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Good Time Charlie: Dreaming of Crist

In Specific Facts on February 28, 2010 at 7:48 pm

When the rumors that Charlie Crist may opt to run as an independent for the open Florida Senate seat, following the “Joe Lieberman Primary sore-loser” model, the reaction from political watchers was rapturous.  Nate Silver summed it up best: “If Crist were to win as an indie, he’d instantly become one of the most important politicians in America. But not an easy path.”  I agree on both points, having a true independent from the center-right would be a refreshing change of pace in Congress, but it will be tough to pull off.  Crist is currently bleeding support against both Marco Rubio, his staunchly conservative Republican Primary opponent, and Kendrick Meeks, the likely Democratic candidate.  The man who was once the most popular governor in the country has lose his luster thanks to a concerted effort on the part of conservatives to punish him for his moderate policies and support for Obama’s stimulus plan.  However, if Crist were to leave the Republican party by highlighting how his sensible progressivism was heir to the Teddy Roosevelt Republican tradition he could be a formidable foe in the general election; once a clear winner develops from either party, and in all likelihood Mr. Rubio looks like the heavy favorite, voters from the other side might flock to Crist as the lesser of two evils.  Given the state’s history with disputed elections, I imagine Florida voters will be sensitive to the notion of “throwing their vote away.”

During the campaign, rather than running as an alternative Republican in everything but name, Crist should promise not to caucus with either party and serve as a moderate swing vote.  Not only would this give him a disproportionate amount of power in the Senate for someone with zero seniority, but it might break the partisan gridlock in Congress.  I know this idea sounds like wishful thinking, but imagine if Crist were to “caucus from the middle” by forming a coalition with bipartisan moderate Senators like Susan Collins, Olympia Snowe, (choke) Joe Lieberman, Evan Bayh, Scott Brown, Jim Webb and Max Baucus.  If this coalition demonstrated that it had “gettable” votes for major issues, then it would instantly become a power broker in Senate politics.  Especially since negotiating with this group would make attacking a proposed policy as extremist from the ideological wings far more difficult.  “Hey, the bi-partisan moderates said it was a good idea so it can’t be that socialist/neo-conservative.”

While I’m dreaming, imagine if the coalition actually had idiosyncratic opinions on issues, rather than just watered down version of partisan ideologies.  Charlie Crist’s mix of social conservativism, fiscal moderation and environmental progressivism are not exactly my ideal mix of policy opinions, but it isn’t just splitting the difference between the two extremes of the parties either.  When all the moderates in the Senate are just timid ideologues who need to be bribed into supporting a particular bill, all the while complaining about it, then legislation is enacted poorly or not at all.  A moderate Senate coalition should do anything in its power to avoid looking like the moderate Democratic coalition in the House, the Blue Dog Democrats, who sell their disproportionate influence for pork and are hated by both sides of the aisle.  Senators do not need to constantly run for election and so their form of moderation could be based on finding policies of practical compromise, rather than naked district profiteering.  Thus, while Ben Nelson might like to be in this hypothetical coalition, the stink of the wrangled bacon he secured in exchange for his health care vote is too strong to include him.  Joe Lieberman may be more odious, but at least he seems to really believe that he is doing the lord’s work by sticking it to liberals.

Reading about some of the things Crist has done during his political career- ending the disgusting public intrusion into the private family affair of Terri Schiavo, allowing non-violent felons to vote and purchasing large parts of the Everglades to create a state park – I developed a healthy respect for the man.  Running as an independent when his electoral fortunes waned smells of opportunism, but he can credibly point to the concerted effort within his party to oust him as proof that his party left him first.  As a Senator, Crist would have opportunities to accomplish far more interesting things than Mr. Meeks or Mr. Rubio, starting perhaps by working on prison reform with Jim Webb.  I hope we get a chance to see what he’s capable of, rather than losing another interesting politician to the rigid litmus test of the base.

