Who Was Buying Low?

It's a faint rumbling, but believe me, there is a rumbling. Sarbanes-Oxley is starting to get the rethinking that it deserves. It has New York City bigwigs worried. Heavy-hitters from the world's of legal scholarship, economic policy and business are coming together to study and make policy recommendations. Financial markets saint, Alan Greenspan, has soured on SARBOX. Even Mike Oxley admits that reform is needed and coming.

OK, so if the "reform SARBOX" stock is rising, who actually was buying low? For the answer I reach way back into the archives to give you the just the third post in the history of "Now Batting for Pedro Borbon..."

More On Airbus's A380 Problems

In our ongoing series chronicling the greatest business rivalry, I direct your attention to this Bloomberg article about the ongoing production delays of Airbus's double-decker A380. It turns out that Airbus's computers don't talk to each other. This is stupid, naturally. But the people at Airbus aren't stupid; they, after all, build planes. Modern aviation is arguably one of the greatest achievements of humanity, and it did not happen to be thus based on the ongoing contribution of stupid people. So what is the deal? How can Airbus, which is attempting to build the largest commercial airliner in history, come to have a mishmash of computer systems? The answer is illuminated in Mary O'Grady's column today talking about the corruption in the Brazilian government. The column is worth reading in its entirety but her point is summed up in the von Mises quote that she leads with.

"Corruption is a regular effect of interventionism."

Indeed corruption is endemic to interventionist systems. Airbus is beset with interventionist thinking. Airbus's basic plane-making purpose is assaulted with the political classes' need to make it a vehicle of political goals and consequently it has become both a massive source of patronage and the locus of political turf wars. Like any other form of intervention, this has caused corruption, a corruption of the mind that also goes by the name stupidity. That is why the smart people at Airbus have a stupid situation on their hands. The incomprehensible computer situation at Airbus is a form of corruption, albeit a subtle one that is perhaps less loathsome than other forms of corruption in that it is not an immoral corruption, and as such it is counter-productive to society.

More on the World Economic Forum

I was all over the World Economic Forum's competitiveness survey the other day. Today the folks at the WSJ's op-ed page take a crack. This money quote shows why those folks are paid journalists and why I, um, er, just do it for the love:

"Speaking of fiscal discipline, who does the WEF consider star performers? Meet the Algerian Tiger. By the WEF's methodology, this poor Maghreb country that lost 200,000 lives in a 1990s civil war is tops in terms of budget surplus, national savings, public debt, inflation, interest-rate spread and real effective exchange rate. Hearing this, the millions of Algerians struggling to build better lives in Europe will surely rush home."

The underlying point of both critiques though is the World Economic Forum is infected with the academic/bureaucratic mentality, a mindset that is so enamored of the elegance of a theory that they hew to that theory even though stepping outside and observing the world as it is would prove their theory ludicrous.

17 Cherry Tree Lane Shocker

To think that all these years I saw Mr. George Banks's wife Winifred as just a sweet, caring mother and progressive, civic-minded lady, when in fact she could have been a closeted cold-blooded assasin.

I Just Saved NYC Taxpayers $200,000

New York City is going to spend $600,000 for McKinsey to study why the NYSE has lost virtually all of its IPO business to London. Unbelievable. In competing for business versus the NYSE, London Stock Exchange officials tout not having onerous regulations like Sarbanes-Oxley. CEOs at companies that go public say that they choose to list in London because they want to avoid Sarbanes-Oxley. Many US companies are going private to avoid Sarbanes-Oxley (more here).

So as a favor to the taxpayers of New York City, I will offer up my services to analyze this problem for considerably less than $600K. I'll do it for, say, half that. And NYC won't even have to wait for my report, here it is:

"S-A-R-B-A-N-E-S - O-X-L-E-Y"

Here's a bonus tip for the New York Economic Development Corporation. For a few extra bucks, say $100K, I think Don Luskin would happily add to my analysis..."runaway litigation, or the depredations of predatory states attorneys general like Eliot Spitzer."

The City That Never Stops Nannying You, Part 2

New York City is no longer the City That Never Sleeps. Candidates for its new slogan are:
1) The City That Never Stops Nannying You
2) The City That Always Tells You How to Live Your Life
3) The Nanny-State That Never Rests
4) The City Whose Democrat Mayor Who Won Disguised as a Republican Knows What Is Best for You.

