FT153: “The two things you need to pass liberal policies are uninformed people and heightened emotions.” —Old Pithy

Posted by PITHOCRATES - January 18th, 2013

Fundamental Truth

The Girls in the “In” Crowd focus on their Appearance and try to be the Kind of Girl the Boys in the “In” Crowd Want

After puberty the attractive people start noticing each other.  Boys become jocks and get physically fit.  Girls start dieting and develop eating disorders.  The jocks tend to come from more well-to-do families because it’s expensive to participate in sports.  So not only are the jocks physically attractive to the girls they also have the nicer stuff.  The attractive girls try to date the good looking boys with the nicer stuff.  And they do.  When these attractive people get together they form the “In” crowd.

I’m in with the “In” crowd
I go where the “In” crowd goes
I’m in with the “In” crowd
And I know what the “In” crowd knows

The “In” crowd attends the best parties.  They wear the finest clothes.  They have the latest toys.  Everyone wants to be part of the “In” crowd.  But most only see it from the outside.  For they aren’t attractive enough or rich enough to be in with the “In” crowd.

We breeze up and down the street
We get respect from the people we meet
They make way day or night
They know the “In” crowd is out of sight

The girls in the “In” crowd focus on their appearance.  And try to be the kind of girl the boys in the “In” crowd want.  The blonde stereotype.  Young and dumb.  And beautiful.  If they please these rich boys they get jewelry, clothes, recreational drugs and great nights out at the best parties at the best clubs.  And all they have to do is look beautiful.  And put out.  To hook up with these rich boys and give them what they want.  Sex with beautiful girls.  Which they readily give up thanks to birth control.  And when that fails, abortion.

I’m in with the “In” crowd
I know ev’ry latest dance
When you’re in with the “In” crowd
It’s easy to find romance

Being in the “In” crowd is where it’s at.  That small clique in school everyone wants to be a part of.  The nerds and the geeks.  The poor.  The overweight.  The short.  Those with horrible acne.  The losers.  They all look at the beautiful people in the “In” crowd and dream of being asked to join them.  But they never will.  So life goes on for them.  These losers.  Some work on their grades and go on to college.  Become doctors, chemists, engineers, etc.  Others get a factory job.  Learn a skilled trade.  Go into journalism.  Or politics.

Once in with the “In” Crowd you become Part of the Upper Class and Live like Royalty and are Treated like Royalty

The rich guys in the “In” crowd like their women young and dumb.  In fact, a lot of the people in the “In” crowd make fun of the smart kids in school.  Calling them chumps for learning stuff.  Some of the “In” crowd go on to great success in sports, music, movies and television.  Some go on to great success for nothing more than being part of the “In” crowd.  Such as Paris Hilton.  And Kim Kardashian.  But a lot of girls who were in with the “In” crowd lose the affections of the boys they once had.  As other young and pretty girls displace them.  Even marry these rich guys.  With nothing but their looks to go on some end up dancing in strip bars.  And when their youth fades some enter prostitution.  Or collect government benefits.  Because instead of hitting the books when they were in high school they went to the best parties.  And travelled with the “In” crowd.

Some of those who did hit the books in high school learned some things.  Some useful things.  Things that helped them get into college.  But they primarily learned how to be Democrat voters.  Because public education is controlled by the teacher unions.  And their Democrat friends in government.  When they go on to college their liberal college professors pull them even further left.  They learn to not like or trust capitalism.  And to love government unconditionally.  When they get their degrees some go into journalism with a liberal bias.  Some become elected politicians.  Liberal Democrats.  Where they have a lot of money pass through their hands.  Which gives them a lot of power.  And what does money and power give you?  Access to the best parties.  Where you can actually meet and rub shoulders with the stars of sports, music, movies and television.  Yes, these losers from high school finally get to travel with the “In” crowd.

And once in they never want to leave.  Because it is great being in with the “In” crowd.  You become part of the upper class.  You live like royalty.  And are treated like royalty.  Because of all that power you hold.  So they want to protect their elevated status.  By protecting their government jobs.  And creating more government jobs.  As many as possible.  So there is always some place for them to go in case their ungrateful constituents vote them out of office.  And these ungrateful constituents are a problem.  Because they believe in limited government.  Low taxes.  Little government spending.  Fewer regulations.  The very things that are anathema to those who have entered the “In” crowd via big liberal government.

A Serious Crisis gets People Emotional and makes them willing to do things they weren’t willing to do Before

American kids are getting their behinds handed to them by Indian and Chinese kids.  Who are blowing them away on test scores.  Why?  Because of the liberal control of public education.  Instead of being introduced to differential calculus in high school American kids are learning multicultural things.  Instead of learning about Adam Smith and laissez faire economics they’re learning about America’s original sin.  Slavery.  Even though the American economy took off in the free North.  Which is why the North defeated the South in the American Civil War.  But they teach our kids that we stole the land from the Native Americans and got rich by exploiting African slaves.  Because of the evils of capitalism.  And the profit incentive.  Which steals from everybody.  And exploits everyone.  This is what they teach our kids.  Instead of math and science.

Of course, dumbing down the curriculum has a very positive side affect.  For liberals.  The less these kids know the easier it is to lie to them.  Making it easier to turn them into good Democrat voters.  Who keep voting for liberal candidates.  And their liberal policies.  Which keeps expanding the size of government.  And the amount of government spending.  Which they pay for by increasing the taxes on those who can afford to pay more.  And they add layer upon layer of new regulations on businesses.  Enforced by a growing number of bureaucrats.  Creating ever more jobs in the federal government.  To help level the playing field.  To help the little guy.  And to punish those who have too much wealth.  Because it is the fair thing to do.  The just thing.  Especially in a country with so many wrongs to right.

But eventually these kids grow up.  Get jobs.  And raise families.  They become moderates.  Even conservatives.  Who tend to vote against the liberal agenda.  Which is why the Left can’t rely on just dumbing down people.  Because dumb can wear off.  So they have to tug on people’s heartstrings.  Get people’s emotions working for them.  And nothing does that better than milking a crisis.  For as Rahm Emanuel said, “You never want a serious crisis to go to waste.”  Because a serious crisis gets people emotional.  Makes them willing to do things they weren’t willing to do before.  Like the massacre at Sandy Hook Elementary.  Twenty dead children really made people emotional.  And the Left hopes emotional enough to get these people to support something that they normally wouldn’t support.  Gun control.  Which the Left is hell-bent on passing.  Just as they were hell-bent on passing Obamacare.  Despite the masses opposing it.  Just as they oppose gun control.  But they were able to tug enough at people’s heartstrings to pass Obamacare into law.  Just as they hope to pass gun control into law.  For when it comes to passing an unpopular liberal agenda nothing helps more than uninformed people and heightened emotions.  And the more of that liberal agenda they pass the more the government grows.  Creating more jobs in an expanding federal government.  Giving these politicians more money.  And more power.  Getting them into the best parties.  Where they meet and rub shoulders with the stars of sports, music, movies and television.  Letting these one-time high school losers continue to be in with “In” crowd.

(The “In” Crowd by Billy Page performed by Bryan Ferry.)

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Hamilton, Jefferson, Republicans, Federalists, Money & Power, Corruption, British, French, Neutral Shipping and Letters of Marque

Posted by PITHOCRATES - September 27th, 2012

Politics 101

Hamilton trusted Men of Integrity to Govern Justly while Jefferson believed Money and Power would Corrupt Anyone

Nasty politics began back in the Washington administration.  With the seething hatred between Alexander Hamilton and Thomas Jefferson.  These American greats had two different visions for America.  Based on their background.  Hamilton’s from his experience in the Continental Army and his business experience.  Jefferson’s from his books.  As different as their views for America were, and despite their hatred for each other, they both loved their country.  And wanted what was best for their country.  While absolutely sure that the other had nefarious plans for its ruin.

Both were students of the Enlightenment.  Both believed in the natural, God-given rights of the people.  And both believed vehemently in the rule of law.  In fact, both were lawyers.  But Hamilton was part of the Continental Army when its troops were barefoot, half-naked and starving.  Which were barefoot, half-naked and starving because of a weak Continental Congress that could not provide for them.  Because they were weak, impotent and could not levy taxes.  All they could do was ask the states to give them money.  The states promised little.  And delivered even less.  Threatening the American Revolution itself.

Jefferson, on the other hand, saw that history was replete with examples of corruption and oppression whenever financial centers and the seat of power got too close.  Hamilton may have seen this.  But what he was most conscious of was the British Empire.  The greatest empire in the world.  Which became the greatest empire in the world by bringing the financial centers and the seat of power together.  Which is what Hamilton wanted to do.  Trusting in the integrity and moral character of gentlemen of the Enlightenment.  Who would rule with selfless indifference.  Principled men with strong Judeo-Christian values.  These were the men that would rule America.  Men like the Founding Fathers.  Who they could trust with money and power.  Who America should trust with money and power.  To make an American Empire to surpass the British Empire.  This is what Hamilton wanted.  While Jefferson believed that money and power would corrupt anyone.  If not in their generation then surely in the generations to follow.  And the best way to prevent this was by giving government as little money and power as possible.