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Awesome Avatar Message Board Exchange

In Uncategorized on February 28, 2010 at 8:46 am

I recently posted a summary and link to my extremely negative Avatar review on a fanboy site; this elicited no fewer than twelve err, umm, avatars to insult me and accuse me of being a troll.  A routine link bomb had turned into solid entertainment.  Some highlights: 

Vanessa791 says, “It never fails to amaze me that trolls love to get on a FAN site just to be able to trash a movie that the other members love. You actually think the garbage you are spewing is going to open our eyes??? You sir, are a fool then. Go spew your crap on a board where it is wanted, it isn’t wanted here.”

Kalimaa responds, “It is best to ignore them. Their only purpose in life is to try to infuriate people. This makes them happy. Sad, but their are millions of people like this that thrive on negativity. A very sad life indeed.”

Imsnoozin, likely a Jr. high school student, adds, “LMFAO, your pathetic.” to which me the accidental troll responded, “Nice grammar.”

From VictoryBlade: “ChristopherCarrbOX2, honestly, what is your problem? Why bother wasting your time on this forum with your awful comments when you know everyone is just going to blast them out of the sky? Do you enjoy it? Stop trying to draw attention to yourself in this manner. It is low and pathetic. Point stated, this thread will soon be forgotten, and so will you, ChristopherCarrbOX2.”

Valdamar says, “This diatrible view of AVATAR intrigues me. Would you describe yourself as a strongly religious person?”

From Darkah: “You see, this is the reason we all need to be on the new site, so these kind of trolls can be immediately removed and banned from the site. If they can express themselves in a respectful way that’s one thing, but to trash the movie and everyone who feels the way we do, that’s another thing entirely.” This comment reminded me of when the magic card kids in high school finally got enough sense to not be in the cafeteria when football practice got out.

And finally, the most hilariously ironic response is from an Avatar nerd with a name so full of diacriticals that it cannot be rendered on this website: “Lol this lame ass probably did create an account just to post a trash-thread, that takes a real lack of a life to do. Must be a lonely Saturday night for this chump.” 

I wish I had planned on trolling the Avatar nerds for my Saturday Night.  After my accidental experience, I now realize trolling provides endless weekend entertainment: roll up a spliff, put on some Biggie, cruise over to a Star Trek website, post a comment about how Worf doesn’t stack up to Boba Fett, relax in the tub for a while, come back and watch the fireworks.  The only thing I can think of that might be more fun is pwning noobs.

Avatar Review Disclaimer

In Uncategorized on February 27, 2010 at 3:30 pm

Although Avatar definitely sucked, I must admit that I watched the movie in Japanese because I wanted to see the 3-D.  There was an English version available in my city, but it was the 2-D version, and, really, let’s face it, the only reason to go see Avatar is to witness stereoscopic film-making.  As a result, I may have been frustrated – not because I don’t understand Japanese – but because I find dubbing to be in poor taste and distractingly ridiculous.  I might understand the rationale behind dubbing – as opposed to subtitling – a special effects movie: people want to focus on visuals and not on reading subtitles.  Nevertheless, dubbing is the norm in Japan for all foreign media.  There are probably only five or six voice actors, and they all sound like Don LaFontaine, even the woman who regularly plays Miley Cyrus.  I attribute this to either widespread hidden illiteracy or widespread poor taste.  Either way, it may have affected my mood as I watched the film.

Our Obese Economy

In General Principles on February 26, 2010 at 2:59 pm

Panics do not destroy capital; they merely reveal the extent to which it has been destroyed by its betrayal into hopelessly unproductive works. – John Stuart Mill

David Leonhardt recently wrote a column for the New York Times in overwhelming praise of the stimulus.  Leonhardt goes to great lengths to castigate opponents as political opportunists, visceral reactionaries, or ideologues, but Leonhardt, and many other proponents of economic stimulus – including Paul Krugman – fundamentally misunderstands the nature behind the opposition; it’s not about doubting the math or denying that government programs designed to create jobs create jobs.  Reasoned opposition relies on the idea of malinvestments contaminating the economy and the creation of moral hazard inevitably postponing a bigger collapse.

