Thursday, March 12, 2009

New Page

I have gotten some complaints about the title of my site. Some say it makes the content seem unserious and tends to make readers think of yapping dogs. My original intent of such a title was to highlight the yip yappiness of the Left and their nonsense ideas, and to include the term "yip yap" in every piece I wrote. I was trying to be funny but since I am not a humorous person (if I were, I'd be writing for Jay Leno), the intended humor never appeared. So, in the spirit of being more serious, but hopefully not grumpy, I have changed to a new site called the Duchess of Wonk. Please go there for future pieces. Thanks.


Monday, March 09, 2009


“The civil rights of none, shall be abridged on account of religious belief…nor shall the full and equal rights of conscience be in any manner, or on any pretext infringed.” James Madison before the House of Representatives, 1789

Last December, the Bush administration issued a new regulation that is intended to enforce federal laws that protect health care workers from discrimination and recrimination should they refuse to perform abortions or make abortion referrals due to their moral and religious beliefs.

But since good rules are made to be broken, the Obama administration will revoke the “right of conscience rule” after a 30-day period for public comments, also known as pretend-your-opinion-matters-to-the-White-House. In that spirit, I offer my two bits.

Far from being the cudgel that bludgeons health care as its opponents hysterically claim, the conscience rule does not restrict any health care worker in general from performing any legal medical service. Although there are several federal anti-discrimination laws dating back to the 1970s, the statutes have been hard to enforce on an individual basis. A rising number of reports of increasing pressure on physicians and other health care workers to compromise their medical ethics had prompted the Bush administration to develop the enforcing rule.

As expected, the ACLU, Planned Parenthood, NARAL and the rest of the little rascals have challenged the rule. They have made specious claims that the rule’s (allegedly) vague construction would not only deny health care to women, if you define abortions as health care, but also deny any medical treatment based on the provider’s personal prejudice. For example, a health care provider who opposes homosexual practice might refuse to treat an HIV/AIDS patient.

Likewise, reason the “pro-choicers,” it gives place to the prejudice of professionals to refuse to “treat” a woman infected with pregnancy—and that in contravention of the Hippocratic Oath. Never mind what the Oath actually says: “I will neither prescribe nor administer a lethal dose of medicine to any patient even if asked nor counsel any such thing… and reject abortion that deliberately takes a unique human life.” The critics’ fallacious reasoning implies we are too stupid to understand the subtle differences between death-causing diseases and life-affirming conditions.

Pro-choice doesn’t end with abortions. It includes assisted suicide for any reason and the “choice” of euthanasia. The decision to apply euthanasia is often made by people other than the patient.

A person close to me had a major stroke, but far from being comatose with signs of diminishing life, she was alert, moving, thinking and communicating. Her grown children decided that even if she were to recover, her quality of life would have been unsatisfactory so it was better to put her down.

She was euthanized by denial of food and water. It took her two weeks to die from thirst and malnutrition. Where was the Hippocratic Oath then? It seems to me it would have been more merciful to have smothered her with a pillow, strangled her, poisoned her or put a bullet in her in the head.

But that would have been murder.

If the healer is not the last line of defense for the defenseless, who will save their lives as pro-choice organizations attempt to wipe out all resistance in their mission to create a culture of death? We must defend the rights of people in the health care community to follow their consciences according to the dictates of the free exercise of religion. If we don’t we will castrate the power of one of our most precious constitutional amendments and open up the door to Hitlerian ideas of who is worthy of life.

Is that the change you want?

Wednesday, January 21, 2009

It's All About the "O"

Who would have thought it could ever happen in our generation? The Founding Fathers probably never imagined it. Certainly our own parents never thought it possible in the near or far future. And now that day is here: the first Socialist/Marxist radical has been installed in the White House to rule the free world. (I bet you thought I was talking about his race, just like all the rest of the "colorblind" media.)

