Freedom Train Status From Afghanistan
Here’s something that surprised me:
Millions of Afghan women will be denied their chance to vote in landmark presidential elections this week because there are not enough female officials to staff the single- sex polling stations.
Despite more than £147million being spent on election aid, the shortage is threatening to undermine the legitimacy of the polls, which are the pinnacle of western efforts to build a peaceful democracy.
Women are not normally allowed to vote in male-run stations in the Muslim country. Afghans will select a president and members of provincial councils at the polls on Thursday.
The Taliban has threatened to attack voters as President Hamid Karzai battles to win another five-year term. Women’s activists said the Independent Election Commission, which is organising the polls, still needs to recruit 13,000 women before election day but the shortfall may be more than 42,000.
Without female staff to operate the strictly segregated stations, and more importantly, without female searchers to frisk women voters as they arrive at those stations, conservative men across the country will ban their wives and daughters from taking part. ‘If half of the population can’t participate, the election is illegitimate,’ said Orzala Ashref, of the Afghan Women’s Network.
No, I’m not saying that life must have been sweet under the Taliban. But I wonder how many Americans would support our continuing efforts in Afghanistan, if they knew the actual conditions of their democratic system.
I don’t have it handy, but recently I saw an astounding figure, where US and other forces were spending far more on military operations in Afghanistan, than that country’s entire GDP.
Red Hot Chili Peppers Cover the Beach Boys
I always like it when young punks pay their respects to the old masters. (And no I’m not referring to Austrian economics.) I don’t remember the show, but the band EMF (“You’re Unbelievable”) did a Tom Jones song, and vice versa, with him present. And they were in awe of Tom Jones doing one of their songs.
Anyway I just came across Red Hot Chili Peppers doing my favorite (classic) Beach Boys song:
I also checked out this 2Pac video, but he had a different take on the whole thing. (And plus, he apparently didn’t realize his underwear was showing! How embarrassing! I can’t believe the director or somebody didn’t bring it up.)
Fed Continues With Leeches, Can’t Understand Why Patient Is Moribund
The Federal Reserve said Monday it will extend its Term Asset-Backed Securities Loan Facility another six months though it said conditions were improving in some areas.
In a joint announcement with the Treasury Department, the central bank said the TALF, as the program is known, now will run until June 2010, from its original cutoff date of December 2009.
“Conditions in financial markets have improved considerably in recent months,” the Fed and Treasury said in their statement. “Nonetheless, the markets for asset-backed securities backed by consumer and business loans and for commercial mortgage-backed securities are still impaired and seem likely to remain so for some time.”
The extension will cover newly issued commercial mortgage-backed securities but will not be expanded to cover assets not already eligible.
The program targets primarily students loans and credit cards but extends to other financing as well.
The TALF started in March and figures prominently in efforts by the Fed and the Obama administration to ease credit, stabilize the financial system and help end the recession.
Gee, isn’t it ironic that the economy keeps getting worse, “despite” the unprecedented rescue efforts of the Fed and Treasury? I mean, it’s almost as if printing up green pieces of paper, and having politicians borrow trillions of dollars, actually makes it harder for the economy to re-coordinate itself after a bursting asset bubble. If we didn’t have fact-based economic scientists on the case, I’d start to worry.
Not to beat you over the head with this graph, but it’s relevant in this post too:
The US Economy Is Rotting From Within
Whether by accident or design, the federal government and Federal Reserve have joined forces to systematically paralyze the US financial sector. We now have have a czar saying he can take back money that executives have already been paid:
Kenneth Feinberg, the Obama administration’s pay czar, said on Sunday he has broad and “binding” authority over executive compensation, including the ability to “claw back” money already paid, and he is weighing how and whether to use that power.
…
Feinberg has been consulting with seven companies that have yet to pay back money they borrowed from the government, including Citi, American International Group, Bank of America, Chrysler Financial, Chrysler Group, General Motors and GMAC.Those companies faced a deadline of Friday of submitted proposals to Feinberg for their top 25 employees.
Feinberg said on Sunday that decisions he makes will be “binding,” but the law limits his power over contracts signed before Feb. 11, 2009.
He also said he has the authority to use a “clawback” provision to go after compensation for executives from any company that received money from the U.S. Treasury’s Troubled Asset Relief Program (TARP).
“I have the discretion, conferred upon by Congress, to attempt to recover compensation that has already been paid to executives not only in these companies, but in any company that received federal assistance,” Feinberg said during his remarks.
Asked by Reuters if he could use that ability to target a firm like Goldman Sachs which paid back $10 billion in bailout money, Feinberg said: “Anything is possible under the law.”
“I can claw back, but we haven’t focused on that at all,” he said.
Pretend for the moment that you are in charge of AIG or Citi or another big financial institution that is teetering on the edge of bankruptcy. If you are to have any chance of coming back from the brink, what do you need? Why, you need very talented people. And how are you supposed to attract and retain those people, when you’re already broke? Why, you can offer them a low base salary, with huge performance bonuses if they do really well.
Now pretend for the moment that you are a really talented financial executive, the kind of person that could actually turn AIG or Citi around. Just how insane would you have to be, to sign a contract with them? Chances are, the firm will sink, and on the off-chance that it doesn’t, you will have Chuck Schumer reading your home address during Congressional hearings so that ACORN knows which house to paintball.