It is first necessary to separate partisan criticism of the stimulus from economic criticism.  The kind of partisan criticism coming from Senator Scott Brown of Massachusetts or Representative Mike Pence of Indiana centers on denying the obvious effects of stimulus or exulting the supposed superiority of the competing Republican stimulus, which Pence claims would have created twice as many jobs at half the price.  This form of opposition is to the Democratic stimulus; it’s sort of stimulus penis envy.     

Leonhardt is right to point out that there is a great deal of misunderstanding and ignorance of the effects and circumstances of the last stimulus being distractingly interjected into the current “Jobs Bill” -aka Stimulus 2.0 – debate, but he is totally wrong to assume that one Hoover Institute Wall Street Journal editorial is representative of a unified opposition:

The case against the stimulus revolves around the idea that the economy would be no worse off without it. As a Wall Street Journal opinion piece put it last year, “The resilience of the private sector following the fall 2008 panic — not the fiscal stimulus program — deserves the lion’s share of the credit for the impressive growth improvement.” In a touch of unintended irony, two of article’s three authors were listed as working at a research institution named for Herbert Hoover. 

But reasoned opposition to the stimulus is not about small government or harping on inefficiencies either.  No matter what the government gets its hands on, there will be inefficiencies.  The truth is that sometimes these inefficiencies have less of a macroeconomic effect than market failures or costs of administration for oligopolies, and are thereby warranted.  Proponents of National Healthcare are eager to point to the fact that administrative costs of private healthcare in the U.S. is 31%, almost twice that of Canada’s public system.  Here is an instance where the specific market for healthcare in the United States has structural inefficiencies that far outweigh the inefficiencies of government administration in a comparable country’s system.  Whether that alone is enough to justify a switch to a public healthcare system in the United States is a complex issue that will not be discussed here; however, it’s important to note that this example serves to show that government is not always more inefficient than private markets.  People whining about the ZIP-code scandals or stimulus money being spent on bridges to nowhere have no traction, clearly don’t pay attention to the number of zeros, and do not represent reasoned opposition.    

Indeed, everyone can agree that without the stimulus, at least American Express, Bank of America, Capital One, Chrysler, Citibank, General Motors, Goldman Sachs, et al. would have either declared bankruptcy or had to fire a significant number of employees to stay afloat.  Schools, police and fire departments, dutiful RMVs, city halls, and other public sector institutions would also have had to make cuts.  It’s clear the stimulus succeeded admirably in keeping a great number of people employed, and, in the case of loans to financial institutions, ushering in a new paradigm of financial rule.  And that’s the problem.

Spending money to allow people to keep their jobs that otherwise would not exist may seem like a moral imperative in the short run, but it is pointless, counterproductive, and immoral in the long run.  Take the example of General Motors: despite an apparent demand for more fuel-efficient vehicles, an evident long-term increase in the price of gasoline, and lagging sales, GM and other American companies proceeded with a general strategy focusing on big cars, while Toyota, Honda, Nissan, Volkswagen, and other exemplars of the future of fuel-efficient automobiles had relatively strong sales throughout the recession.  The reason Chrysler failed is ultimately because it made a product that nobody wanted to buy.  Quality cars can be made more cheaply overseas, where the inefficiencies of unions play smaller roles, and business models don’t ignore climate change, gasoline prices, safety, and other issues of import.  Propping up Chrysler may save jobs now, but it is pointless in the long run unless there is demand for its product.

The idea of fundamentally flawed companies continuing making inferior products with taxpayer dollars is a good transition to the ideas of malinvestments and moral hazard.  Matt Taibbi has made a career documenting the atrocities of Goldman Sachs and other financial powerhouses, and his words are frankly better than mine:

…The biggest gift the bankers got in the bailout was not fiscal but psychological. “The most valuable part of the bailout,” says Rep. (Brad) Sherman (of California), “was the implicit guarantee that they’re Too Big to Fail.” Instead of liquidating and prosecuting the insolvent institutions that took us all down with them in a giant Ponzi scheme, we have showered them with money and guarantees and all sorts of other enabling gestures. And what should really freak everyone out is the fact that Wall Street immediately started skimming off its own rescue money. If the bailouts validated anew the crooked psychology of the bubble, the recent profit and bonus numbers show that the same psychology is back, thriving, and looking for new disasters to create. “It’s evidence,” says Rep. (Paul) Kanjorski (of Pennsylvania), “that they still don’t get it.”