An Outbreak of Yellow Fever in Philadelphia nearly settled the Quarrel between Hamilton and Jefferson

So Jefferson opposed Hamilton at every opportunity.  Such as the Bank of the United States.  And Hamilton’s funding system.  Making matters worse was that Hamilton’s Treasury Department was the largest department in the federal government.  While Jefferson’s State Department was one of the smallest.  So Jefferson tried to transfer some parts of Treasury to his State Department.  The Post Office.  Which he failed in getting.  But he did succeed in transferring the Mint from Treasury to State.  Hamilton even learned that James Madison and Jefferson met with Robert Livingston and Aaron Burr to conspire against Hamilton to remove him from office.  Hamilton saw an ambitious Jefferson.  Who wanted the kind of power Jefferson accused Hamilton wanted for himself.

So these gentlemen began a campaign to force the other from office.  Hamilton had an ally in the Gazette of the United States who championed his policies.  To counter Jefferson hired Philip Freneau into the State Department to help finance a new paper.  The National Gazette.  Whose sole purpose was to attack Hamilton while praising everything Jeffersonian.  Hamilton wrote anonymous attacks published in the Gazette of the United States.  While Jefferson left his dirty work to Freneau.  And the attacks grew uglier.  The attacks were not just on policy or the future vision of the nation.  But these were personal attacks on each other.  Where accuracy was not a major requirement.  Such as when Hamilton took Jefferson out of context.  Quoting selective excerpts from a 1787 letter to suggest that Jefferson wanted to rob the Dutch to repay the French.  Hamilton and Jefferson became like two quarreling children in Washington’s cabinet.  Each running to ‘father’ tattling on the other.  Insisting that Washington demand the resignation of the other.

An outbreak of yellow fever in Philadelphia nearly settled the question.  By almost killing Hamilton.  But he survived.  Unlike some 4,000 others in Philadelphia.  Even Hamilton’s illness was seen through a political lens.  Hamilton sought the medical advice from an old college buddy.  As opposed to following the good advice of Dr. Benjamin Rush.  Who recommended massive bloodlettings.  When Hamilton recovered he publically thanked his friend (who had nothing to do with his recovery) and encouraged others to follow his recommended treatment.  Which didn’t include bloodletting.  Dr. Rush was infuriated.  Accusing Hamilton of killing countless others through this quackery instead of the sensible bloodletting that was established medical practice.  Of course, this was a personal attack on Dr. Rush.  Because he was not a Federalist.  But a Republican.  And a friend of James Madison and Thomas Jefferson.

While the French were causing Headaches for Jefferson and his Republicans the British were doing the same to Hamilton and his Federalists

The yellow fever also claimed another casualty.  The National Gazette.  As people fled Philadelphia, or died, circulation fell.  And the paper lost money and closed shop.  About the same time that happened Jefferson resigned from the cabinet.  And returned to Monticello.  Things were looking up for Hamilton.  Until the reverberations of the French Revolution further divided the country.  The Federalists were reestablishing trade with the British.  So when the French and British were back at war with each other it caused some problems in America.  For the American people still hated Britain.  While having deep emotional ties to the country that had helped them win their independence.  France.  The United States had proclaimed their neutrality in this new war.  But being a maritime nation dependent on exports her best interests lay with Great Britain and the most powerful navy in the world.  Which further proved that Hamilton and his Federalists were secret monarchists.  And that Hamilton wanted to be king.

Meanwhile, the French had sent their new ambassador to America.  Citizen Genêt.  Who Jefferson, the Republicans and the American people welcomed with open arms.  But then he started issuing letters of marque to American captains to attack and capture British shipping.  Bringing them back to American ports to refit them.  Which was a dangerous thing for a neutral nation to do against the nation that kept the sea lanes safe for their commerce.  Then Citizen Genêt tried to raise an American army to attack the Spanish in Florida and in New Orleans.  With further aims of attacking the British in Canada.  This was too much even for Jefferson.  And it was one of the few times that Jefferson and Hamilton were in agreement.  Citizen Genêt had to go.  For Jefferson he was proving to be an embarrassing liability for the Republicans.

While at the same time the British were retaliating.  Issuing orders to blockade France and to seize any neutral shipping trying to supply France with corn.  Which was pretty much any agricultural grain product.  A major export of the United States.  So this was a direct blow against U.S. commerce.  Even though she was a neutral in this current war between France and Great Britain.  This did not make the American people happy.  Nor did it help Hamilton or his Federalists with their rapprochement with Britain.  Then the British began to seize all shipping going to and from the French West Indies.  Which were mostly American ships.  So while Citizen Genêt was causing great headaches for Jefferson and his Republicans the British were doing the same to Hamilton and his Federalists.  Further dividing the nation.  And bringing them closer to war.  In large part due to the politics dividing the nation.

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LESSONS LEARNED #82: “Too much debt is always a bad thing.” – Old Pithy

Posted by PITHOCRATES - September 8th, 2011

Thomas Jefferson hated Alexander Hamilton for his Assumption and Funding Plans 

Thomas Jefferson hated Alexander Hamilton.  For a variety of reasons.  He thought he was too cozy with the British.  And too anti-French.  He also thought Hamilton was too cozy with the merchant class and bankers.  Jefferson hated them, too.  For he thought honest Americans farmed.  Not buy and sell things other people made.  Or loaned money.

But Hamilton was not a bad guy.  And he was right.  George Washington, too.  America’s future was tied to the British.  Trade within their empire benefited the fledging American economy.  And the Royal Navy protected that trade.  For they ruled the seas.  They couldn’t get that from France.  Especially with a France waging war against everyone.

But there was something especially that Jefferson hated Hamilton for.  Assumption.  And funding.  The new nation’s finances were a mess.  No one could figure them out.  There was pre-war debt.  And war debt.  State debt.  And national debt.  The Americans owed their allies.  Neutral nations.  And the former enemy they just won their independence from.  Getting their hands around what they owed was difficult.  But important.  Because they needed to borrow more.  And without getting their finances in order, that wasn’t going to happen.

Thomas Jefferson Understood that a Permanent Debt gave a Government Power 

Hamilton was good with numbers.  And he put America’s financial house in order.  A little too well for Jefferson.  The new federal government assumed the states’ debts (assumption).  And serviced it (funding).  Giving great money and power to the federal government.  Far more than Jefferson believed the Constitution granted.  And this really stuck in his craw.  Because this was the source of all the mischief in the Old World.  Money and power.  The Old World capitals were both the seats of political power.  And the centers of commerce and banking.

Jefferson understood that a permanent debt gave a government a lot of power.  Because debt had to be serviced.  And you serviced debt with taxes.  The bigger the debt the greater the taxes.  Which didn’t sit well with this revolutionary.  I mean, excessive taxation was the cause for rebellion.  Taxes are bad.  And lead to political corruption.  Because the more taxes the government collects the more it can spend on political favors.  Patronage (good paying government jobs for political allies).  Giving rise to a politically-connected ruling class.  Like the Old World aristocracies.  Government grows.  As does their control over the private sector economy.

It’s a process that once started moves in only one direction.  Greater and greater debts.  Paid for by greater and greater taxes.  Until the debt becomes unsustainable.  Like in Revolutionary France.  In present day Greece.  And even in the United States.  Who, in 2011, saw its sovereign debt rating downgraded for the first time in American history.  Because of record deficits.  And record debt.  Caused by excessive spending.  Everything that Jefferson feared would happen.  If government had a permanent debt.

Baseline Budgeting guarantees Permanent Growth in Government Spending

Big Government spending took off in America in the Sixties.  Historically government receipts averaged 17.8% of GDP.  During the Fifties and the Sixties, GDP grew while debt remained flat.  Of course, if GDP grew then so did tax dollars coming into Washington.  For 17.8% of an expanding GDP produced an expanding pile of cash in the government’s coffers.

Liking the taste of this money, government kept spending.  So much so that they adopted baseline budgeting in 1974.  Where current spending is automatically added to for next year’s spending.  Guaranteeing permanent growth in government spending.  To pay for LBJ‘s Great Society.  The Vietnam WarApollo.  And other spending programs.  The spending was so out of control that the debt started to creep up.  And what they didn’t borrow they printed.  Leading to the Nixon Shock.

The Nixon Shock (ending the quasi gold standard) unleashed inflation.  Which Paul Volcker and Ronald Reagan defeated.  With inflation tamed and the Reagan tax cuts, the Eighties saw solid GDP growth.  And record deficits.  The Democrats liked all that cash coming into Washington.  And they spent it faster than it came in.  But to reduce the deficit they made a deal.  For each dollar in new taxes the Democrats would cut three dollars in spending.  Of course they lied.  Because Democrats don’t cut taxes.  They got their new taxes.  But Reagan didn’t get any spending cuts.  In fact, the deal went the other way.  For every dollar in new taxes there were three dollars in new spending.  The deficit grew bigger.  And for the first time the debt grew at a greater rate than GDP.  As shown here:

(Source:  GDP, Debt, Receipts)

The Obama Stimulus gave us Record Deficits and Record Debt

After the 1994 midterm elections, Bill Clinton and the new Republican House compromised.  They reined in spending.  Implemented welfare reform.  And rode the dot-com bubble on the good side.  Before it burst.  It was capital gains galore.  Put all of this together and GDP rose and flooded Washington with tax receipts.  While debt remained flat.  In fact, there were budget surpluses forecast.  But then that dot-com bubble burst.