After noise ordinances, smoking bans, and other assorted impositions on our liberty comes now the attempt to ban trans fat. Russ Roberts does the hard-hitting skewering of this latest assault.

Update:
If you would like express your displeasure at the impending loss of more of your liberty or otherwise address the arrogance of those who feel they know what is best for you, you may do so to the following:

NYC Health Department Communications
Contact: (212) 788-5290; (212) 788-3058 (after hours)
Geoff Cowley (gcowley@health.nyc.gov)
Andrew Tucker (atucker@health.nyc.gov)
Sara Markt (smarkt@health.nyc.gov)

Thank You SuperHank!

SuperHank has answered the call.

Principle Over Power?

This is interesting. Some conservatives seem put adherence to principle above political power. Is there any analagous instance where liberals have shown a desire to hew to principle rather than retain or gain political power? I can think of none. At least not since this guy was kicking around.

WEF Is Right and Yet Clueless

The World Economic Forum released its annual survey of economic competitiveness today and the United States slipped out of the top spot to number six. I don't think this result is off the mark, the US has slipped, but the reasons put forth by the WEF are totally off-base and reflect the malign influence of a set of ideas that goes by the moniker of "Rubinomics" on its economic analysis. From Bloomberg we learn that the number one reason that the US is less competitive is...drumroll...the "twin deficits", which of course refer to the budget deficit and the trade deficit. Let's state first off that this is NOT a defense of budget deficits, but budget deficits have been a fairly regular feature of the US economy for decades, certainly for the last twenty or so years and yet the US economy's performance has been fantastic. In the last twenty-five years we have added the equivalent economic activity of roughly two Chinas or five Germanys. Also, one is compelled to ask how the US slipped in the rankings from last year when our budget deficit over the period was shrinking. It must have been the other twin - the trade deficit. Fine, our trade deficit did indeed grow, pretty much just like the majority of years during the exceptional twenty-five years just past. So why now? Why is our projected $850 billion trade deficit trouble when our $726 billion trade deficit last year didn't prevent us from taking the top spot? Is crossing the $800 billion mark the problem? Who said? How do they know? Curious indeed. There must be more to it and indeed there is. Read down the article to the next reason given - Hurricane Katrina. Yes, our government was slow to respond to hurricane Katrina so we are less competitive as a nation. This is just my impression but I think government is no more or less competent than in years past, how could this effect the ranking? How is it that flat-footedness on something that the government was never capable of handling nor is really supposed to handle means our economy is less competitive? Did France take a hit in their standing for letting enraged Muslim youth burn cars and rampage for weeks before responding? It seems that the WEF is holding the US to some naive statist standard to which the US has never claimed it wished to live up to, or it just taking a cheap short at the administration consistent with opposition talking-points. Either way, it's not very sound economic analysis. Shaky. So what else? Infant mortality and HIV/AIDS. Yes, the US is apparently less competitive because we have more AIDS patients and more babies dying. Well, this is a shop-worn indictment of the universal heathcare brigades. We have more preemies born here because we have such excellent prenatal technology and we have the will to give preemies a chance and many of them die for obvious reasons - other nations don't count or even birth their preemies. AIDS? Is AIDS ravaging a broad spectrum of our productive, working age adult population or is it confined to a subset of adults who are associated with specific behaviors like intraveneous drug use and unprotected sex? It's the latter. Just because we have a higher incidence of AIDS patients relative to Finland reveals not one iota about our relative economic competitiveness. Really shaky.

Of course nowhere in the article is there mention of costly and onerous regulatory policies like Sarbanes-Oxley or creeping protectionist sentiment such as that embodied by theSchumer-Graham tariff proposals or the Dubai Ports World debacle. This report attempts to ignore decades of economic evidence that benign tax and regulatory regimes, the rule of law, and openness to trade create the conditions of competitiveness and replace these criteria with a wish list of collectivist standards and fashionable outcomes. Clueless.

Did McGreevey and Clinton Not Get the "We Want to Win" Memo?