Taibbi is wise to point out that bankruptcy laws were largely ignored in the seemingly arbitrary distribution of stimulus money: as has been said many times, Lehmann was allowed to fail, AIG was not; bankruptcy laws are designed to fairly distribute assets to creditors in the case of a company’s failure and have been judiciously employed by courts enforcing contracts and the Rule of Law since Henry VIII.  When it becomes clear that bankruptcy and liquidation is not on the table because of the number of jobs at stake, this creates moral hazard; that is, large financial institutions know that their failure means massive ripple effects throughout the economy, so they know that they will be bailed out with taxpayer dollars anytime they run into trouble; they use their privileged positions to make riskier and riskier bets, and investors of all stripes begin betting on the government’s moves or riding bandwagons, instead of relying on fundamentals, resulting in a bubble economy.

Ultimately, I support this particular stimulus only because our reckless behavior got us to a point of no return.  But eventually, there must be massive restructuring and a gradual, gentle purging of toxic institutions.  In the early 1900s, the Roosevelt government took over large conglomerates and broke them up.  We may have to take similarly drastic action once the economy begins growing again.  

While Keynes and Hayek spent most of their careers in bitter disagreement, I think it’s possible that the two theoretical frameworks can be reconciled by seeing the former as for efficacious employment in emergency situations, and the latter as our ultimate long-run approach; we must take more minimalist, cautious steps going forward.  Moral hazard and malinvestments have contaminated the American economy, and while there’s little we can do towards curbing malinvestments and moral hazard while things remain so fragile, the new Keynesian revival must be tempered with this realization.

To use a metaphor most people are familiar with, the American economy is shockingly, morbidly obese.  High blood pressure and metabolic problems indicate increased risk for heart disease and/or diabetes.  Of course, if the economy has a heart attack or a diabetic shock, it should seek out emergency treatment by going to the hospital.  But a better long-run solution is not to wait until that point, to recognize its problems, and to consistently employ healthy savings and regular free-market capitalism.    

Terrorism isn’t a Team, it’s a Noun

In General Principles on February 25, 2010 at 6:52 pm

Joe Stack’s decision to crash a plane into an IRS building in Austin, Texas can not be divorced from the symbolic weight of that form of violence in this country.  Pretending that he was not aware or did not intentionally intend to parallel 9/11 is willfully naive.  Obviously the scale of the attack was much smaller, and in his suicide note/anti-IRS screed Stack seemed to hint that he only intended to kill himself.  Then again, one quote either hopes for copycat suicides or mass-murder: “I can only hope that the numbers [of people dying for freedom] quickly get too big to be white washed and ignored that the American zombies wake up and revolt; it will take nothing less.” Whether or not he intended to kill many people, or only himself, his actions speak for themselves: this was terrorism.  He flew a plane filled with gasoline into a building and murdered someone to make a political point.  

So while I applaud the media’s decision to not treat this story with the hysterical panic it treated the underwear bomber, it is sad that their motives aren’t avoiding an incitement of the very terror that terrorists hope for, but rather an absurd belief that Stack’s actions are distinct and separate from other terrorism.  Good Morning America treated the story like it was a human interest piece by focused on Stack’s daughter calling him a “hero.”  Newsweek featured an editorial email discussion about whether or not Stack could be called a terrorist and, incredibly, decides he can’t be considered a terrorist because:

Terrorists have beards and live in caves. He was also an American, so targeting the IRS seems more a political statement—albeit a crazy one—whereas Abdulmutallab was an attack on our freedom. It’s kind of the idea that an American can talk smack about America, but when it comes from someone foreign, we rally together. 