George W. Bush started his presidency with recession.  A couple of tax cuts later and GDP was tracking up again.  But 9/11 changed things.  And gave us two costly wars (Iraq and Afghanistan).  On top of an expensive Medicare drug program.  Record deficits took debt to new heights.  Then the Housing Bubble burst.  Followed by the subprime mortgage crisis.  And President Obama used this crisis to advance a dormant Democrat agenda.

It was an $800 billion stimulus.  Something he promised would have no pork or earmarks.  Nothing but shovel-ready projects.  Of course, it was nothing but pork and earmarks.  And those shovel-ready projects?  There’s no such thing.  So the stimulus didn’t stimulate anything.  Other than record deficits (surpassing Bush’s).  And record debt.  Debt increasing at a greater rate than GDP.  And equal to or greater than GDP in dollars.  Not seen since World War II.

Hamilton and Jefferson would have United in Opposition against Barack Obama

Debt fell as a percentage of GDP following World War II.  It fell from above 90% to below 40% around the end of the Sixties.  GDP was rising during this period while debt remained flat.  So the flat debt became a smaller and smaller percentage of a growing GDP.  The ‘growing your way out of debt’ phenomenon.  But that process stopped and reversed itself during the Seventies.  When Congress spent with a fury.  As noted above.  Debt grew.  Back to the level of GDP it was during a world war.  Only now there is no world war.  And we’re not spending to save democracy.  We’re spending to end democracy.

(Source:  GDP, Debt $, Debt %)

It is what Jefferson feared most.  Out of control government spending.  Racking up massive debt.  The kind that is impossible to pay off.  And is permanent.  And it was being done not for a war to save democracy from fascism.  But to change America.  To make it a different kind of nation.  No longer one of limited government.  But Big Government.  One with a ruling class.  A ruling class that now has a claim on 100% of GDP.  To pay for everything they gave us.  Where there is no choice but fair-share sacrifice.  Where everyone pays their ‘fair share’ of taxes.  Which is government-speak for raising taxes on everyone.  To flood government coffers with more private sector wealth.

The country is not what it was.  And it will never be what it once was again.  Not with this level of spending.   This is the kind of spending nations see in their decline.  It’s what toppled Louis XVI.  It’s what roiled Greece in riots.  It’s what downgraded U.S. sovereign debt.  For the first time.  Even Alexander Hamilton wouldn’t approve of this.  For his Big Government idea was all about making the nation an economic superpower.  Not bringing back feudalism.

So if you’re not a fan of Barack Obama, here’s something you can credit him for.  His policies would have reconciled two of our most beloved Founding Fathers.  For Hamilton and Jefferson may have hated each other.  But they would have united in opposition against Barack Obama.

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Using the Myth of Man-Made Global Warming to Acquire Money and Power

Posted by PITHOCRATES - August 31st, 2011

A Company needs Government Help when they can’t Compete in the Market Place

The new green energy sector was going to make America energy independent.  And create jobs.  Good, high-tech jobs.  Building high-tech, expensive things.  Things we could charge lots of money for.  So we could pay high wages to all those new green energy workers.  And the Obama administration helped.  Poured federal money into green startups.  That are now failing left and right (see What went wrong at Solyndra by Barry Cinnamon posted 8/31/2011 on CNNMoney).

Chinese solar panels are 10-20% less expensive than U.S.-made panels; but by some estimates, Solyndra’s panels were 100% more…

For five years or more, the U.S. government was providing support for solar manufacturing in the U.S.  The DOE Loan Guarantee program provided critical funding for Solyndra’s manufacturing growth, supported by over $1b in private capital. Unfortunately, both these private investors and the DOE made a couple of bets on Solyndra that didn’t pan out.

A company needs government help when they can’t compete in the market place.  So they can continue to build a more costly and/or a more inferior product.  And even when they get that help they still can’t compete.  Which just means this was a bad investment from the get-go.  Only getting as far as it did because of government help.  Which was tax money poorly spent.

So why did they fail?  A couple of bad decisions by their CEO.

The first bad bet was that refined silicon, the feedstock for the solar panel industry, would stay expensive. Solyndra invented a solar panel that didn’t use expensive silicon. Unfortunately for Solyndra, and fortunately for all the silicon solar panel manufacturers and customers, silicon has gotten very cheap over the past few years…

The second bad bet was that Solyndra’s flat roof installation technology would make up for their relatively expensive panels.  Solyndra did indeed see big savings on flat roof installations, but the rest of the industry did not stand still. Other commercial flat roof products are on the market (full disclosure, Westinghouse Solar has an inexpensive and easy to install flat roof solar panel product) with similar benefits at much lower costs to Solyndra.

Of course, had they never had the government help they never would have gotten off the ground.  And anyone who would say otherwise needs to answer the logical follow-up question.  If they could have done this without government help, why didn’t they?

The Public Sector doesn’t know Squat about a Good Business Idea

But it’s just not Solyndra.  There’s green failure wherever you look in the unfolding saga that is the tragedy of green energy (see Green jobs only produce fiscal black hole posted 8/31/2011 on qcsunonline.com).

Lowlights of the saga include the recent bankruptcy of Evergreen Solar Inc. of Massachusetts, recipient of $58 million in direct subsidies and tax breaks, including federal “stimulus” funding, but which cut 800 jobs and is now $485 million in debt, with more job losses to come with the closure of a Michigan plant. Green Vehicles of Salinas, Calif., received $500,000 in city subsidies, but closed last month without having produced anything of significance, Human Events magazine reported. The company had promised to create 70 jobs and pay back local taxpayers $700,000 a year in taxes.

Seattle got a $20 million federal grant to weatherize 2,000 homes and create 2,000 jobs. After a year, three homes had been retrofitted and 14 new jobs created, many of them administrative. That’s a return on investment of about one job per $1.4 million. In Michigan, Fisher Coachworks is out of business two years after being touted as part of the state’s green future, and despite millions in state subsidies to sell buses bought with federal tax money.

The U.S. Forest Service awarded $490,000 in stimulus funding to Urban Forestry Revitalization Project in Clark County, Nev., to plant trees and other greenery in urban neighborhoods. It created 1.7 jobs, one of them a full-time temporary job, and 11 short-term and temporary.

Overall, estimates the Competitive Enterprise Institute’s Chris Horner, $30 billion in green handouts in the stimulus bill cost taxpayers about $475,000 per job.

These are good examples of why there is a private sector and there is a public sector.  The private sector aren’t experts on providing for the common defense or promoting the general welfare.  And the public sector doesn’t know squat about a good business idea.

Lobbyists’ Money influences Government Misdirection into Economic Affairs

The government is backing a lot of electric cars and hybrids.  They believe this is our future.  And, of course, ethanol.  So while they are interfering with natural market forces, good ideas may not get a chance.  Like, say, this one (see Old newspapers could make gas substitute by Colin Bird posted 8/31/2011 on USA Today).

The researchers have discovered a bacterial microbe that likes the taste of old newspapers — the cellulosic wood pulp that makes the paper, to be more exact. In the process of eating the paper, the microbes excrete a biofuel that can act as a substitute for gasoline, the Detroit News reports.

Such microbes aren’t new; we outlined their potential to make ethanol a few years ago. The difference here is the type of fuel that comes out of the microbes: butanol.

Butanol is better than ethanol because it doesn’t require any modifications to today’s gasoline-powered engines. (Many older cars can’t accept E15, let alone E85.) Also, butanol would generate similar gas mileage performance as gasoline. Ethanol has 27% less energy per gallon compared with gas.

It’s not yet known if this discovery is marketable or scalable, especially since alternative fuels are a bit out of vogue, with more attention focused on electrics, plug-ins and hybrids.

Anyone who has ever tried E85 that actually had a real commute to work saw what a bust E85 was.  There was no cost savings because you had to pump 27% more of it into your tank than gasoline.  Worse, the first time you found out about this you may have been driving home from work.  Late at night.  Going through an area not known for its bright lights and safety.  And have to stop.  To buy gas.  Not a lot of fun.  Especially if you’re a woman.

But the government is committed to E85.  Because, of course, of the powerful corn lobby.  Who is chopping in high cotton these days.  The price of corn has never been higher.  What with it being both a staple food and now a fuel.  So while the money will influence more government misdirection into economic affairs, butanol may die a quiet death.  For it has no lobby.

Global Warming may not be Man-Made, but the Myth of Man-Made Global Warming Is

All of this government malinvestment in products is one thing.  And a complete waste of taxpayer’s money.  But it’s ‘the why’ that they are doing this that really rubs the salt into the open wound.  To save the planet.  From man-made global warming.  Which, as it continues to be shown, is a myth (see Watching A Green Fiction Unravel posted 8/30/2011 on IBD’s Investors).

