Tuesday, October 20, 2009

Who Doesn't Use Nazis as a Political Weapon?

Do any of these sound familiar?

-"We demand that the State shall make it its primary duty to provide a livelihood for its citizens."

-"The activities of the individual must not clash within the framework of the community and be for the common good."

-"We demand economic reform suitable to our national requirements;"

-"The passing of a law instituting profit-sharing in large industrial enterprises;"

-"The creation of a livable wage"

-"We demand the treasonable system of health care be completely revolutionized."

-"We demand an end to the status quo in which people die or rot away from lack of proper treatment due to the failure of their medical coverage, Health Maintenance Organization, or insurance policy. "

-"We further demand the extensive development of insurance for old age and that prescription drugs be made both affordable and accessible. "

-"We demand the creation and maintenance of a healthy middle class, the immediate communalizing of big department stores and their lease at a cheap rate to small traders, and that the utmost consideration shall be shown to all small trades in the placing of state and municipal orders. "

-"The primary land reform will be to ensure all members of the nation receive affordable housing. The party as such stands explicitly for private property"

-"setting aside land for national wildlife refuges"

-"By cleaning the urban, agricultural, and hydrographical (water) areas of the nation"

-"By creating legislation regulating the amount of pollution, carbon dioxide, greenhouse gases , and toxins released into the atmosphere"

-"And for the continued research and development of clean burning fuels and energy sources"

-"The state must consider a thorough reconstruction of our national system of education with the aim of opening up to every able and hardworking American the possibility of higher education and of thus obtaining advancement"

-"We demand the education of gifted children of poor parents, whatever their class or occupation, at the expense of the state"

-"To put the whole program into effect, we demand the creation of a strong central national government for the nation; the unconditional authority of the political central parliament over the entire nation and its organizations; and the formation of committees for the purpose of carrying out the general legislation passed by the nation and the various American States"

If one didn't know any better, one might think that these select quotes were taken from the Democratic Party's website. Some of these were almost stated verbatim by then candidate Barak Obama. There is only one problem. These quotes didn't come from the Democratic party, but actually from the National Socialist Movement. A more well known name for this group is Neo Nazi.

Now, before you fly off the handle, understand that I don't believe that the Democratic party is aligned (intentionally) with the American Nazi movement. This is merely to clear up why there are tea party protesters ignorantly displaying images of Obama and swastikas. They are not Nazis as Nancy Pelosi has subtly suggested, they are merely making a sophomoric connection between the Demoratic party and Nazis. I guess the nomination of a black man for president wasn't a clear enough signal that Democrats don't really see eye to eye with the Nazi party.

To be frank, the Nazi party in America has more in common with American liberalism than anything else. But there is a HUGE glaring difference: Nazis are white supremacists, Democrats are not. In fact, Democrats seem to command a huge portion of minority votes in this country and are champions of immigration reform and entitlements for all, regardless of race or gender.

In the name of fairness, there are certain items (not many) that are more aligned to American conservative ideals, like this gem:

-The state must ensure that the nation's health standards are raised by protecting mothers, infants, and the unborn By prohibiting abortion and euthanasia, except in cases of rape, incest, race-mixing, or mental retardation & By creating conditions to make possible the reestablishment of the nuclear family in which the father works while the mother stays at home and takes care of the children if they so choose"

Maybe it's time to give the Nazi talk a rest. Homeland Security should stop giving the false impression that Nazism is a right-wing hate movement because clearly it is not. Likewise, conservatives should realize that politics makes for strange bedfellows and awkward political alliances. There are certainly extremist groups that identify more with hardcore conservative values that could prove to be a political liability in the future.

Let's assume the best in both political parties with regards to intent, and that neither wants to usher in the Fourth Reich. The real point to all of this is that trying to label a political opponent, either directly or by association as a Nazi is idiotic.

Update! Just for fun, check this out.

Monday, October 19, 2009

Economic Crisis

My area of expertise. Not really, I'm just an enthusiast.

A lot of people have chalked up our financial crisis to greed. In fact, this morning, the news was crowing over the bonuses of several companies on Wall Street in the wake of one of the biggest economic downturns in the last 100 years. Most reporters are asking what government can do to curb these excesses, and the answer is short of a frightening seizure of new powers over our ability to exercise commerce [somewhat] freely, there is nothing that they can do.

But why is this such a problem? I don't think that most people when asked point blank, 'what caused our financial crisis' would directly blame bonuses, though they may point to them as some sign of endemic greed. Instead, ask this: should a private business be allowed to squander its money as stupidly as it sees fit? Should Joe Schmoe who runs the lawn mowing business be allowed to give six figure bonuses to his employees free of government scrutiny ? (Questions of where this kind of revenue would come from for a lawn service aside).