Islamic terrorism is a form of terrorism, not the sum total of it!  Grouping all Muslim at war as “terrorists” reduces the word to a proper noun, devoid of any meaning beyond branding.  People are only terrorists when we say they are.  People who fight against the U.S. military in their own country are terrorists, not combatants, but U.S. citizens who use violence to make political statements just have poor methods of communicating  their legitimate political frustrations.

The attempt by like-minded commentators and media figures to distinguish Stack’s actions from his opinions, often by simply assuming that the audience is sympathetic to his opinions since “everyone hates the IRS,” reminds me that Americans have never wanted to grapple with the intentions of the 9/11 hijackers.  The people that flew those planes into the World Trade Center and the Pentagon had political grievances no less legitimate than Joe Stack’s: the continued deprivation of Palestinians, the garrisoning of troops in Saudi Arabia and the sanctions on Iraq that led to the deaths of hundreds of thousands of Iraqi children.  I disagree with their interpretation of some of these issues, but I could have a civil conversation with someone who held their views on these subjects.  But they didn’t have a conversation, they murdered people.  We, rightfully, did not embrace their political arguments in the face of their barbarism.  Perhaps it would have been wise to consider their stated aims rather then conveniently pretend they hated us for the very reasons that make us great, but a weak nod to what they believed without a passionate repudiation of what they did would have been cultural suicide.

Those who sympathize with a murderer like Joe Stack are embracing the path of moral insanity, no matter how much they don’t like paying taxes.  Vernon Hunter, a father and a Vietnam Veteran, died because Joe Stack wanted to make a point.  That’s evil and it’s terrorism.  When you think of Joe Stack and terrorists like him, don’t be afraid, be indignant at their rejection of humanity in favor of ideology.

Flawless Victory: Airstrikes and COIN

In Specific Facts on February 23, 2010 at 7:11 pm

Yesterday, in a television address that was aired nationally in Afghanistan, General Stanley McChystal apologized for the NATO air-strike on Sunday that mistook a civilian bus convoy for insurgent reenforcement to the battle in Marja and resulted in as many as 27 deaths including four women and a child.  Apart from wondering about efficacy of television addresses as strategic communication in a country where in 2005 only 19% of households owned a TV, NATO’s newfound sensitivity to civilian collateral damage underscores the difficulty of counter-insurgency warfare.  Can the U.S. win wars fought with its principal advantages used sparingly, a tactical necessity to avoid any mistakes to adhere to larger strategic goals and sharp political reprisals from allied leaders should any errors occur?  Moreover, will we have the patience and will to even try?

I remember having discussions in high school, with Air Force recruiters no less, about the immorality of air warfare, which kills indiscriminately and without any human cost on our part.  Which is to say, that my support for a more local and tactile American combat presence is long held and deeply felt.  Yet, it must be pointed out what that means: we can only use air power sparingly, with restraint and without doubt.  This entails the U.S. forgoing its principal advantage in combat and instead committing to increased risk, casualties and time-frames. The U.S. supremacy in the skies has been unbroken and unquestioned since the Korean War, the last time an American pilot was shot down by another airplane.  Since then, we have owned the skies; but the ground, we can only rent.  We toppled Saddam and the Taliban in days principally because we bombed them to oblivion; no force on Earth could long stand against the firepower the U.S. can rain down from its drones, long range rockets and bombers.  Unfortunately, in the wars of tomorrow much of this firepower will have to stand as a deterrent rather than a primary participant, because air warfare is fundamentally incompatible with population-centric counter-insurgency.  This will make our wars more humane, but also far, far more costly and difficult.