Given the very obvious effect that Jim McGreevey's decision to slather the New Jersey electorate with another coating of lurid and dysfunctional behavior, why would Bill Clinton prominently remind us of the sticky, gooey national experience, even with its putatively laudable parts, that was Clintonism. Despite all the nuanced political analysis I have seen, this just doesn't seem like a smart move, but what do I know.

New York Magazine Celebrates Bad Parenting...Again.

New York Magazine, in its desperate quest to be seen as the standard bearer of scoffing, rejectionist urban narcissistic elite, now seems to include a monthly feature that belittles traditional family life (background here). This month's contribution is a guide on how to completely abdicate your role as a parent and hire others to raise your children (even more so than usual).

Aside: If your looking for the issue on the newstand, it's the one with former NJ Governor McGreevey on the cover. Naturally, for New York, McGreevey's is a psychobabbly, civil rights-tinged tale of sexual identity and inner struggle that turned out beautifully, not the tale of a governor of a wealthy and populous state that used to hump strangers in truckstop bathrooms. (One can almost hear an exasperated Bob Menendez sighing "Why now?")

Debilitating Capital Losses...Not just for the Rich Anymore

Here is a great Bloomberg article chronicling the latest instance of an investor herd failing to alter its navigation so as to avoid a large precipice. Here is the key sentence:

"Declines in these mutual funds are approaching the $6 billion loss at Amaranth Advisors LLC, the Greenwich, Connecticut, hedge fund that bet wrong on natural gas, which has dropped 59 percent this year. Hedge funds are private pools of capital that can only accept money from individuals with more than $1 million because regulators figure they can take more risks than people in mutual funds. "

Heck, who needs to mess around with secretive, unregulated, only-for-the-rich hedge funds when you can lose your shirt just as easily in non-secretive, regulated, fit-for-average-consumption mutual funds.

Bad investment decisions are an equal opportunity affair, open to all. Still I doubt this will blunt the instinct in our Great Sausage Factory to extend regulation to the hedge fund industry.

A Stroll Through the Archives

Busy day so blogging will be light, but in light of recent events, I thought I'd reprise an oldie but goodie (posted Nov. 22, 2005):

The Real Mr. Danger and his Useful American Idiots
Bloomberg has a story on the execrable shenanigans of murderous, election-stealing, socialist dictator Hugo Chavez. However, be forewarned, there are so many bloodboiling elements to this story from petty inanities to deep outrages.

Where to begin? First, we have our Great Sausage Factory aggessively tackling a non-problem, which I've addressed here. High oil prices have NOT had a significant negative impact on the economy and there is NO evidence that swaths of society are struggling economically in this environment.

Second, the GSF's solutions to this non-problem are thoroughly discredited, economically disastrous collectivist proposals. Two high-ranking Sausage Factory workers, Grassley and Dorgan, have proferred, in various guises, the awful anti-capitalist idea of windfall profit taxes.

Third, even if addressing poverty through handouts (another awful idea) is your bag, the "poor" in the US are not the right poor people to be helping. By global standards we don't have poverty in the US. Our poor have TVs, microwave ovens, often have cars and own their own homes. In places like South America, they have ponderous, crushing poverty. This is has nothing to do with helping poor people.Furthering the bloodboiling is Chavez's malicious and brazen ploy to undermine the current government and social stability in the USA using tactics that on a grander scale would qualify as economic warfare.

Finally, the ultimate outrage is that prominent and powerful citizens like Ed Markey and Joseph Kennedy II are wilfully complicit in this dangerous stunt whether it be through their own ignorance or cynicism. Liberals love to wax perplexed on how a figure like Joseph McCarthy ever got traction in the minds of Americans. Well, when they attempt to import the socialist policies of a highly unfriendly state (nay, an avowed enemy really) in order to undermine the current government, they plant the seeds of McCarthyism.This is very dangerous ground. Not Chavez's bluster or puny oil spillings, but his discovery and exploitation of today's useful idiots.

Unlikely Kudos

As a person for whom the scariest seven words in the english language just might be House Ways and Means Committee Chairman Rangel, intellectual honesty, fairness, and just plain honorability force my hand to state this:

Rep. Charles Rangel displayed edifying statesmanship today in rebuking Hugo Chavez. Well done, Sir.