Dear readers, please forgive my curmudgenous posting. I guess I'm the turd in the Waterford punch bowl, here to rob the nation of its joy at Obama's coronation, I mean inauguration. USA Today described a humble scene: "For all the comparisons to Lincoln and Roosevelt and Kennedy this inauguration day, there was just Barack Obama, a slender black man in a dark overcoat." An ordinary man, humbly accepting the "hosannas to the king" of some 2 million fans as he made his grand entrance into Jerusalem, I mean D.C.. A donkey and palm fronds spread on the way would have made the scene complete.

Obama is the New Messiah for millions, perhaps billions, around the world. The Palestinians in Gaza believe Obama will bring lasting peace to the Middle East despite repeated failures since 1948. All of Europe thinks Obama will bring the dream of financial "equality" to the masses. The "human rights" crowd expect Obama to sign on to prophylactic abortion-on-demand, banish the idea of traditional marriage from the radar screen of civilization, and allow Auschwitz like experimentation on the stem cells of newly conceived babies. The "green" group hopes for the worship of their nature goddess. And the UN expects the USA will submit its sovereignty to UN rule under an Obama administration in the name of global cooperation.

Yet the new president has been sounding rather centrist since winning the nomination, even to the point of irritating his Bolshevik backers. So is he a radical idealogue or a political opportunist? I think leopards don't drop their spots. Melanie Philips of The Spectator (UK) summarized the phenomenon well: 'You have to pinch yourself - a Marxist radical who all his life has been mentored by, sat at the feet of, worshiped with, befriended, endorsed the philosophy of, funded and been in turn funded, politically promoted and supported by a nexus comprising black power anti-white racists, Jew-haters, revolutionary Marxists, unrepentant former terrorists and Chicago mobsters, is on the verge of becoming President of the United States. And apparently it's considered impolite to say so.'

Except for the probing of the vast right wing conspiracy, no mainstream media has examined his life. There has been no scrutiny on things like how he got into Harvard, what his birth certificate actually says, how he was elected president of the Harvard Law Review without having written a single article that anyone knows about, or especially how his voting record revealed his political philosophy. If the media had been doing its job instead of carrying on a long distance love affair with the man, the voting public may have seen that there was little in his life as an Illinois state senator or congressional member that would indicate he had any propensity for "change" much less action at all. He stands for the basics of Democratic Party left: robbing the productive to reward the unproductive for an ever increasing cycle of government dependence, the most radical ideas in the culture in death and subservience of American sovereignty to a global world order.

One thing we do know--he is a "brilliant orator." (Or if you're a brilliant orator who is a Republican out to deceive the masses, you're a "great communicator.") Obama's campaign of "hope and change" was absolute genius. He has made no promises, except to "spread the wealth." He has only remarked how bad things became under Bush despite such assertions not being believable under the blazing glare of the facts. The hope/change message means nothing except where the listener will fill in the blanks--or worse. Obama is really the Genie in the Lamp. And foolish people are going to be in for some bitter surprises.

Obama's inaugural address sounded downright right, even Reaganesque in its tone. But on second look, it was filled with chained-together bromides and platitudes more suitable for a Hallmark card. If you're a more suspicious person, you might not see a cute card but some dark meaning hidden in his cliches.

For example, in a recent pre-inauguration speech, Obama decried Bush's mishandling of the economy and how his new administration will inherit a trillion dollar deficit. That said, Obama went on to sell the idea of another trillion dollars to stimulate the economy. Somehow, the first stimulus passed under President Bush (by a Democratic Congress) was evil, only feeding the recessionary fires. But the next one under his watch is good, a solution not to be confused with throwing good money after bad.

Obama has also complained that Bush has made the US less safe. He will fix that with conditionless dialogue with our enemies who will sit across the table from our diplomats, wishing our death. Obama has complained about our bad standing in the world and our ruined relations with our allies. He will fix those with a new cooperation. That sounds like he will be giving away our sovereignty to his European lefty brothers.