The other thing that I notice in talk about 'Wall Street' is that there should be sweeping new regulations to prevent this kind of situation in the future. Fair enough, but again the question to ask would be, 'have regulations prevented economic trouble in the past?' It is hard to say because the greatest motivator for market regulation, the Great Depression, has yet to be, and God willing will never be, equalled.

In cursory terms, I would like to examine our market situation and all the talk of hybridizing our economy into a semi-free, heavily regulated marketplace. For the sake of the discussion, I will assume that the majority of economists are right, and that free market forces provide all of the incentive necessary to self regulate. This is not entirely the case, but it will make the exercise considerably simpler. Also, let's set aside greed as the prime reason for our recent woes, and rather pin it for what it is: motive.

Let's begin with a balanced economy where the price is a perfect reflection of supply and demand and that the ebbs and flows of the economy are suspended for a steady state. In other words, prices are not fluctuating, but everything is in equilibrium. In this economy, an investor is faced with a new opportunity unfamiliar to the economy at large. It is a speculative endeavor (Oooh! Scary!!) and nobody can really be sure what the accurate price of the completed product will be. The investor evaluates the pro forma, becomes familiar with the risks involved, and decides that the potential gains are worth assuming the risk. At this point, it is perfectly reasonable to conclude that a different investor would arrive at an entirely different conclusion, and pass on the opportunity. It is also reasonable to conclude that the risk involved would restrict the amount of money the investor is willing to commit to the project. After all, he knows what his money can earn elsewhere due to our static state environment. His only motive is the potential of greater gains.

The real life analog to this scenario was the CDO, or securities based on the mortgage. The major difference is the investor, not the risk or the return potential of an investment. Rather than examine details on the investment, people deferred their due diligence to a rating agency and failed to understand, or even attempt to understand what this investment was. But it goes further because this was a double decker of failure. Just as 'Wall Street' sold these CDO's, people having no business obtaining loans for homes and absolutely no grasp on the unchecked growth in home prices which greatly exceeded the rate of inflation, entered into investments of their own. Consider this a rickety piece of shit investment structure on a poorly laid foundation of American trustworthiness to pay back loans.

Few people, other than Donald Trump and compulsive gamblers are willing to put everything at risk on a single investment, and so they diversify (Benjamin Graham, anyone?) into several securities and investments with differing risks and returns (as a rule of thumb, greater risk=greater return potential). So, with hindsight, how could so many people invest so much money in something that was so risky? Well, personally I am left to conclude that for one reason or another, the risk was not perceived. In fact, this seems to be the case with most booms and busts. People see it go up, and for one reason or another, don't seem to recognize the increasing risk in holding these investments. This complicates things because the greater the price, the bigger the bubble, the greater the risk becomes for the stakeholder. Risk is now a moving target.

Was greed the prime motivator for entering these investments? Perhaps for some, but I would hope that this same greed would convince someone to preserve the gains they had made elsewhere. I don't know about the rest of America, but greed in my mind is synonymous with stinginess and most greedy people wouldn't simply give their money away to a risky investment. After hearing from my parents about people they knew involved with the Stanford group, the victims were not greedy, but thought they were preserving their wealth in a safe investment with a good rate of return. They simply didn't apply the rule of thumb and question the return they were receiving.

The risk was there in spades, and yet that failed to deter individual and corporate investors from investing heavily. With that being said, I suspect that no amount of regulation will prevent this from happening in the future. It will be a patch to our economic regulation that will prevent this particular investment vehicle from being used in the same way, but the basic problem remains. So what will regulation get us? I think it depends on the type. If we go the route of the FDIC in the future, where the government inherits the risks of the bank and its account holders, we will likely engage in riskier investments and see even more spectacular failures.

Imagine if there was a government agency that guaranteed that if you walked into a casino, made your way to the roulette table and bet it all on black that you would be able to recover your loss courtesy of Uncle Sam. How many people would go to the casino for the nearly 2:1 payout? I would suggest that part of why we flew so high and crashed so hard is our willingness to stupidly shift the inheritance of risk onto the government which is actually ourselves. If there is greed, it is in those who welcome regulation and a promise of economic support to engage in riskier behaviour at the expense of the tax payer (Read: Bailouts). This is a veiled attempt by the super wealthy to shift the burden of risk onto the middle class who have little clout in businesses in which they are invested, and bear a large tax burden. All the while, the wealthy have everything to gain and nothing to lose (a favourite scenario among investors)