The People Versus the Powerful

Together we can take on the powerful special interests. Let's tell Big Hip Replacement that Americans have had enough!

My Brush With Infamy

Wow, I had a brush with infamy and I didn't even know it. A couple of years ago I had a lunch (not a business lunch, but a burgers-n-beers get together) with a friend who brought along a colleague from Deutsche Bank. The colleague was a nice guy, a regular cannuck, so we had some beers and talked hockey...and energy. This guy exuded confidence talking about energy and he was impressive, albeit his confidence did border on arrogance (although I wonder how much of my impressions of that day are enhanced by hindsight). Turns out that guy was Brian Hunter, the energy trader who lost $6 billion in a week and has all but brought down Amaranth Advisors, the formerly $9.5 billion hedge fund.

That's it. Just a meaningless anecdote. Although it is odd to know that I had beers with the guy who eventually could be the guy that winds up doing the most damage to our industry. Just as the feds are breathing down our necks and begging Congress to regulate hedge funds, he goes and masterminds the largest hedge fund meltdown in a decade. Nice goin'.

I'm Confused

OK, what is wrong with this statement taken from the front page WSJ article on Hungary's political turmoil?

"In a recording laced with expletives and leaked Sunday to local radio, the multimillionaire advocate of free markets is heard telling fellow Socialist Party officials that the "moment of truth will come swiftly" for the economy he has rushed to link to the outside world."

Either Gyurcsany isn't a very good advocate of free markets having joined the Socialist Party, or the Socialist Party isn't a very good socialist party having let a free market advocate not just enter their ranks but be their standard bearer. Odd.

Dammit Lady, I'm Trying to Raise $4 Billion Here!

Too funny. Bloomberg carried this story a few days ago, about how Columbia University President Lee Bollinger is embarking on a $4 billion fundraising drive. I can just picture Bollinger's "aw shit" reaction when news got out that the dean of the International Affairs school has invited Iranian apocalyptic whackadoo Mahmoud Ahmadinejad to speak at the university. Apparently SIPA Dean Lisa Anderson got a little jealous that her competitor, the Kennedy School at Harvard, was getting all the press. Clearly she thought, 'we're just as good as Harvard, we will get our own women-beating, gay-bashing, terrorist-sponsoring theocratic dictator to speak!' I'm sure Dean Anderson got a call from Bollinger post haste to the effect "you flumin' idiot, I'm trying to raise $4 billion with a b here! You're killing me!"

A little side color for readers that may be unfamiliar with the dynamics up at Columbia (and why would you be my globally-minded readers, parochial concern that it is?). Columbia has always been a bit balkanized in that the prestigious graduate programs produce alumni that are loyal to their graduate school and not the university in a larger sense. This is particularly true of the business school which produces capitalist movers and shakers who generally see the rest of the university as a silly hive of aging 60s radicals and neo-collectivist idealogies. Bollinger pissed alot of alumni off with his antics and it has exacerbated this balkaniztion, which has impications in the fund-raising sphere. Rich alumni are making donations specifically to their graduate schools. You get a faint whiff of this in the Bloomberg article. Russ Carson for example gives big dollars to the b-school but I doubt he would give one red cent to the university at large for Bollinger to get his grubby hands on. Bollinger sounds high-minded, but truth is he isn't enamored of not having more control over the funds that current b-school Dean Glenn Hubbard and particularly former Dean Feldberg have brought in. ``I want to draw alumni into the whole university, not just the parts they went to,'' Bollinger says. Yeah well, Bollinger is a big part of the reason behind the fund-raising balkanization.

Anyway, Bollinger appears to be deftly slinking out of this with a mild condemnation of Ahmadinejad and a "ah...er...(think dammit!), um... too short notice to pull off."