Experiments performed by a European nuclear research group indicate that the sun, not man, determines Earth’s temperature…

The results from an experiment to mimic Earth’s atmosphere by CERN, the European Organization for Nuclear Research, tell researchers that the sun has a significant effect on our planet’s temperature. Its magnetic field acts as a gateway for cosmic rays, which play a large role in cloud formation.

Consequently, when the sun’s magnetic field allows cosmic rays to seed cloud cover, temperatures are cooler. When it restricts cloud formation by deflecting cosmic rays away from Earth, temperatures go up.

Or, as the London Telegraph’s James Delingpole delicately put it:

“It’s the sun, stupid.”

Why, this seems to disprove much of what the global warming alarmist have been alarming us about for lo these many years.  And being scientists, of course you know what they will do.  Do everything within their power to hush things up.

This new finding of 63 scientists from 17 European and U.S. institutes from an experiment that’s been ongoing since 2009 is, if we may paraphrase Vice President Joe Biden, a big deal. Which is exactly why the mainstream media, with so much invested in global warming hysteria, is letting last week’s announcement from CERN pass like a brief summer shower, ignoring it.

Even CERN’s own director general, Rolf-Dieter Heuer, is trying to avoid the meaning of the findings.

He told Germany’s Die Welt Online that he’s “asked the colleagues to present the results clearly, but not to interpret them. That would go immediately into the highly political arena of the climate change debate.”

But, as British science writer Nigel Calder points out, Heuer would have no reservations about entering “‘the highly political arena of the climate change debate’ provided” his results endorsed man-made warming.

Of course, without global warming, the globe isn’t warming.  Even at the poles.  Where the icebergs are.  Which can mean only one thing.  Those icebergs aren’t melting.  And the sea levels aren’t rising.

And it’s not just the CERN research creating a problem for them. They also need to explain why sea levels, like presidential approval numbers and consumer confidence, have fallen. According to NASA, the oceans are down a quarter of an inch this year compared to 2010.

Under the rules of climate change, sea levels, due to melting ice and water that expands as it warms, should be increasing in a way that we’re all supposed to believe is a threat. But NASA scientists say that El Nino and La Nina, weather cycles in the Pacific Ocean, have caused sea levels to fall.

So, yes, global warming is man-made.  The myth of global warming, that is.  Just like the billions of dollars the government has been throwing at these bad green investments.  The idea that these ‘investments’ will create jobs is another man-made myth.

Money and Power – the Driving Force of all Mankind and Governments

The green energy sector is based on man-made global warming.  Which real science continually disproves.  Man isn’t warming the planet.  The sun is.  As it always has.  And always will. 

And the scientists know this.  The real ones.  And the fake ones that have been pushing global warming.  Why do they do this?  Just look at what they have accomplished.  Costly new regulations.  And all that government spending on green energy.  Paid with our taxes.  Stifling real economic output.  And transferring a lot of wealth from the private sector to the public sector. 

And there it is.  Like it always is.  Money and power.  The driving force of all mankind.  And governments.

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FUNDAMENTAL TRUTH #77: “Liberals only call for bipartisan compromise when they’ve lost majority power and can no longer dictate policy.” -Old Pithy

Posted by PITHOCRATES - August 2nd, 2011

English Law and Capitalism gave People Freedom few knew in the 18th Century

Politics is a class struggle.  The ruling class against everyone else.  The ruling elite fights to keep the power in the hands of the privileged few.  While everyone else tries to wrest it away.  So they can live a better life.  Free from tyranny.  And oppression.

Life was pretty good in British North America.  The colonies were growing.  Their English law and free market capitalism gave people freedom that few knew in the 18th century.  Over in Europe the masses were poor and worked for subsistence.  Over in British America, though, a thriving middle class was emerging.  Like I said, life was pretty good.  Until the French had to go and spoil everything.

Great Britain and France were at war.  Again.  And this one was a world war.  The Seven Years’ War (the French and Indian War in North America).  Great Britain ultimately prevailed.  And made all French North America British.  We call it Canada today.  But conquering a world power and managing an empire that stretched around the globe was expensive.  And to make matters worse, the treasury was running low.  They needed more tax revenue.  But Britain’s land owning aristocracy was already heavily taxed.  And they were none too keen on paying any more.  So what to do?

Well, there was this.  There was a vast continent on the other side of the Atlantic with a lot of wealth that just got a whole lot safer thanks to some brilliant, and very expensive, military engagements.  Surely, they would not refuse to pay for some of the safety they gained in the recent war.

The London Ruling Class wouldn’t let a bunch of Backwoods Upstarts challenge their Authority

Well, as it turned out, yes, they could.  And did.  And don’t call me Shirley.

At the time, the American colonialists were proud Britons.  They loved their way of life.  And the representative government enshrined in Parliament.  Based on the Rule of Law.  Only thing was that they had no say in Parliament.  No representation.  Which was fine.  For awhile.  Being that far from the seat of government had its advantages.  But it was a different story when that distant power started flexing its muscle.  And a great power desperate for money could be rather presumptuous.

Now the colonists were reasonable people.  They were willing to make some kind of bipartisan deal of fair-share sacrifice.  But they wanted to talk about it.  They want to sit in Parliament.  And they wanted more say about their future on the new continent.  They were already very unhappy with some of the treaty details the British made with the French.  And the Indians.  Forbidding western expansion?  And allowing the French Canadians to practice their Catholicism in their very backyard?  No.  These would not do.  Americans had to have more say in America’s future.  And the British response?  “Shut your bloody mouths you insolent swine.  You do as we say.  And like it.”

I’m paraphrasing, of course, but you get the gist.  The ruling class in London wasn’t about to listen to a bunch of backwoods upstarts challenging their authority.  No, they were going to dictate policy from London.  And the Americans were going to accept their second class status and do as they were told.  Well, long story short there was a rebellion, the colonies declared their independence from Great Britain and a new confederation of states was born.

After Winning Independence the States got Drunk on Democracy

The Revolutionary War lasted from 1775 until the Treaty of Paris formally ended the war in 1783.  It was a long and bitter war.  Especially in the South where it evolved into a civil war between Patriot and Loyalist.  Independence did not come easy.  Nor was it cheap.  Like Great Britain, the young confederation of states racked up a large war debt.

With the common enemy defeated the several states went their own ways.  And threatened to destroy what they just won.  Some states were fighting over land.  Over tariffs.  Trade.  The united confederation of states wasn’t very united.  And they were more on the road to becoming another war-plagued Europe than the great nation envisioned by George Washington and the others who had served in the Continental Army.  Who saw the greater America.  Beyond the borders of their own state.

And the worst danger was democracy.  Mob-rule.  Religious persecution.  And the general feeling you didn’t have to do anything you didn’t want to.  The people were drunk on democracy.  They were voting themselves whatever they wanted.  In debt?  No problem.  We’ll pass debtor laws to protect you and rip up those contracts you signed.  Or we’ll give you worthless money we’ve printed to pay your debts.  And we’ll pass a law forcing creditors to accept this worthless money as legal tender.  Even though it’s worthless.  The Rule of Law was collapsing.  As was the new ‘nation’.

Madison and Jefferson feared the Power a Permanent Government Debt Gave 

This was quite the pickle.  An oppressive ruling class was bad.  But so was mob-rule.  They needed something else.  Something between these two extremes.  That would somehow strike a delicate balance between responsible governing.  And liberty.  The solution was federalism.  As created in a new Constitution.  Drafted during the summer of 1787 in Philadelphia.  Which created a new central government.  That shared power with the states.

Getting the new constitution ratified wasn’t easy.  Most of the old Patriots from the Revolutionary days hated the thought of a new central government.  They didn’t trust it.  This was just King George all over again.  Only on this side of the Atlantic.  The wrong side.

Alexander Hamilton and James Madison worked tirelessly for ratification.  They wrote a series of essays explaining why it was the best compromise possible.  These essays became the Federalist Papers.  An extensive set of checks and balances would greatly limit the powers of the new federal government.  And the only thing the new central government would do would be the things the several states couldn’t do well.  Coin money, treat with other nations, raise an army and navy, etc.

Hamilton and Madison succeeded.  The constitution was ratified.  And the United States of America was born.  And soon thereafter Hamilton and Madison (and Jefferson who was out of the country during the Constitutional Convention) parted ways philosophically.  Hamilton wanted to assume all the states’ debts and fund it.  It was the right thing to do because they had to pay it to be taken seriously on the world stage.  But this scared both Madison and Jefferson.  They feared the power a permanent government debt gave.  Money and government was (and still is) a dangerous combination.  All the world powers consolidated money and power in their capitals.  And all the great mischief of the Old World was a direct result of this combination.  It’s what lets the ruling class oppress the people.  Money and power concentrated into the hands of a privileged few.

