is nominally responsible to the elected arms, but the latter would have to put up a terrible fight to even touch them. And progressives fight the peril of a “populist” democratic reaction with two slow, but inevitably lethal, strangulation tactics: subsidized progressive education, and Morlock voter importation.

What I find most interesting about this situation is that the argument seems to be focusing on whether the Demcorat Presidential nominee is or is not more qualified to be President than the Republican Vice-Presidential nominee. Does that strike anybody else as just … odd?

Tell the truth — that’s the first time you’ve thought about her in a week, isn’t it?

Read it.

Not sure whether this represents progress or not….