Calfornia AG Wants Michigan Workers' Pension Money

California is the largest car market in the country, so it would make perfect sense for an automaker to locate a factory in California. Making cars near where they are sold makes basic business sense. Well, automakers don't do this for a variety of reasons that can be summed up in this latest silliness. (Not only is California failing to attract the auto industry, it is actively repelling it.) This may seem like politicians trying to score cheap political points coming into an election. It is anything but. Anti-business politicians and their tort lawyer donors are looking to make global warming lawsuits the next shakedown bonanza, hoping to repeat the $230 billion score that they wrung from the tobacco industry in order to fund expanding government without directly raising our taxes. The desire to extract massive gobs of filthy lucre is about the only similarity though to the assault on tobacco. To begin with, the case againse tobacco actually had some scientific grounding to it. The global warming (remember global warming is not one question but five) premise of the suit is scientifically shaky. Second, the villians in the tobacco suits, some CEOs and some southern farmers, were inconsequential or unsympathetic and so easily slaughtered in the press where much of this battle was fought. That is not the case here, where the face of the auto industry is not a CEO with a drawl but the beleaguered auto-worker, that pure salt of the earth soul struggling to keep a job and make ends meet. GM and Ford are drowning in healthcare and pension liabilities for their workers that they can't fund (because consumers have decided they don't want to pay for them, "just the steel, bolts and the gears please," they say with their dollars) and California Democrats and their lawyers want to extract billions from this already bare kitty? Do you think Jennifer Granholm would be on board with this? Finally, this is a grand scale assault on a MAJOR sector of the US economy. The auto industry (counting the manufacturers, parts makers, dealers and allied industries) is HUGE, dwarfing the tobacco industry. Not everybody smokes but most have a car, and need their cars. The effects of a successful suit would hit the economy hard.

All in all, California's suit is a disastrous gambit that is not likely to play out like the tobacco suits. Still, I think the auto industry ought to entertain strategies to reduce the likelihood that other states get the same idea. I always thought the tobacco companies should have stopped selling cigarettes in the states that sued them, seeing how long politicians could stand not to have cigarette tax revenues flowing in. Something along those lines could work here. Automakers couldn't actually refuse to sell cars into California, but they could, say, tack on a fee that would place the cost burden of the litigation squarely on California rather than spreading it across their entire customer base. Call it the "California Global Warming Lawsuit Defense Fee" and have it right there on the sticker below the "Destination Charge". $250 would do the trick. That might disabuse ambitious AGs in other states from pursuing this irresponsible and dangerous course.

Great Marketing Idea #147

These guys could have a sale, say buy one and get 50% off a second, and call it a Tie Coup!

Is Ireland's Anti-Americanism Deep?

One of the truly great developments of the last two decades has been the surging economic prosperity of Ireland, commonly dubbed the "Celtic Tiger." Ireland's gains are perhaps not on a par with the economic miracles of post-war Japan and Germany but only because Ireland's rise has been so quick. In time, the Celtic Tiger may well turn out to be every bit or more of a miracle as those two examples. But economic prosperity has many consequences and Ireland will present a great case study for historians and sociologists who wish to track these consequences. Unfortunately, one of the truly sad developments coincident with Ireland's prosperity is growing anti-Americanism, and a vicious strain of it moreover. This is but one example, but it is one of many that you can find rampant in Irish media. It seems as if Ireland, just off the continent in terms of geography but never in the continent's league in terms of prosperity, strives for Continental acceptance now that its wealth is on a par with Europe's. Anti-Americanism is a result of that striving.

What is sad for me, whose grandparents emigrated from Ireland and whose family draws tremendous pride from their Irish roots, is that America has been the greatest of friends to Ireland for decades. Americans of Irish descent have been unflinching supporters in nearly every way - promoting arts, supporting tourism and business, giving charity, sponsoring cultural exchange, lobbying for strong government ties (and sadly not always in the most honorable way such as providing funding for the IRA) - for their ancestral homeland. Three generations of Irish-Americans have lived by the credo "be thankful and loyal to America for the advantages it has given us but to never forget from whence we came." It has to be said that seeing such virulent anti-Americanism in the Irish media brings feelings of betrayal and a sad pain. This pain is exacerbated by the cruel irony that Ireland achieved its economic miracle by virtue of economic policies that are far more American than Continental. Still it seems remarkably incongruent with the long standing ties between Ireland and America and just plain damned against the Irish nature. I can only hope this is just a case of the media, much like in the US, being dominated by a small subset of arrogant, elitists who are chronically out of touch with the broader attitudes and views of society.