Had Liberals lived during the Revolution they would have been Loyalists

Fast forward a few hundred years and we see exactly what Madison and Jefferson feared.  The federal government is bloated beyond the Founding Fathers worst nightmares.  And handling such vast sums of money that would even make Alexander Hamilton spin in his grave. 

We’ve come full circle.  We began by rejecting a distant ruling class.  And we now have a distant ruling class again.  In Washington.  Made up of liberal Democrats.  And obedient RINO Republicans who toe the liberal line.  And the nation has a permanent debt so large that we’ll never pay it off.  Thanks to out of control government spending.  It’s as Madison and Jefferson feared.  All of that spending and debt require ever more taxation.  And ever more borrowing.  And whenever taxation and borrowing is not enough, they manufacture a crisis to scare us into raising both taxes and the borrowing limit.  For we have no choice.  Because if we don’t the consequences will be unbearable.

This is the liberal way.  Big Government.  The bigger the better.  With all power concentrated into as few hands as possible.  Their hands.  The privileged few.  The ruling elite.  Who like to dictate policy when they have majority power.  And cry foul when they don’t.  For the only interest they have in bipartisan compromise is when they can’t have their way.   

Liberals like to invoke the Founding Fathers (and Ronald Reagan) whenever they can in some twisted explanation of why they would support their policies (i.e., the new central government was created to raise taxes and therefore would approve high taxes).  But their actions are clearly more consistent with King George and his ruling class than the Founding Fathers.  And had they lived during the Revolution, no doubt they would have been Loyalists.  To support and maintain the ruling class.  And their privilege.

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FUNDAMENTAL TRUTH #59: “When the Right partners with business the Left calls it crony capitalism. When they partner with business the Left calls that smart government.” -Old Pithy

Posted by PITHOCRATES - March 29th, 2011

The Right likes Capitalism, the Left likes Marxism

Crony capitalism isn’t capitalism.  At best it’s mercantilism.  At worse it’s autocracy.  But the critics of capitalism haven’t the foggiest clue of what capitalism is.  They think it just exploits the working class.  Like Karl Marx said.  Of course, Karl Marx was wrong.  His philosophy has never worked.  Whereas capitalism, true capitalism, has.  Try to point to a successful Marxist country today.  You can’t do it.  Because when you take from those according to ability and give to those according to need you have everyone trying to show as little ability and as great need as possible.  Put yourself in that position.  Do you want to show some genius and work 12-hour days and see all of your earnings go to people sitting at home collecting state benefits?  Or would you rather not work those 12-hour days, relax at home and collect those state benefits?  If these are your choices, you don’t have to answer.  Because everyone is going to choose to stay at home and collect benefits.  Because no one volunteers to be a slave.

In such a world try to imagine how many cellular towers people would install when no one wants to work.  Not many.  Which means no cell phones, no text messaging, no internet on your mobile device and no sitting in your favorite coffee shop Internet hotspot.  For no one will spend the excruciating time, money and effort to create something while he or she is paid less than those with greater need who do nothing.  In other words, there is no incentive to work hard.  So no one will work hard.  Just like you won’t work hard by working overtime hours for free.  And why won’t you?  Because when you work you sell your time to an employer.  It’s your time.  If no one is paying you for it, you’d rather do something fun.  We all would.  Because it’s our unalienable right to pursue happiness.  Like Thomas Jefferson wrote in the Declaration of Independence.  And pursue it we do.  Because when it comes to our happiness, we’re all Jeffersonians.  Even Alexander Hamilton.  Even though they often saw things differently.

And one of those things was capitalism.  Jefferson didn’t like bankers.  Especially when they were in tight with the government.  Hamilton, on the other hand, liked the bankers.  Because he knew the difference between money and capital.  Assume everyone has a few bucks in their pockets.  What is that going to buy these individuals?  Not much.  Certainly no cellular towers.  But when you pool that money together you get capital.  And capital can buy cellular towers and the other conveniences of modern society.  And this is capitalism.  There’s a little more to it but the point is capitalism provides incentive.  And incentive stimulates innovation.  People take risks, work hard and create great things.  Marxism, on the other hand, provides no incentive for anyone to innovate.  There are no risk takers and people work the bare minimum they can get away with.  And there is nothing great in a Marxist society except misery, hunger and fear.  North Korea and Cuba are about the last of the Marxist societies remaining.  The Soviet Union, Eastern Europe and Mao’s People’s Republic of China are relics of the Cold War.  Now on the ash heap of history.  And all of these countries have/had sealed borders.  People could not leave.  If they tried they often died.  Many still risked it.  Because life was horrible under Marxism.

Jefferson the anti-Capitalist turns to Capitalism

Now whenever you gather money in great big piles you invite corruption.  Especially in government.  Which is what Jefferson feared.  You need money to do things.  And if government had access to great pools of it, they could do a lot of things.  Build armies.  Build navies.  Fight wars.  Grow the size of government.  Increase the size of the federal payroll.  Buy favors.  Sell patronage.  So more and more people became part of a growing, bloated federal government.  Who then had a vested interest in seeing it continue to grow to protect and increase the power and money they had.  All the great cities in the old world (London, Paris, Madrid, etc.) were corrupt.  The bankers were in bed with the politicians.  And the people suffered.  In his beloved France, Jefferson saw firsthand this insidious combination of money and power impoverish and starve the masses.  He saw revolutionary fervor grow in the Jacobin clubs.  And witnessed the outbreak of the French Revolution.  To check the power of the absolute monarchy and instill republican ideals.  And he liked what he saw.

With the backdrop of history, two men (and their followers) pulled America in two directions.  The Hamiltonians wanted to model America after the British Empire.  Rich and powerful.  Jefferson envisioned a nation of citizen farmers.  Simple farmers toiling the land.  Free from the corruption of the banks and the merchants.  With limited government.  Working with a modest federal budget.  Without any debt.  Of course, this all went out the window with the Louisiana Purchase.  When he needed a big whopping pile of money.  And a little extraconstitutional authority as well.  Sort of like a European monarch.  Which he took.  And thanks to a little thing called capitalism, the British and Dutch put together some creative financing for the French and the Americans.  They paid cash to France in exchange for the American bonds they just underwrote.  Some would say it was a bit hypocritical considering his attacks against Hamilton, but the U.S. profited very well from that purchase.  The point being is that even an ardent anti-capitalist like Jefferson had to turn to capitalism to close this deal.  Because there was no other way a young and poor nation could ever come up with that kind of money without borrowing it.

But all politicians aren’t like Thomas Jefferson.  In fact, shortly after the Founding Father generation, government began to grow.  There were political favors.  Pandering.  And corruption.  As the quality of the politician declined more unscrupulous people were attracted to government.  A growing nation needed to grow.  It needed to build things.   Armies.  Navies.  Forts.  Government buildings.  Post offices.  Canals.  Railroads.  As the nation grew it collected more taxes.  It soon had a lot of money to buy these things.  And issuing contracts for these things could be a very lucrative endeavor.  For the unscrupulous politician.  Who would only contract with those who made it worth his while.  The unscrupulous businessman.

Buying and Selling Favors for Personal Gain

This is crony capitalism.  The joining of business and government in backroom deals.  This isn’t laissez-faire capitalism.  This is the buying and selling of favors for personal gain.  And this is what many people think capitalism is.  Especially those critics on the Left.  Who think in zero-sum terms.  The only way some people can have more money is if other people have less.  Some people are lucky.  Some just aren’t.  Ability and ambition have nothing to do with it.  It’s all based on who you know.  And when money and power is concentrated in too few hands, it shuts out others from the market place.  And that’s just not nice.  Good people will be unable to make other and more important things.  So unless someone smart steps in and coordinates this economic activity, that activity will be inefficient.  It will build the wrong things.  And the wealth will accumulate in the wrong hands.

These politicians want to partner with business to make the right things.  By the right people.  The things they want to see built.  And not the things they don’t like.  A good example of this today is the electric car.  And the internal combustion engine.  They love one.  And despise the other.  They put in policies to increase the cost of gasoline-powered cars.  And the cost of gasoline.  And provide subsidies to electric car companies to help them build cars no one wants to buy.  And subsidies to consumers to reduce the price on electric cars.  So they’ll buy something they don’t want.

Currently, there is no market for the electric car.  People are buying it now for one of two reasons.  Because of the subsidies.  Or the smugness.  Yet companies are building these cars.  Why?  Well, they’re not doing it to lose money.  They’re making money.  Somehow.  But it isn’t in the market place.  And if it isn’t the market place, it can mean only one thing.  They are getting some sweet federal subsidies to build these cars no one wants.  And this just isn’t capitalism.  It’s another example of crony capitalism.

The Left hates Shareholders, not Corporations

The Left attacks the Right for being the party of the big corporations.  They’re nothing but a bunch of crooks.  The corporations.  And the Republicans.  Republicans pander to the corporations.  They want to deregulate their industries.  While consumer safety suffers.  As does the environment.  And they want to cut their taxes.  Paid for by tax hikes on the poor and working class.  To those on the Left the business corporation is evil incarnate.  Unless they want to partner with them.  And build things together.  Then they’re okay.