I also fear Obama's "bringing Americans together" rhetoric. The entire basis of representative self-government is rigorous debate and disagreement. First, debate keeps the government too preoccupied to interfere with the citizens' pursuit of life, liberty and happiness. Second, rigorous debate hones solutions, even if one side loses its cause. This is not division; it is the American form of governance that has served us well since the Constitution was ratified--itself a "victim" of divisive politics. Does Obama really think he will get overarching agreement between lefty Democrats and what's left of traditional conservative Republicans to agree on diametrically opposed ideologic policy solutions? Does he think that half of the American people will stand silently by while the Obama/Pelosi/Reid triumverate smash the vestigial remains of the republic the Founders envisioned? If so, he is either counting on an impotent GOP to go along to get along--the beginning of a one-party system--or Obama will work closely with media, government agencies and education to suppress any dissenting opinion. The attack machine of the Left over the past eight years will look like a comedy routine compared to what Obama's media machine will do.

Obama has already betrayed his Socialist propensities when he told "Joe the Plumber" that he wanted to spread the wealth. This "new era of responsibility" simply means that the responsible wage earner will pay the bills of the non-earner, just like we are doing with the endless bailouts of everything under the sun. And the wage earner will pay through higher taxes and inflation, as his government continues to print the money necessary to pay for all this CRAP (Capital Rehabilitation Asset Program). True to the Socialist credo of a centralized economy, Obama's government will take over much more of the financial markets--all in the name of saving the economy--and severely diminishing its ability to create wealth. Obama and the Congress will regulate and tax businesses in the name of "green" and "transparency" to the point of paralzying entrepreneurship, invention, and job growth.

I paint a bleak picture. If all this is true, then why on earth did he win the election? Like I said before, he's the Genie in the Lamp. With all the promises of endless handouts and about 84% of the American people already on the mooch (analysis to come in the next installment), why wouldn't people vote for a Socialist? Having their lives regulated a la "Brave New World" is a small price to pay in their minds. Most will gladly sell their birthrights to freedom for a bowl of stew. What foolish people don't know, because most have probably not read the book, is that society became stratified, with only the wealthiest minority occupying the privileged top rung of society. The rest wallowed in increasingly subservient and degrading social positions with no hope of escape. So much for social and economic equality. But at least the government took care of the lower strata.

I'm not hoping Obama's presidency will fail. Conservatives do not seek failure like the lefties had done in their undermining of everything President Bush did to strengthen the economy, win in Iraq and Afghanistan, and to protect the homeland from another vicious attack. On the contrary, if Obama succeeds, we all do. But as a Socialist/Marxist radical, bastardizing the ideas of freedom and "human rights" to expand abortion on demand, the destruction of families and the next generation, creating an ever-expanding dependency on the government, and the depression of a vibrant economy through excessive taxation and money-printing, will cause his failure and ours.

Given some of his idealogic flip-flops, at least in speeches, I'm not really sure what to ultimately expect from President Obama. He has a long record of "present but not voting," a stern support for the abandonment of important moral issues, a healthy list of who's who in the Marxist crowd, a rhetoric for truth, justice and the American way, and an ability to backpeddle and keep his balance that would make circus performers jealous. He may be just as likely to betray his Bolshevik supporters as traditional American values. If the American people wise up and elect a dominant Republican/Independent Congress next time around, maybe we'll get more of the former. That's the kind of change I'm looking for.

Here's to hope.

Sunday, January 27, 2008

Is the U.S. In A Recession?

No, and we wouldn't be headed for one if Bernanke would keep his hands off the economy.

Even by the newspaper definition of recession, the U.S. is not in one. The media definition of a recession is a decline in the Gross Domestic Product (GDP) for two or more consecutive quarters. That has not happened. In fact, the economy is growing. The third quarter GDP for 2007, the latest round of reduced data so far, grew by an annualized 4.9%. This is up from the second quarter annualized growth rate of 3.6%, which is better than the 3.4% growth of 2006. According to my economics book (Economics by McConnell and Brue 2008), a recession is a period of decline in total output, income and employment. The downturn, which lasts 6 months or more, is marked by widespread contraction of business activity in many sectors of the economy.