Europe Has a Russian Problem

Vlad Putin has assembled (kind word, stolen and horded is more like it) Russia's oil and natural gas assets into a state-owned monopoly called Gazprom, so that he can nuture Western Europe's dependence on him as its energy supplier. This was helped along when Gerhard Schroeder's government passed the phase out of nuclear power generation (Germany has something like 19 nuclear power plants, and I don't recall reading of a German "Chernobyl" in the news in the last 30 years) for which Schroeder was given a lucrative do nothing job on a board somewhere within Gazprom's vast complex.

We have already seen that Putin will attempt to blackmail other countries where things don't seem to be going his way. Putin strategy is working too, and will work as long as Europeans go along and as long as the gas keeps flowing. And it WILL flow, even if that means creating shortages for Russians and the Russian economy. Essentially what Putin is doing here is restricting the freedom of the Russian domestic economy that could and should grow and provide an increasing standard of living for Russians in order to pursue the expansion of Russian political influence. The prosperity of actual Russians takes a back seat to his vision of reclaiming Russian dominance over the former Eastern Bloc.

In a sense Putin is, or strives to be, indistinguishable from Khushchev, Chernenko, Andropov and all the rest. It is obvious that he is no friend of democracy or of capitalism. Unfortunately he may turn out to be no friend of peace.

Religion of Brotherly Love?

After a 30-24 overtime loss to the Giants yesterday in Philadelphia, enraged Muslim Eagles fans called for the beheading of Eli Manning...

Lowry on Michigan

The MSM is right, not everyone is benefiting from the economic recovery. You heard it here before. The rank political tone of Lowry's article is merely a proxy for the statist and protectionist idealogy that drove Michigan's failure versus the open, free market idealogy which flourishes outside of Michigan.

Please SuperHank, Help Us!

Man, I really hate to be prophetic...not two days ago I say:

"The number one risk to the current economic expansion is bad policy. Not oil, not housing, not that MSM hobgoblin known as the trade deficit. The big thing that will screw up the health of the economy and our steadily increasing standard of living is a boneheaded, interventionist move by our politicians. It is great to have a man of Paulson's stature actively preempting such a development."

Then I read this:

"Two Democratic senators, Byron Dorgan of North Dakota and Russ Feingold of Wisconsin, have proposed that any company wishing to import goods into America would need a government-issued certificate. The senators, according to this New York Times article (link requires subscription), view this as a “market-based system to cut the trade deficit to zero within 10 years.”

Quick. Light the beacon. Sound the siren. We need SuperHank.

Team Pelosi Votes Its Disdain for You and Me

The earmark reform bill that passed the Lower Chamber of the Great Sausage Factory was only about the transparency of government spending decisions. It had nothing to do whatsoever with the merits or demerits of a particular spending proposal. It pertained not one iota to the best way to provide healthcare or reduce pollution or increase the number of jobs or any other policy goal. It was simply about letting citizens know what their elected representatives are doing. It was as close to a referendum on open government as we're gonna get. 89% of Republicans voted for open government (and 100% of avowed socialists!), 77% of Democrats voted for closed government. Policy differences aside, this was a shameful display on the part of Team Pelosi. The Upper Chamber of the GSF passed a similar bill unanimously (kudos to both sides). It is also the first time in a long time that the Senate has outshone the House in the integrity department.

Wait a Chardonnay-Grape Pickin' Minute...

France actively opposed the war in Iraq. France is helping Lebanon have peace. It's as if appeasement doesn't work or something.

Sell...and Run and Hide Too

Senior Airbus executives must be so thrilled that they are now 5% owned by the Russians. I think it is fair to say that Russian ownership is a sell signal. Michael Turner is no dummy.

Background here and here.

Snow Vs. Paulson

Here are some further, albeit MSM, thoughts on former Treasury Secretary Snow versus current Treasury Secretary Paulson.

Uncanny Resemblance

Did someone say that the US economy is like the Yankees?

Recent developments supporting this brilliant analogy: falling gas prices are akin to Hideki Matsui's return to the lineup.

How to Make the Terrorism Supply Curve Vertical...and Move It Left

Wow, I am on a roll. I was talking income inequality here just before the topic had a brief mini-boomlet.