For those on the ground, restraint from the air will be acutely felt.  Another incident from the battle in Marja demonstrates the impossibility of “surgical strikes” and victim-less war.  11 people were killed when a U.S. rocket fired from miles away struck the wrong house.  Marines said they were startled by the rocket, because after taking small arms fire from a nearby building earlier in the day they had called in an attack and been denied.  I hesitate to infer too much, but in all likelihood the initial request was denied to comply with McChyrstal’s increased scrutiny of air attacks and yet the eventual result was a tragic mistake.  Taking more time and being more careful means that sometimes, perhaps often, enemy combatants will elude troops pinned down on the ground who could have called for an air-strike.  Necessarily, being sure means not exploiting every opportunity.  Supposedly NATO had intercepted Taliban radio communication about the bombed bus convoy, but without an urgent need to bomb it, even somewhat credible intelligence might not participate an attack.  Bombings that go awry are incompatible with the strategy of “winning of hearts and minds” by proving that NATO troops protect the population, as the deaths are poignant reminders of the violence we bring with us.

Finally, by declaring our intentions to minimize civilian deaths, we allow our political allies to sharply criticize us when things go wrong.  Hamid Karzai has proven a liability more than an asset anyway, but his condemnation of the attack removed any cover we might have had and threatened to weaken the entire enterprise in Marja.  If we fought by conventional rules, we could greet political condemnation with a shrug and the explanation that we break eggs to make omelets.  Instead, the NATO commander apologized on national television and Karzai gets a win without risking anything.  We must tolerate this situation, because these are the rules we created.

Despite all of this, population-centric COIN remains the most promising mechanism for fighting these types of wars.  Our attempts at violent coercion were an abject failure in Iraq and COIN offers us new possibilities for just warfare along with justified intentions.  However, embracing the inherent difficulties of these conflicts will hopefully allow to make strategic considerations about whether or not we should enter into any more of them.  If COIN is the only way out of Afghanistan, hopefully it is also tough enough medicine to teach us to avoid future applications of its methods.  

The Latest in Totally Lame JPop

In Dispatches from the Wild Wild East on February 21, 2010 at 1:32 pm

JPop is infamous for it’s lameness.  But this video takes the cake:

Our Spendthrift Uncle, Sam

In Specific Facts on February 19, 2010 at 6:17 pm

We have focused on debt and deficits quite a lot around here lately, and it’s not hard to see why: the U.S. deficit is at a record level even as Europe struggles with the consequences of excess deficits in the Greek debt crisis.  Deficits are not intrinsically bad, pretty clearly some situations demand deficit spending: the choice between running a deficit and say, being conquered by Nazis and Imperial Japan, or a decade long economic collapse accompanied by death from famine and deprivation, isn’t difficult to make.  However, the existence of persistent deficits, through good times and bad, indicates a political failure in this country.  To illustrate the problem, let’s consider a thought experiment: imagine the U.S. government as a person- someone you know, your wacky, rich Uncle Sam.

Sam doesn’t have a job, per se, he gets money by managing his trust fund, the U.S. economy.  When he invests wisely the trust fund grows and he can live off of a percentage of it- though if he takes out too much of the funds principal, and wastes it, then it hurts the fund’s growth.  Over the past 50 years Sam’s trust fund has grown steadily and now his principal is 27 times as large as it was then – 5.3 times as large when adjusted for inflation.  Yet, despite this massive increase in assets under management, Sam’s personal debt has grown nearly 50 times as large over the same period.  As a result, while he already owed 50% of his trust fund in 1960 because he was still paying off debt accumulated during times of extreme crisis, he now expects liabilities to equal assets by the end of this year.  Even if he had never actually paid off any debt, but just lived within his means, Sam’s debt would be a paltry 2% of his assets by now.  Instead, nearly 10% of what he takes out of the fund every year goes towards interest repayment on existing debt.

As a fund manager, Sam knows that sometimes taking on debt allows him to capitalize on investment opportunities.  If he pays 2% interest on a loan, but the fund grows 5% faster because of his spending then he makes a profit.  This line of thinking led him to make some strategic investments recently, because a weak economy presented him with an opportunities to buy low and reap long term profits.  However, most of his spending doesn’t go towards investments, whether in education, infrastructure or research and development; instead, he mostly he uses his money on charitable contributions and security.  One set of Sam’s advisors points out the immorality of someone so wealthy cutting his charitable contributions, while another set decries that cutting investments in security might mean losing the whole fund.  Recently, during a time of robust fund growth, Sam managed to cut charitable contributions and security spending (from 4.85% to 3.08% of the fund over 8 years), paying down his debts for four years in a row, something he hadn’t done since 1930.  No one particularly appreciated this approach, however, and new fund management quickly turned things around by cutting the amount taken out of the fund, even while increasing spending on security and creating a new charitable program.