Some economists prefer to look at individual indicators like manufacturing orders, wages, wholesale inflation rate, supply chain data and employment rate to name a few. Well, the unemployment rate is 5%, which is considered full employment. A rate like the 4.5% that we saw at the end of 2007 is considered a tight labor market--which could also be inflationary as wages rise. As of November 2007, manufacturing and trade inventories were up 1.6% over October, which was up .7% from September. New orders for manufactured goods were up 1.5% from the previous month. New orders for manufactured durable goods were up .1%. Here's the real good news: according to the Bureau of Labor Statistics, non-farm business sector productivity (output per hour) was up 6.3% third quarter 2007. Hourly compensation was up 4.2%. That means labor costs were down 2%. In the manufacturing sector output rose by 5% and wages rose by 1.5%. Now before anybody starts yip yapping about how wages are not keeping up with productivity growth, understand that there are other factors that affect productivity growth. The main one is technology. Others include capital investments and education/training, all of which will make a worker more productive. The bottom line is--economic data is good even if the stock market waffles around wildly.

The stock market would theoretically be one measure of economic performance if it wasn't so driven by emotion and craps shooters. But since this is apparently the only measure Bernanke is looking at as he slashes interest rates, why is the market flapping around so? It all boils down to the subprime credit problem. The subprime defaults were a small, small problem in the overall mortgage market and microscopic in the total debt of the American consumer. The subprime fallout should have been limited to the people involved in this sector and not effect to any appreciable degree the overall economy. But the subprime got its tentacles everywhere because of collateralized debt obligations, or CDOs. The purpose of CDOs, like mortgage backed securities, is 1) to spread the risk around a large pool of investors and get it off the backs of the actual lenders and 2) make more money available for loans. These are good goals, but a variety factors affected their values. Many CDO products are held on a mark to market basis, which is the act of assigning a value to a position held in a financial instrument based on the price of the current instrument. The final value of a futures contract that expires in X months will not be known until it expires. But the failure of risk models used by credit rating agencies and failure to monitor credit performance by institutions that bought these investments paralyzed the credit markets because these futures contracts couldn't be valued. Major loss of confidence in the validity of process used by ratings agencies to assign credit ratings to CDO investments and cash flows led to a collapse of liquidity.

So followed the stock market. But the market was to see even worse thnaks to perosnal debt. Greenspan's monetary policy created the housing bubble. This was highly praised for boosting the housing and construction industry which was in turn credited with keeping the economy afloat after the Clinton years. But a bubble is artificial in that it must be inflated by something and so it was thanks to Greenspan's monetary policy of too loose for too long. Homeowners assumed that the equity in their homes was real so would never fall. They borrowed against the equity in their homes. Consumers maxed out their credit cards because the low interest rate lowered these rates. Sure, the economy could do well excessive consumer spending since 2/3 of the economy is driven by the consumer. But debt for that purpose is foolish. To borrow for investment is generally OK, but to borrow to consume and use up is just plain dumb. It drives the economy in the short term but eventually that money must be paid back. And ballons pop.

So followed the stock market. Bernanke has radically cut the interest rate. News media has reported that the "subprime crisis" has grossly affected overseas markets and investors in this country are losing confidence. The fear is that holders of American dollars will dump them and move to places with better investments. That would further depress the dollare and be extremely inflationary in the U.S. So, true to government bureaucratic thinking, Bernanke "did something." He cut the interest an unheard of 3/4 of a point. This has the effect of weakening the dollar and being inflationary. And it did nothing to help the stock market. Bernanke apparently assumes thought lower credit card rates will encourage more consumer debt and boost housing prices and get people borrowing against the equity in their homes again as prices rise due to demand because of cheaper mortgage rates. But the guy who lives according to his means gets rewarded with smaller earnings thanks to too low fixed income interest rates. So the Fed says let's just spend our way out of recession with even more debt than before that ended in threats of recession. There that ought to work.

We never learn.