Now Greg Mankiw is noting some economics work on the relative value of human capital applied to the activity of terrorism. Where have I heard this before? Let's expand the theme a little. Given this continuum of productivity we can infer that the incidence, or supply, of large scale terrorism such as 9/11 is relatively inelastic, in that only skilled and seasoned terrorist with broad experience in navigating various international law enforcement and administrative barriers can perpetrate something on the order of 9/11 and that it takes time for such terrorists to achieve this level of capability. So it takes time to actually supply large scale terrorism, even though the value of it (to a terrorist) might be calling for it immediately. Elevating those barriers through a series of actions that tighten and enlarge the enforcement and administrative superstructure, colloquially known as the "war on terror," can only increase the inelasticity of supply of large scale terrorism (make the supply curve of grand-scale terrorism more vertical). Furthermore, by targeting the senior leadership and most highly trained terrorists, we shift that nicely vertical curve to the left - as the most productive terrorist elements cease to operate the overall level of terrorism supplied must fall.

The conclusion that this analysis should lead us to, and that I and others have stated, is this: low productivity terrorists should be of low concern to us. Some 19 year old illiterate thug from Jeddah making his way to Iraq to fight means little to us and his presence should not enter into our planning all that much. The killing or capture of high level terrorists should constitute the bulk of our resources. (Naturally this seems obvious, but that is why we have the 'science' of economics, to convey the obvious in a way that conveys some notion of analytical rigor.) The recent revelations about our capture and interrogation of leading al Qaeda figures can only be viewed as a positive reflection on the way we have approached terrorism. The most logical response from Congress would be to implement laws and procedures that further enable this sort of activity. sadly this doesn't seem to be the case. If I was a staunch opponent of the Iraq war and was looking to 'support the troops by bringing them home' I would advocate wider latitude for terrorist surveillance. More wire-tapping and SWIFT monitoring would surely reduce the need to be chasing low level terrorists around the deserts of Iraq. Sadly, that doesn't seem to be the case either.

The Consumer is Tapped Out...No, for REAL This Time

Just as gas prices are falling, providing a more positive outlook for consumer spending in the upcoming all-important shopping season, Bloomberg is still pimping the gas price wrecks the economy meme. In what is an atrociously bad article titled "Credit Card Users, Hurt at Pump, May Sap Retail Sales", Bloomberg introduces you to Sandra Cuevas, a Queens, NY woman who has racked up $25,000 in credit card debt. In a display of either enormously disingenous journalism or sheer stupidity, the reporter, Andrea Cheng, links energy prices with this woman's woes. There is no earthly possibility that Ms. Cuevas from Queens could have racked up $25,000 in credit card debt due to the high gas prices we have experienced for the last six to twelve months. Only Ms. Cuevas's sad profligacy could have achieved that feat.

Cheng does admit that gas prices are falling, but notes that they are higher than 2004. Yes, but so what? That was two years ago, all that anybody is concerned about is comparisons with last year. The article then goes on to make some mildly acceptable assertions that credit card balances have increased and that it presents a risk to the consumer outlook (despite the fact that carried credit card balances have been on an upward trend for many years as more and more of what we buy everyday is now able to be bought via credit card). Finally, after presenting us with dueling analysts and after inserting the de rigeur worn out and heretofore inaccurate phrase "the consumer is tapped out", we get this stunner - Sandra Cuevas has paid off all of her credit card debt! Apparently times have been so bad, wot with gas prices and all, that Ms. Cuevas found the money to expunge her debts. What's more, it would seem then that this Queens shopaholic has dry powder going into the holiday season. Hmmm. Might be time to buy retail stocks.

Paulson Makes Important Stand on Free Trade

Here what I said about the nomination of Henry Paulson as Treasury Secretary (full post):

"[Bush] need[s] a genuine policy stud to keep the economy on solid footing as long as possible. That means, principally, debunking and demolishing the numerous bad policy ideas that are fomenting around DC these days from windfall profits taxes to price gouging legislation to trade protectionism."

I had in mind the disastrously protectionist tariff proposals that Sausage Factory goofballs Schumer (NY) and Graham (SC) have been threatening.