The big problem Sam has run into, is that while everyone at the bank loves when he takes less money out of the fund in a year, no one presents him with opportunities to break out of his long term spending commitments.  Some investment advisors give him contradictory advice: don’t take money out of the fund since that will hurt its growth, but decreasing the size of the hole in his personal budget is essential.  Yet, aside from interest payments and contract obligations he made to long term investors, he now has a annual deficit larger than his income.  While maybe he could have cut spending in earlier times to close the deficit, now he’s going to have to cut into the fund’s principal just to keep the lights on.

When examining his portfolio, one immediately gets the impression that Sam lives in a state of crisis.  How else can you explain why he felt it was necessary to spend above income even when his funds were growing steadily?  For example, why does he spend so much more on security than other portfolio managers?  In absolute terms, he spends as much as everyone else put together, but even given that he manages the largest fund, he spends more proportionately than anyone else does.  Security is an investment, but usually only in a negative sense, like insurance; security prevents losses, rather than producing returns.  Is Sam purchasing the equivalent of expensive full coverage car insurance when perhaps only liability coverage is necessary?  Moreover, does having so much insurance lead Sam to be careless when driving?  After all, why get the insurance if you’re just gonna follow the speed limit?  Just paying the deductible on all his crashes has become onerous to Sam, but he keeps finding someone new to drag race.  Not all of his advisors think security is a bad investment, they explain the one time he managed to pay off debt as a “peace dividend” that resulted from decisively and ruthlessly out-pacing his closest rival.  If his security investments in the Middle East pay off, a new era of prosperity will result.  So far, the results don’t seem promising.

His portfolio is a bit of a mess right now, but my advice to Sam is to switch from the aggressive strategy that hopes to recoup all of his losses in one fell swoop in some sort of modified Martingale investment system to something more conservative and gradual.  In particular, investing directly rather than through complicated security derivatives might make returns more tangible.  Finally, if he can’t live within his means, then maybe he should make more money, even if it hurts growth.  Otherwise, he’s looking at a hell of a margin call in the future.

Japanese Commercial of the Week

In Dispatches from the Wild Wild East on February 19, 2010 at 4:58 pm

The idiot tax also exists in Japan:

China Diplomacy: Dalai Lama, Google, Taiwan, Trade

In Specific Facts on February 18, 2010 at 4:21 pm

The media has increasingly expanded on the President’s apparent rough start with China diplomatically.  Obama’s meeting today with the Dalai Lama came fresh on the heels of a widely publicized Taiwan weapons deal, a feud over Google censorship, and an escalating trade war, yet all of this smoke obscures that President Obama has done nothing radical or out of the ordinary in U.S.-China relations.  Rather, the current political and economic climates are stacked against the administration, and much of the rhetoric amounts to nothing more than muscle-flexing.  The Administration’s dealings with China have been rooted in measured, compromised positions. 

President Obama’s meeting with the Dalai Lama was carefully arranged, and it was a considerable step back from the warmth shown to the exiled political leader by the Bush Administration.  George H.W. Bush was the first U.S. President to meet with the Dalai Lama, in 1991, while Tiananmen Square was still very much an embarrassment for Chinese leadership.  The meeting was in private, and photographers were not allowed.  President Clinton avoided Chinese anger by occasionally attending the Dalai Lama’s meetings with other officials, but never meeting with him privately; when the Dalai Lama visited the White House, he was granted an audience with First Lady Hillary Clinton.  George W. Bush has been the most receptive President so far: meeting several times in private with the exiled religious leader, giving him the Congressional Gold Medal in an elaborate public ceremony, and urging Chinese leaders to meet with the Dalai Lama for talks.  