The Left hates corporations.  Yet it’s always the left that favors corporatism.  The partnering of business and government.  Like in Mussolini’s fascist Italy.  Or outright nationalization of the corporation.  A complete takeover by the government. Like in Hugo Chavez‘s Venezuela.  It apparently isn’t the corporations per se they hate.  It’s the shareholders.  They have no problem with these corporations making obscene profits.  As long as the politicians can share in these profits.

So there you have it.  The difference between crony capitalism and smart government.  It all depends on the amount of money flowing into the government’s coffers.  If the shareholders keep the full return on their investment then the business and Republicans are practicing crony capitalism.  If the shareholders share their return on their investment with the Democrats, then that’s smart government partnering with business.

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LESSONS LEARNED #35: “Not only is ignorance bliss, but it’s a godsend to Big Government.” -Old Pithy

Posted by PITHOCRATES - October 14th, 2010

If Jefferson Could Talk from the Grave He’d Be Hoarse from Shouting by Now

Politicians.  They’re all the same.  Well, most of them.  They enter politics for one thing.  For a career.  And what do people want from a career?  Great success.  Great prestige.  Great wealth.  Great power.  And a little revenge.  The pencil-neck, computer-nerd geek takes great pleasure in seeing a jock from his high school days emptying his trash while boarding his private jet. “Those wedgies and swirlies were a bitch but look at us now.”  It’s true.  The best revenge is living well.

But some people lack any talent or ability.  Some of them will never amount to anything.  They’ll never know the joy of looking down on people better than them with sweet condescension.  So these people go into politics.  Where people with no talent or ability can live well.  It’s a simple formula.  Sell your soul.  Whore yourself out.  Shake down businesses with taxation and regulation (and get even with all those people who have far more talent and ability than you ever had).  Collect tribute.  Consolidate power.  Hold those you serve in contempt.

Lord Acton wrote in 1887, “Power tends to corrupt, and absolute power corrupts absolutely.”  A century earlier, Thomas Jefferson fought tirelessly to prevent great money and federal power from conjoining.  The Old World capitals consolidated money and power.  And this concentrated the money and power into fewer and fewer hands.  Kings ruled by whim.  And oppressed their hapless subjects.  It’s a story as old as time.  And is still true today.  To the great chagrin of Jefferson.

Go West, Young Man

The transcontinental railroad was making poor progress during the Civil War.  Because it was starved for capital.  No one would invest.  Few doubted that they could build it.  Even if they could, few doubted it would ever make money.  The West was mostly raw, unsettled land.  There was nothing to transport.  Nothing to earn revenue.  It was a huge investment with a huge risk.  Investors are smart when it comes to money.  And they saw the transcontinental railroad as a one-way road that their money would go down and never return.  They needed something.  Big Government.

When it comes to throwing money away on a losing investment there is but one place to go.  Uncle Sam.  With the power to tax, the federal government has huge piles of money to play with.  So here’s what happened to build that railroad.  Union Pacific (UP) created a shell company called Crédit Mobilier (CM) to finance and build the railroad.  These companies were one and the same.  Without getting too complicated, UP sold their ‘worthless’ stock to CM at par.  Now, CM being a finance and construction company, a train never had to run over the road they were building to make a profit.  Union Pacific, on the other hand, needed trains running on that new track.  They were a transportation company.  They earned a profit from transporting goods on their trains.  This meant it could take years before UP could even hope to earn a profit on the new transcontinental railroad.  CM, on the other hand, could start earning a profit with the first invoice they submitted for construction.  And they did.

CM had strong revenues.  They submitted grossly inflated construction invoices to UP.  UP added a small construction management fee and submitted them to the government.  The government paid UP.  UP paid CM.  With revenues far exceeding their costs, CM made obscene profits.  CM stock took off into the stratosphere.  Some of which was sold to Congressmen at a deep discount who in turn realized obscene capital gains if they sold their stock.  Or collected obscene dividends if they held onto their stock.  In return for this sweetheart deal, they approved all cost overruns.  Killed any legislation unfavorable to UP/CM.  Provided lucrative incentives to build track on the worst ground in the most indirect path (to maximize the railroad’s mineral rights).  Provided little to no oversight on the construction of the road (some track was built on ice, with cheap steel and flimsy wooden trestles wherever possible).  When east met west the different railroads kept on building, parallel to each other to keep billing Uncle Sam.  All paid by the public treasury.  By the taxpayer.  The little guy.  Being raped and pillaged by their own representatives.

Affordable Housing for Those Who Vote Democrat

Politicians buy votes.  Pad the federal payroll.  Steal from the treasury.  Break the law.  Violate our trust.  You know, politician stuff.  Because of the inconvenience of elections, they can’t be too blatant about their rape and pillage.  So they do things that are in the best interest of the public.  Or so they say.  Like affordable housing.  You see, the Left buys the votes of the poor and minorities by throwing bones to them.  And there are a lot of minorities in the inner cities of the bluest of blue cities.  So they threw big bones to them.  Houses.

Despite their War on Poverty, the Left just can’t help these people.  The truth is, of course, that they don’t want to help them.  If they’re poor and dependent on the government, the Left can count on their vote.  If they escape poverty and don’t need Big Government to provide for them, these people are of no use to the Left.  Ergo, they never escape poverty.

Of course, the problem of remaining in abject poverty is that you can’t qualify for a mortgage.  Banks are funny that way.  They only loan money to people who can pay them back.  So they declined a lot of mortgages to these poor inner city minorities.  Well, this was just too good for Big Government to pass up.  A large group of minorities (i.e., a large Democrat voting bloc) being denied mortgages?  Why, that’s racism.  So they drafted a lot of legislation and unleashed their justice department with extreme prejudice.  The message?  Approve these loans.  Or face the consequences (revoking a bank’s charter, a federal lawsuit, a public demonstration headed by Jesse Jackson, Charlie Rangel, et al, etc.).  So they found creative ways to approve loans.  And they got a little help from Uncle Sam.

The Subprime Mortgage Crisis is a Lot Like the Crédit Mobilier Scandal

By a little I mean a lot.  Uncle Sam screwed the mortgage bankers by making them approve extremely risky loans.  So, to help the mortgage bankers, Uncle Sam screwed the American people.  They guaranteed those highly risky mortgages, thus transferring the risk from them to us, the taxpayer.  And to further mitigate the bankers’ risks, they purchased a lot of those highly risky mortgages to remove them from the banks’ balance sheets.  It’s called the secondary mortgage market.  And the primary players are none other than Fannie Mae and Freddie Mac, ground zero of the subprime mortgage crisis.

Once upon a time, a mortgage was one of the safest investments.  People saved up to pay a 20% down payment.  With their life savings invested, people paid their mortgage payment and they paid them on time.  And if you could afford a 20% down payment, mortgage bankers had a lot of confidence that you would be able to service your mortgage.  But in the day of 5%, 3% and 0% down, a person doesn’t have a whole lot to lose.  This makes the first few years of these mortgages especially risky.  The introduction of ‘no documentation’ mortgages meant people could lie about their income (or include overtime earnings).  Add to that the Adjustable Rate Mortgage (ARM) and the interest-only mortgage and you just made these especially risky mortgages even more risky.  Sure, these will get almost anyone into a home, but they get in by the skin of their teeth.  But if they lose their overtime due to a weakened economy, if their interest rate on their ARM resets at a higher rate or a balloon payment is due on their interest-only loan, guess what?  That stream of mortgage payments could very well stop.

Now that would be a BIG problem.  Because of what Freddie and Fannie did with those mortgages they bought.  They sliced them up and built creative investment vehicles.  Derivatives.  Mortgage backed securities called collateralized debt obligations.  Wall Street repackaged all these risky mortgages into highly profitable investments.  Everybody bought them.  Pension funds.  Trust funds.  In America.  And throughout the world.  Big gains with a low risk.  Or so it would seem.  You see, they never eliminated the risk.  They only transferred it to someone else.  And once people couldn’t pay their mortgage payments anymore, the house of cards came crashing down.  We call it the subprime mortgage crisis of 2008.  It caused a worldwide recession.  And cost the American taxpayer dearly.  Even those not born yet.

Yes We Can…Screw the American Taxpayer

The subprime mortgage crisis of 2008 is a government creation.  Their quest of affordable housing to buy votes put more and more people into houses they couldn’t afford.  They created legislation akin to extortion of the banking industry.  They used the Justice Department to apply the muscle for that extortion.  They had their friends in the media and the activists for racial equality to further pressure the banking industry.  Their lack of oversight of Fannie and Freddie (thank you Barney Frank and Chris Dodd) let them make extremely risky loans.  And their policies of buying extremely risky mortgages ultimately transferred all risk to the taxpayer.  Why?  Because like all good government scandals, the seekers of favors rewarded our representatives well for their complicity with sweetheart mortgage deals, vacation junkets, fat contributions to their campaign war chests, etc.  In other words, politics as usual.  But on a grand scale.