Thursday, January 10, 2008

Folly of a Politically Managed Economy

According to the Bureau of Economis Analysis, United States real gross domestic product (discounted for inflation) grew by an annualized 4.9% in the third quarter 2007. That's even better than the 3.8% growth rate reported for the second quarter of 2007--good growth despite the ever weakening dollar and rising oil prices. Yet the media and various financial pundits relentlessly predict imminent recessionary doom due to the "housing crisis" unless the government steps in with a massive bailout for lending institutions and defaulting homeowners. The political pressure must be very great because even Fed Chief Ben Bernanke has succombed repeatedly to pressure to reduce the federal funds rate despite being the boss of a completely independent national banking arm. But the macro-problems of bailouts and Bernanke's thinking, beyond screwing people who have wisely adhered to the Shakesperian maxim of "neither a borrower nor a lender be," is the increasing tendency toward greater central planning of the economy.

On the surface, firms like Countrywide have laid people off amid losses and have demanded that the government (taxpayer) take care of their (irresponsible blunders) losses. Hedge fund managers are screaming about bankruptcy and demanding that the Fed drop interest rates as low as necessary to reinflate the housing bubble to cover their losses. The entitlement champions are shrieking about the difficulty of getting home loans and all the unfortunate Americans who will lose their homes if the government (taxpayer) doesn't pay for it. Isn't owning a home a right, they insist? No my children, it is a privilege and a great responsibility--as everything should be in a society where people want to be free to choose. Nowadays, responsibility for one's actions and choices is anathema to the crybaby '60's generation and the children they've raised.

The federal funds rate directly impacts lending and savings rates. If you're a borrower, you love lower rates; if you're a saver, you hate them. First, let's do the Reader's Digest review of basic macroeconomics. Economic growth in the U.S. is driven by consumer spending which accounts for 2/3 of it. So corporate America and the government want to make coming by money very easy for the consumer so that he can spend more. This necessitates borrowing more, unfortunately. When the consumer demands more, businesses produce more. When productivity goes up, the laborers' wages go up. To produce more, companies generally hire more workers. When demand outruns labor, the unemployment rate drops, prices go up and businesses make more profit, which hopefully reduces the unemployment rate.

The 17 rate cuts Greenspan authorized from 2001 to 2004 were intended to make money so cheap businesses couldn't refuse to borrow so that such debt would hopefully jumpstart the cycle I described above. But the unexpected consequence was the tremendous drop in mortgage rates that drove an almost panicky demand for housing. This was the primary factor that kept the economy afloat. However, it seems that the demand was artifially created because interest rates were too low for too long which created a real estate bubble.

Low mortgage rates cut into the profits of lending institutions, but because rates were low, demand for loans skyrocketed. I suspect that because lending institutions were earning volume based profits, due diligence for risky borrowers not only took a backseat, it ended up in the trunk. Lending institutions used teaser rates in adjustable rate mortgages (ARM) to entice subprime borrowers who should never have owned a home in the first place. But housing prices continued to climb and foolish people borrowed against the equity in their homes assuming the values could only continue to go up. When home prices dropped and the ARM reset--oops. You'd think that seasoned bankers, a normally risk averse bunch, would recognize that what goes up must come down. Now, finally, the banks and other lending institutions are tightening up requirements for their loans. Nothing like closing the barn door after the horse escaped.

Why are the hedge funds so upset? Didn't they hedge their bets? Let's do another Reader's Digest type of tutorial. In order to "create" more money for loans, financial institutions securitize loans. That is, loans are repackaged as investment grade securities and sold to investors. Due to the tendency of rating agencies to assign investment-grade ratings to MBS, loans with a high risk of default could be originated, packaged and the risk readily transferred to others. Hedge funds create "derivatives" which are financial instruments based on the value of their underlying assets. So, in this market hedge fund managers created options and futures contracts assuming that the underlying value of these securities would continue to increase in value. These kinds of contracts allow for leveraging, which is a fancy term for borrowing against an asset in the hope that it will increase in value and hence make more money that investing only what you have. To illustrate, say a homeownver borrows against the equity in his home and dumps the money into a stock market that has been bullish for a while. He is betting that the market will continue its upward performance and he hopes to make a profit several times larger than the debt on his equity loan. The hedge funds' lost their bets--oops. The hedge funds among others have continued to pressure the Fed to reinflate the housing bubble and the Fed has obliged despite the fact that bubbles do not promote economic stability.