The approach of the Obama Administration represents a compromise between those of the Clinton and Bush Administrations.  By meeting with the Dalai Lama in the Map Room, instead of the Oval Office, of the White House, and scheduling no joint press conference, the Administration sends a strong, yet unoffensive signal to Chinese leadership.  This strategy avoids both the equivocation of the Clinton approach and the brashness of the Bush approach.

Recently, Google waged censorship battle with the Chinese government, which accused the company of supplying vulgar content to internet users and may have been involved with a highly organized cyber attack on the company’s network aimed at gathering intelligence on human rights groups.  Google has cited the safety of its network in public considerations of ending its operating in China.  The U.S. State Department has weighed in on the issue.  According to Secretary of State Hillary Clinton:

We have been briefed by Google on these allegations, which raise very serious concerns and questions. We look to the Chinese government for an explanation.     

Conflating the financial interests of a private company with larger national interests are imprudent; Secretary of State Clinton’s comments are vague enough to avoid such a confusion, but tempting enough to invite media speculation and instigation.  Especially with China, it is important for the U.S. to emphasize the considerable latitude and freedoms our corporations enjoy.  Likewise, it is important to emphasize that this particular disagreement is not between the United States and China, but between China and Google.  Going forward, the Obama Administration should be more careful to stay uninvolved.    

The common assumption that U.S. weapons deals with Taiwan are designed to create antagonism between the rival governments, keep the PRC military occupied by proxy, contain China’s development, or enhance U.S. geostrategic influence in the region is flawed.  On the contrary, Taiwan arms deals began in 1979 as part of the normalization of relations between the United States and the People’s Republic of China.  The U.S. supports a good, balanced relationship between the two powers, and weapons sales to Taiwan usually correspond to PRC arms buildup across the Taiwan Strait and are designed to prevent the military balance from tilting excessively in China’s favor.  Furthermore, the United States is bound by law in the form of the Taiwan Relations Act to provide for the defensive capabilities of Taiwan.  The current weapons deal was based on equipment largely approved by the Bush Administration starting in 2001 and represents only a fraction of what was requested by Taiwan.  The most important reason for the arms deal is to reassure Taiwan and other long-time Asian allies Japan and South Korea that the U.S. seeks a balance of military power in the region and economic integration to mitigate potential hostilities.  This is an issue that the U.S. and China fundamentally disagree on but poses no immediate threat, and it may go away by itself if relations between the two Chinas continue to warm.   

This timeline by NPR shows the history of economic relations between the U.S. and the People’s Republic of China.  Over the last fifteen years or so, Chinese factories began gradually producing more and more goods for American consumers.  During the recession, aggregate demand in the U.S. has dropped and so have Chinese exports.  The Obama Administration seeks a more balanced economic relationship between the two countries, with China floating the RMB and creating a climate more friendly to U.S. exports.  Americans depend on Chinese manufacturers for cheap goods and Chinese manufacturers depend on American consumers.  Recently, both sides have exchanged rhetoric and tariffs as economic relations continue to sour.  

Unfortunately, a tougher stance towards Chinese trade policies should have been taken by the Bush Administration.  After eight years of exceptional growth, the booming Chinese domestic economy and the U.S. trade deficit gives the Chinese government more bargaining strength.  It will nevertheless be necessary for the Obama Administration to insist that China make concessions in exchange for an open American market.  While free trade benefits everybody, China has engaged in unfair protectionism while acquiring many concessions from the U.S., including being granted most-favored nation status and WTO membership.  By showing a clear tit-for-tat strategic face to Chinese leadership, the Obama Administration might succeed in rebalancing the economic relationship between the two countries.

The Administration has taken a tough, but fair and necessary approach towards China.  Much of the bad publicity is the effect of trying to correct the mistakes of the previous administration.  Ultimately the most important element of the U.S. China relationship is that economic interdependence hedges against military antagonism.  It will continue to be important for the two countries to work together in an assertive, yet non-threatening manner.  The Obama Administration’s diplomacy thus far seems to focus more on a long-term, honest partnership between the two nations, and less on quick fixes, appeasement, and politicking.