Why do they do it?  Because they can.  They count on you being ignorant of history.  And accepting every lie they tell you.  Because they hold you in contempt.  They look down on you with sweet condescension.  These pencil-neck geeks who could never amount to anything on their own merit or ability.  But some sold souls later and they have finally gotten even with those who were better than them.  And here they are.  Still living well.  Even during the worst recession since the Great Depression.

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LESSONS LEARNED #33: “The Founding Fathers weren’t perfect but they were closer than most.” -Old Pithy

Posted by PITHOCRATES - September 30th, 2010

Anarchy Averted

Washington men didn’t live long.  And George Washington thought about that.  A lot.  He loved his Mount Vernon.  His garden.  And he longed to retire there to spend out his years in peace under his vine and fig tree.  But he gave up that dream when he accepted command of the Continental Army.  He was already at that age when a lot of Washington men died.  So when he left, no doubt he thought he may not return.

The Revolutionary War lasted 8 long years.  And Washington spent those years with the army.  In the field.  He was at Valley Forge.  He didn’t leave to go home to see Martha.  No.  His wife came to Valley Forge to see him.

Washington was a wealthy man.  He didn’t need to make these sacrifices.  A lot of wealthy men didn’t.  But he did.  And he sacrificed a lot.  Even his eyesight.  When the army officer’s wanted to mutiny over a long list of failed promises (pay, pensions, etc.), Washington pleaded with them.  To not throw away the thing they’ve fought so long and hard for.  As poorly as the Continental Army was treated, those words did not move them much.  Then Washington pulled out a letter from a congressman to read to them.  But couldn’t.  After stumbling over a couple of words, he stopped.  He then pulled out a pair of spectacles.  No one had ever seen the great George Washington in such a public display of weakness.

“Gentlemen, you must pardon me,” he said.  “I have grown gray in the service of my country, and now find myself growing blind.”

Some cried for the old man who had given so much.  When he no doubt had so few years left to live.  If their commanding general could make such sacrifices, so could they.  So there would be no Caesar.  No Cromwell.  No armies would march to the seat of power.  This republic would not collapse into anarchy as history often scripted her republics.

The Most Powerful Man in America Surrenders His Power         

But would he be king?  He could have.  Easily.  He had the power.  And the love and adoration of the people.  In fact, some were begging him to become king.  Others, though, questioned his intentions.  They looked at the army with a nervous unease.  They were, after all, a nation built primarily from English stock.  And they knew their English history.  Of Oliver Cromwell.  The New Model Army.  Just what were his intentions?

He still stayed in touch with his officers (and later would go on to be the first president of the Society of the Cincinnati).  This seemed a bit ominous to some.  This is why once the war was over, people tried to forget about and disband the army as quickly as possible.  To renege on the promises they made to these veterans.  They just wanted these soldiers to go away.  There were too many bad memories of standing armies in their midst.  Whether they wore a red coat or a rag, they just wanted them gone.

Even King George questioned his intentions.  Few give up power.  If he did, it would place him in the pantheon of greats.  But would he?  Yes.  He would.  And did.  Washington would be a Lucius Quinctius Cincinnatus, the Roman farmer who walked away from his plow to assume dictatorial powers to help save his nation.  When the threat was past, he returned power to the Senate and returned to his plow.  And so did Washington.

Answering the Call of Duty.  Again.

Then the nation called for their Cincinnatus once again.  There were problems with the Confederate Congress.  It was having difficulty governing the peace.  There were state rivalries.  Their finances were in a mess.  And there was no national identity.  There used to be.  British.  And the European nations treated with that singular entity.  Great Britain.  Now that the mother country was gone, there was no singular entity.  No unity.  Everyone was for themselves.  And the European powers had to make multiple treaties with the multiple states.  If they wanted to go through that headache.  And many did not.

Some called for a revision to the Articles of Confederation.  But it was difficult to get the states on board.  A weak confederacy favored the individual states.  And the individual states liked that.  But it also limited their potential as a nation.  Some feared the inter-state rivalries would balkanize the nation.  Make the New World a repeat of the Old World.  To bring the nation together would take an extraordinary effort.  Or an extraordinary man.  George Washington.  Who agreed to attend the Philadelphia Convention in 1787. 

After a long and hot summer, the Philadelphia delegates produced a constitution.  With James Madison being the primary architect.  They then sent it to the states for ratification.  At which time James Madison and Alexander Hamilton began a writing campaign to urge its ratification.  (John Jay contributed to this campaign, too, but not as much as Madison and Hamilton).  Once ratified, it came time to populate the new government.  Some competed with each other for some positions.  But for one of the positions there was unanimity.    There was but one man the people would trust with the most powerful office in the land.  Their Cincinnatus.  George Washington.  But would he do it?  Would he leave his blissful retirement beneath his vine and fig tree?

Yes.  Not because he wanted to.  More than 10 years had passed since this old man had agreed to command the Continental Army.  He had outlived many Washington men.  The way he saw it, he was living on borrowed time as it was.  And there was another consideration.  Against the greatest of odds, he did NOT lose the Revolutionary War.  He had made mistakes in his life, but his name was safe for posterity.  But if he took a risk now he could lose the good name he built.  And if there was anything soldiers (and politicians) worry about, it’s their legacy.  (That’s why they write memoirs.)

Another Long 8 Years

When it was clear that he was, in fact, the indispensable one, he sacrificed his personal want for the public need.  Again.  And again, serving a second term as president.  He was ready (and looking forward to) retirement after one term.  But the party politics were threatening to tear apart the new nation.  The rift between Jefferson and Hamilton had grown.  It was splitting the government into two camps.  The Federalists (led by Hamilton) and the anti-Federalists (led by Jefferson).  They pleaded for Washington to serve a second term as he was the only one who could hold them together.  He consented.

That second term was particularly unpleasant for Washington.  Party attacks turned into personal attacks.  Even against Washington.  And the ugliness got really ugly over the Jay Treaty.  Many wanted war with Great Britain.  But having actually fought a war with Great Britain, Washington favored peace.  Yes, the treaty favored Great Britain.  And, yes, it tied American interests to Great Britain, not her war time ally.  France.  The Jeffersonians unleashed an unfettered vitriol on the Federalists.  Including Washington.  But Washington bet on the right horse.  Great Britain proved to be the dominant European power.  And her Royal Navy came in handy protecting U.S. trade with her.  Over a decade of peace and prosperity followed. 

After 8 years, though, there was no persuading Washington for another 4-year term.  He had grown ever older in the continued service of his country.  Now he felt it more than ever that his days were few.  Rarely did he know happiness like he felt at the inauguration of the 2nd president, his vice president, John Adams.  Adams wrote that after he took the oath of office, Washington said, “Ay! I am fairly out and you fairly in!  See which of us will be happiest!”  He may not have actually said this but he no doubt felt the sentiment.  And with that, he returned to his plow.  Cincinnatus had come home.  Where he would happily live out his remaining years.  All two of them.

Where is Our Cincinnatus?

Today it’s about money and power.  Not duty.  Today, people want to be full-time politicians.  For the money and power.  And the elitist status.  People get into Congress and they just don’t want to leave.  Should we vote them out of office, they have a tantrum.  They call their constituents stupid for not knowing who the better candidate was.  And they won’t go quietly.  Some will change parties.  Or run as an independent.  Or as a write-in candidate.  Anything to stay in Washington.  To hold on to their power.  To stay among the elite.

The nation has deviated far from the path of disinterested public service of the Founding Fathers.  The anti-Federalists would be shocked to see what became of the government they helped create.  Even the Federalists.  Even Hamilton.  Not even he, the champion of a strong federal government, would approve of the federal government today.  His mercantilist polices had the goal of making the nation rich and powerful.  Not to suck the wealth out from the private sector.  Which began in earnest with Wilson.  Then picked with FDR.  Then ramped up further with LBJ/Nixon/Ford/Carter.  Had Hamilton lived in the 20th century, he would have earnestly campaigned for Ronald Reagan.  To put an end to the public sector’s pillage of the private sector.

And now we find our nation adrift again.  But who will step in and stop it today?  Who is out there?  Willing to put down their plow for disinterested public service.  And by ‘plow’ I mean any real job.  Worked by someone who is not part of the Washington establishment.  Where is our George Washington?

www.PITHOCRATES.com

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LESSONS LEARNED #32: “America is great but it can’t make bad ideology good.” -Old Pithy

Posted by PITHOCRATES - September 23rd, 2010

Hamilton vs. Jefferson

So what was the deal with these two Founding Fathers?  Why did they hate each other so?  They were exceptionally bright, among the best read of the founders.  They each had impeccable revolutionary credentials.  And, prior to 1787, they had similar visions for their new country.  So what happened?

Despite their similarities, they were two very different men.  Hamilton was a bastard child whose father left him at a young age.  His life was hard.  He had a job while still a child.  Anything he had he had to earn.  Jefferson, on the other hand, was born into the planter elite of Virginia.  His life was not quite so hard. 