Let’s be clear, I am not defending the bonuses that the TARP firms have been handing out. But my point is, even the 1% chance that these bailouts might work, has been eradicated by appointing a pay czar who will chase away any true talent. AIG and all the rest are now hulking shells propped up by the taxpayer, serving no economic purpose except to crowd out competing mechanisms for allocating capital.
The below chart shows what happened to bank lending to businesses, after Bernanke’s “heroic” injections of reserves. There’s a credit crunch on, all right, courtesy of the Fed.
More Thoughts on Economists Making Excuses
I’ve been really disappointed in economists taking the Robert Lucas / Bill Easterly approach in answering the Queen of England’s perfectly good question, “Why didn’t you economists see the financial crisis coming?”
To refresh your memory, here is what Easterly (a big-name economist at NYU who has done some cool work on development) said:
First, Your Majesty, economists did something even better than predict the crisis. We correctly predicted that we would not be able to predict it. The most important part of the much-maligned Efficient Markets Hypothesis (EMH) is that nobody can systematically beat the stock market. Which implies nobody can predict a market crash, because if you could, then you would obviously beat the market.
In other posts, I have pointed out that this reasoning is only true if you frame investing the way an economist using a rational expectations model would frame it. It’s analogous to game theorists concluding that the only “rationalizable” strategy is to immediately defect in a 3000-round prisoner’s dilemma, even though “irrational” players in the real world will end up making a lot more money following their ad hoc strategies.
But in this post, let’s take Easterly’s response at face value. The Queen could and should come back and say:
Yes, gentlemen, very well. So I’m asking you, why didn’t you forecast these things back in 2004, so that housing prices would have popped back then? You wouldn’t have beaten the market; you would have spared the market trillions in losses.
Everyone with me? If you’re still not seeing it, let’s switch examples. Let’s suppose that George Bush was taken utterly surprise by the attacks on 9/11. (I realize there are some who would dispute that, but go with me on this–I’m just making a point.) Bush is furious and calls in all the intelligence gurus. He takes them out to the woodshed, demanding to know why they get funded billions per year if they can’t even see an attack on US soil coming that takes out the Twin Towers and hits the Pentagon, for crying out loud!!
Now can you imagine if somebody said, “Well Mr. President, we all feel awful about this, but it really wasn’t our fault. By its very nature, an attack like 9/11 couldn’t have been forecasted. If any of us had predicted it–even as late as 9/10–then we would have foiled the plot–we’re all patriots, after all.”
Now wouldn’t the above excuse have been worthy of an Atomic Wedgie? Well that’s what Easterly said to the Queen. But by dressing it up with fancy terms like “efficient market hypothesis” Easterly’s answer sounds deep, rather than patently absurd as the above quote is.
One last way of putting it, to make sure you get my point here: If the gurus on CNBC and in the bowels of the ratings agencies had realized how fragile things were in, say, 2005, then history would have been averted. Things wouldn’t have gotten even more fragile in 2006. So in the alternate universe, it’s not the case that the housing bubble still would have been just as severe, except that Bill Easterly made billions shorting the market. No, the bubble wouldn’t have been pumped up as much.
In that alternative universe, it still would have been true that “no one beats the market” (in the tautologous sense that Chicago School economists use that incantation). But “the market” wouldn’t have lost trillions of dollars.
The mainstream economists screwed up big time during the housing bubble years. The people interviewed on CNBC, and advising the government, weren’t saying, “What are you coming to us for? We have no special insight on the stock market.” No, they were assuring investors that the boom would last. (And I regret to say that I contributed to this madness before seeing the light [.pdf] in the summer of 2007.)
Lucas and Easterly are saying nothing more profound than, “It’s true we economists didn’t predict the crash, but then again neither did most of the big-money people around the world.” This is true, and the Queen’s correct response should be, “Fine, so my question is, why not? What did you–and most of the rich people–do wrong, so that we can try to prevent this from happening again?”
People were already suspicious of economists before this crisis. Now it’s downright embarrassing.
Potpourri
* Mario Rizzo on the issue of whether economists should have predicted (forecast) the financial collapse.
* The Economist on the experience of John Law and fiat money. (HT2TAE)
* Paul Green offers practical tips for Internet privacy. I have been urging techie/security guys I know, to write up such an article. What do people think of Green’s suggestions? I would like a second (and fifth) opinion before I go changing my antivirus software.
A Pacifist No Longer
A lot of people are emailing me about the controversy. What can I say? I run into some old timers telling me how great socialized medicine is, and I just lose it.
Bill Maher: Americans Are Dumb (When They Oppose Bigger Government)
Alex Tabarrok links to this Bill Maher rant:
Or take the health care debate we’re presently having: members of Congress have recessed now so they can go home and “listen to their constituents.” An urge they should resist because their constituents don’t know anything. At a recent town-hall meeting in South Carolina, a man stood up and told his Congressman to “keep your government hands off my Medicare,” which is kind of like driving cross country to protest highways.
I’m the bad guy for saying it’s a stupid country, yet polls show that a majority of Americans cannot name a single branch of government, or explain what the Bill of Rights is….
Can Bill Maher explain what the Tenth Amendment to the Bill of Rights is?
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