Is a bailout good economic policy? Some commentators believe that any measure that keeps the unemployment rate low is good policy. But government regulation cannot take the place of the function of a free market. The free market is smart--it knows how to correct and maintain overall balance, even if financial measures fluctuate a bit in the process. Government involvement distorts the market and starts an avalanche of unexpected results that will take much longer to correct, if that is even possible as government solutions add layer upon layer of bureacratic sediment.

The so-called "housing meltdown" and "financial crisis" (and other inflammatory descriptors) only affects 4% of borrowers. That means 96% of borrowers pay their mortgages on time. The subprime sector has only a tiny affect on the overall economy in absolute terms but economists and financiers talk about the trickel through effect of losses on investors and consumers. For example, investors may want to dump stocks and consumers want to hang on to their money for fear of job loss and loss of home equity. Since the beginning of the housing bust we have seen instability in the stock market that many analysts say is a direct result of the "housing financial crisis." But the enormous majority of stocks in the market have nothing to do with the housing market or the lending institutions.

I realize that monetary policy is the Fed Chief's legitimate purview, but it seems that he is using it in a manipulative manner to satisfy the political pressure of the few but powerful that run a relatively small part of the economy. As Greenspan did, Bernanke uses the stock market as a measure of the health of the economy. The value of a stock is affected by its earnings expectations, which are also driven by "irrational exuberance" or irrational pessimism. This is the folly in using the market as primary data for policy formulation. Monetary policy is not meant to drive the market or bailout bad investments; it is meant to create price stability which is a major factor in earnings expectations. In the meantime, wise savers are are forced to subsidize the hubris of the mortgage industry in the form of crappy returns on fixed-income investments.

At the same time, Bernanke seems to be ignoring one of the most basic laws in free market economics: savings equals investment. I wonder how much the Fed would have been needed as the lender of last resort, or how much more money would have been available for loans to good risks, if the savings rate in this country was much higher. I suppose it depends on the government's fiscal philosophy. Consumption drives our economy; debt drives it harder, so let's "spend our way to prosperity." But an economy built on consumer debt and profligate spending is like a house built on sand rather than rock--makes an unstable foundation. I believe balance between spending and saving with less emphasis on debt will drive the economy just as successfully and without so many of the boom-bust cycles that seem to be increasing in frequency.

Is a bailout in keeping with the principles of self-reliance, responsibility, and risk-taking that built this country? I am sorry for investors who have lost money but that is the risk when one is looking for rates of return that are substantially higher than risk free investments like T-bills. In a free market economy there will always be good invesment opportunities but "you got to take the bad along with the good" as my mother used to say. Hedge fund managers who have lost a bundle in the subprime carry the same burden. It's too bad there are some who will lose their houses because of default, but as my daddy always said, "if you can't afford it, you don't need it." The lending institutions that have been making these risky loans especially need to suffer the consequences in keeping with the principle of responsibility. Responsibility is the price of freedom. Refusal to accept it is inversely proportional to the freedom we will have. Sure, it's tempting to demand government rescue as largess to be reaped at will, but we as a nation will have to pay the proverbial piper one way or another. We have to get control of the pervasive greed in this country and get back to fundamentals like "slow and steady wins the race" and flee the selfish "I'm gonna git mine and git it right now."

But the worst, perhaps even unconstitutional, government interference in the free market is President Bush's plan to freeze ARM rates as part of the bailout. The Contract Clause appears in Article I, section 10, clause 1 of the U.S. Constitution:

"No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, expost facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility."

The framers of the Constitution added this clause due to fear that states would continue a practice that had been widespread under the Articles of Confederation—that of granting "private relief." Legislatures would pass bills relieving particular persons of their obligation to pay their debts. Interestingly, with all the yip yap the Democrats have been doing regarding the unconstitutionality of national security measures and the constitutionality of measures no where mentioned in the Constitution, they disregard this constitutional provision that is written in stereophonic black and white and make lots of noise about how the president has not gone far enough. What is far enough--gifting defaulters their homes at taxpayer expense?