A bit shy, Jefferson buried himself in books.  He loved to read.  And to think.  To ponder the great questions of life.  While Hamilton worked in and learned the import/export business in the Caribbean.  As Jefferson pondered about what might be, Hamilton mastered commerce.  Understood capitalism.  Pondered what was.  And could be.  If he ever got off of that godforsaken island.

Eventually, he did.  He came to the colonies and went to college.  And gave Jefferson a run for his money in the smarts department.  And in one area, he simply left Jefferson in the dust.  Hamilton could understand things if you put dollar signs in front of them.  Jefferson could not.  For all his genius, Jefferson couldn’t make a buck.  He was forever in debt.  Because he struggled in these areas, he distrusted banking and commerce.  And the big cities that they corrupt.  Hamilton, though, understood banking and commerce.  He understood capitalism.  And what it could do.

Thus the divide between these two men.  Hamilton, a champion of capitalism.  And Jefferson, a champion of the yeoman farmer (a farmer who owns and works his own land.).  Of course, Jefferson was anything but a yeoman farmer.  He had others (i.e., slaves) work his land.  Here he was like the contemporary liberal.  Do as I say.  Not as I do.  For wealth and luxury obtained from the labors of others is okay for me and my fellow planter elite.  But not for you.  Especially when the ‘black arts’ of commerce and banking are concerned.

London, Paris/ Versailles and Madrid

The old world capitals had many things in common.  They were the homes of powerful monarchies.  They were the financial capitals of their countries.  And they caused a lot of mischief in the world.  Jefferson saw the connection between money and power.  More money, more power.  More power, more mischief.  Another good reason to hate commerce and banking in Jefferson’s book.

Of course, Hamilton saw it differently.  He saw one empire in ascent.  And two in descent.  And it was no coincidence that the better practitioner of capitalism was also the empire in ascent.  Great Britain.  He may have fought against her in the Revolutionary War, but he still admired her.  Where Jefferson feared the combination of money and power, Hamilton saw the Royal Navy.  Great wooden walls (as John Adams called them) that had protected the empire since she became an empire.  Grew her empire.  Increased her wealth.  And her power.  In fact, losing her British colonies was the only real defeat this empire had suffered.

When the Founding Fathers looked west they saw great potential.  Jefferson saw farms.  Hamilton saw empire.  One greater than Great Britain.  For after all, the Americans did what no other European nation could.  They defeated her in war and took huge chunks of her empire.  (Of course, our Revolutionary War was but one theater in a world war Great Britain was fighting at that time.)  Hamilton saw great potential for his new nation.  If only business and government partnered to harness that great potential.

Money + Power = Corruption

When business partners with government we don’t get capitalism.  We get mercantilism.  Or crony capitalism.  But you have to understand things were different in Hamilton’s day.  A good politician then went to great lengths NOT to profit from his time in public service.  It was expected.  Selfless disinterest.  In fact, it was unseemly to even campaign for public office.  That was just something a gentleman of the Enlightenment wouldn’t do.  And if anything was important in those days, it was showing how much a gentleman of the Enlightenment you were.

That said, business partnering with government would NOT lead to corruption.  At least, in Hamilton’s eyes.  With the right men in power, only good would result.  Though Jefferson, too, was a gentleman of the Enlightenment, he had no such faith in government.  To him, it was simple arithmetic (as long as there were no dollar signs involved):

                Money + Power = Corruption

So the new American capital wouldn’t be in a big American city.  Not in New York City.  Not in Philadelphia.  It would be in a swamp.  On the Potomac.  In Virginia’s backyard.  So Jefferson and his planter elite brethren could make sure the new American government would speak with a southern accent.  So much for that enlightened disinterest. 

Both Right.  Both Wrong.

No man is perfect.  Not even me.  No, really.  It’s true.  I’m not.  And neither were Hamilton nor Jefferson.  Hamilton may have wanted to conquer the world.  And Jefferson may have been such a good liar that he even fooled himself.  But the Hamilton treasury department gave this nation international respectability and allowed her to service her debt.  Which allowed her to borrow.  Which allowed her to survive.  And Jefferson fully understood what Lord Acton would say a century later:  Power corrupts.  Absolute power corrupts absolutely.

However benign a government may be, however it may look out after the people’s interests, government is still a body of men.  Jefferson understood this.  The Founding Generation was special.  They knew it.  They knew they were making history.  But were they unique?  Would this moment of selfless disinterest in time prove to be fleeting?  (As it turned out, yes.)  And, if so, what would happen to later generations?  When men of lesser character assume offices of sweeping powers?  What then?  Well, they would abuse their power.  So what to do?

Simple.  You prevent such a scenario from happening.  By not giving government sweeping powers.  And by not letting them accumulate great wealth.  Because bad things happen when you do.

The French Revolution

France was the cradle of the Enlightenment.  In the 18th century, anyone who mattered spoke French.  France was the dominate European power.  And some in France lived very well.  Most did not.  The majority were still feudal peasants.  Or poor laborers, artisans and craftsmen.  And they were hungry.  Poor.  And without breeches (those fancy knee-length pants the rich people wore).

While the sans-culottes (those without breeches) went without, the king, nobles and clergy were living large.  All the wealth of the largest European country was concentrated in their few hands.  As was the power.  And, of course, you add money and power and what do you get?  That’s right.  Corruption.  Add to that some crop failures and you get a very unhappy population.  Who overthrow the monarchy.  Execute their king.  And his queen.  And quite a few others before they stopped the bloodletting. 

Note that France’s troubles were the result of the money combining with the power.  The French monarchy incurred a huge debt fighting their perpetual war (it seemed) with Great Britain.  At the end of the world war that included the American Revolution, both saw those great debts grow larger.  Great Britain, an advanced capitalist nation, was able to service her debt and get on with the business of empire.  France, still fundamentally feudal, could not.  This great nation that had sparked the modern age could not even feed her own people.  She had taken all her people could give.  And her people could give no more.

Beware the Do-Gooder

The downfall of most nations results from this combination of money and state power.  This is an ideology that history has proven a failure.  The more money the state accumulates, the more it can do.  And the less you can do.  You go with less.  And the state causes greater hardships for everyone.  It can go to war.  Which it can lose.  Or prolong.  Hitler started out strong but the German people paid a steep price in the long run.  The allied bombers destroyed their homes.  And killed their families and neighbors.  While the allied armies killed their husbands, fathers, brothers and sons.  And those Germans who unfortunately fell within Soviet controlled territory after the war faced possible retribution for the crimes their husbands, fathers, brothers and sons committed against the soviet people.  In that hell on earth know as the Eastern Front.

But war is not the only mischief a state can do.  They can build opulent palaces (like at Versailles).  Or they can create a welfare state.  Where they get as many people as possible dependent on the state.  And the more they do, the more wealth the state transfers from the private sector to the public sector.  The state does well.  Especially the inner-party members.  The few who control the wealth.  And what happens in the long run?  The state gets richer and the people get poorer.  Just like they did in pre-revolutionary France.  In pre-revolutionary Tsarist Russia.  And, ironically, the state that replaced Tsarist Russia; the Soviet Union.  Communist China.  Cuba.  North Korea.  Peron’s Argentina.  Idi Amin’s Uganda.  Saddam Hussein’s Iraq.  Etc.

Whenever the government has large amounts of money and power, they rarely do good things.  What typically happens is that the ruling elite live well while the masses suffer.  And they use fear, intimidation, torture and execution to maintain their power.  What a nation chooses depends on how much they care what the free world thinks of them.  The Communists cared little so they used more brutal force.  Social democracies do care.  So theirs is a much softer tyranny.  These people don’t use force.  They seduce with promises of free stuff and a better life.  Which they never deliver.  Well, not to the people.  They do deliver it to those who hold power.

You Get What You Pay For

It’s bad when we don’t learn from world history.  It’s especially sad when we don’t learn from our own history.  We know what works.  And what hasn’t.  Wilson’s progressivism didn’t work.  FDR’s New Deal didn’t work.  LBJ’s Great Society didn’t work.  These administrations just transferred more money from the private sector to the public sector.  Money plus power equals corruption.  And these administrations were rife with corruption.  When we suffered the stagflation of the 1970s, those in power were still living large. But we never learn, do we?

The Obama administration is transferring more money from the private sector to the public sector than any other previous administration.  Our national debt will exceed our gross national product (GDP).  For all intents and purposes, it will be permanent.  All subsequent generations will work more and more just to service this massive debt.  And pay for all that ‘free stuff’ we were promised.  Sure, we’ll have free health care.  It just won’t be any good.  Nothing free is.  The free toy in a box of cereal is never as good as the toy you pay for.  Because you get what you pay for.  And if the government is going to give everyone free health care, it will have to be ‘free toy inside a cereal box’ quality health care.  For the same reason they don’t put expensive toys in cereal boxes.  If you give something to everyone, you have to give everyone less.  It’s the only way you can afford to give something to everyone.  You have to give everyone crap.

These things have never worked.  Nor will they.  Ever.  Even if the United States does them.  Because bad ideology is just bad ideology.  No matter how great the nation is that tries it. 

www.PITHOCRATES.com

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