By cutting the interest to satisfy the few, wise savers are forced to subsidize profligate behavior found in both the financial institutions and the borrowers. Government interference in the free market in the form of bailouts foreshadow a possible paradigm shift toward greater central economic planning. And we know how well that worked over a 70 year period.


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Tuesday, January 08, 2008

Hillary's Tears

The news media has been trying so hard to make Hillary Clinton look like she is either lacking in humanity or lacking in strength. Throughout her campaign, she has shown herself as tough and as articulate, if not more so, as any of the male contestants on the campaign trail. Though I am not a Hillary apologist--I am no more for her collectivist economic proposals or her lifestyle socialism than I am for Stalin's--I believe the questionable media attention she has received concerning her emotional state betrays an underlying prejudice against her as a woman. She has been called "mannish," "lesbian" for her persistance and toughness and "lacking humanity" for her straight-faced speeches. All these labels are intended to diminish her to the point of making her seem an unviable candidate. A label of "feminine" is not likely to be helpful either because the connotative definition of the word precludes such attributes as decisiveness, self-control and risk-taking that are reserved for the male character only. I guess that's politics.

So what happens if Hillary should emote more than usual, as she apparently did yesterday when she received disheartening polling news in the New Hampshire primary? Various media pundits swear they saw her get "choked up" and "her eyes glistened" (if you looked closely enough and used your imagination) and they have not stopped harping on whether the "tears" were manipulative or genuine. If genuine, has she demonstrated her humanity or has she shown the weakness that is assumed innate in the female psyche (that makes women unfit for leadership duty)? Or was she just calculating and manipulative? She didn't make anybody happy, but I guess that's politics.

This whole media debate about Hillary's tears is like debating the physicality of ghostly ectoplasm. Neither exists. She did not cry, tear up or choke up. She calmly, and dare I say professionally, expressed her disappointment in the polls. But can you blame the (tabloid) media for spending so much air time on Hillary's "tears" since they rank with the Kennedy asssassination in national importance? With only the Iranian threats against U.S. warships in the Straight of Hormuz , riots in Kenya, fallout from Bhutto's assassination, nuclear Pakistan, nuclear Iran, nuclear North Korea, more threats from Bin Laden, more threats from Al Queda in Iraq, Bernanke giving in to political report on, it must have been a real slow news day.

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Thursday, November 01, 2007

Fed Chief Bernanke Succombs to Wall Street Pressure

The consensus of the economists that the WSJ interviewed for today's Econ blog points to continuing the rate cuts. This latest cut was motivated by the expectations of “the market;” the stock market went up on expectations of a rate cut and Bernanke felt compelled to comply.

Although Bernanke has stated that there will be no more cuts for a while, he has shown that he will fold under pressure. The economists here, most of whom work for investment firms whose profits will benefit enormously from further cuts, are all pushing for more rate cuts. The opinions of these economists aren’t based on solid and well-rounded analysis of economic fundamentals, but are thinly cloaked petitions to the Fed for more cuts. The Fed is supposed to keep policy decisions close to its vest so as not to create information arbitrage for insiders, but obviously this isn’t true in the current Fed’s case.

Savings equals investment in the macroeconomy. It is investment that drives stable economic growth, while monetary policy is meant to keep temper inflationary pressures along the way. The current Fed policy demotivates saving because the returns are so low. The option for individuals and businesses then is to spend down savings and to borrow for more spending. This is the Fed's goal for driving the economy, but it is short-sighted. Eventually we have to pay the proverbial piper, as is now the case in the current mortgage market. But instead of letting the few problem hedge funds, lenders and borrowers take their medicine, Bernanke is reinflating the housing bubble that caused the problem in the first place.

The financially responsible and those living on fixed incomes will just have to tighten their belts further. The irresponsible will continue to spend themselves into bankruptcy with the belief that the Fed and the taxpayers will take care of them.

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