Well, this is from the WSJ front page today:

"In an interview ahead of a speech today and a trip to China next week, Mr. Paulson observed that to those who fear competition China has become "a symbol of a threat posed by globalization." But, he said, "if China doesn't do well, that hurts us rather than helping us."

and this:

"Both in China and in the United States we must not allow ourselves to be captured by harmful political rhetoric or those who engage in demagoguery," Mr. Paulson plans to say in today's speech. "Instead we must realize that the U.S.-Chinese relationship is truly generational and demands a long-term strategic economic engagement."

This is great to see. The number one risk to the current economic expansion is bad policy. Not oil, not housing, not that MSM hobgoblin known as the trade deficit. The big thing that will screw up the health of the economy and our steadily increasing standard of living is a boneheaded, interventionist move by our politicians. It is great to have a man of Paulson's stature actively preempting such a development.

RHC Peppers Ain't Torture, Jefferson Airplane Maybe

I have long suspected it to be the case, but if this is true, it turns out the the interrogation techniques used on captured terrorists that the media and the assorted other weenies have been moaning about are essentially identical to your typical college fraternity initiation ritual (or at least one fraternity initiation ritual with which I am familiar). No reports on whether Abu Zubaydah was forced to wear a maxipad on his head too.

Best News of the Day

Apparently a leading group of math educators has released a new report that supports traditional approaches to teaching math at the expense of some of the newer, um, more novel approaches. Wow. Learn the actual fundamentals. Shocking.

I don't know enough to say whether this is a decisive win in the 'math wars,' but it sure seems like fantastic news. The 21st century will belong to the nations that lead in math education. Feminist film criticism majors will not give us this century's equivalents of the jet engine, the Internet or the Bessemer process.

Booker Is Now Officially in the Lion's Den

Cory Booker, Newark, NJ's new mayor, who has been a symbol of a new politics in the inner city, has picked his first big fight with the entrenched machine. Newark has a severe budget deficit and Booker is taking an approach that is about as boringly sensible as you can get - raise revenue and cut costs. (Ignore supply-side dynamic effects for this analysis and assume that raising taxes will raise revenues on a linear basis.) Naturally, the government worker unions will have none of this, at least the cost cutting part of it, and so it begins. We'll see how Booker handles this.

Updating Boeing vs. Airbus

Some interesting stuff happening if you are a commercial aviation buff and follow the best business rivalry bar none.

First, Russia has indeed taken a 5% stake in Airbus, which, as I stated here, is likely a negative, not because Russia doesn't have world class engineering, but because this is simply about the Russian government getting in on the political patronage and power-broking that European governments use Airbus for.

Second, Bloomberg is reporting that Aeroflot may split an upcoming order for 44 planes between Airbus and Boeing. It may be that they have needs for the two planes, but it is also likely that this is a gambit to accelerate Russian influence into Airbus. They've just bought a big stake and now the Russians are going to buy Boeing planes (maybe Dick Cheney could attend the order announcement)? I'm skeptical. I think they are faking an interest in Boeing to gain more concessions and, paired with their new shareholding stake, generate maximum momentum behind their desire to integrate Russian influence into the Airbus system.

New Tactic for Steeling American Resolve

In all of the commentary generated by the occasion of the fifth anniversary of 9/11, one tidbit in particular stuck out, not because it is the most weighty concern but because it has long been, at least to me, the biggest head-scratcher. Who else but Mark Steyn to nail it (scroll down):

"In theory, if you’d wanted to construct an enemy least likely to appeal to the progressive Left, wife-beating gay-bashing theocrats would surely be it. But Islamism turned out to be the ne plus ultra of multiculti diversity-celebration — for what more demonstrates the boundlessness of one’s “tolerance” than by tolerating the intolerant."

Yes, truly puzzling. Well OK, not really. So let's steal a beat from certain quarters and advocate adaptation of tactics to match the opposition's methods and approach. GWOT hawks should henceforth pitch for national resolve in this struggle by pointing out that Islamic radicals seek to restrict a woman's right to choose, ban stem cell research, and do away with labor and environmental standards. Couched in that manner, we might start hearing cries of "nuke 'em all" from the leftosphere.

Good Government Is Here At Last !

The government has just declared that it will henceforth prohibit sleeping on the job. Just think of all the good that our government can accomplish now that its workers must be awake at all times.

Big Blue Means Big Green for NBC

Sanford C. Bernstein & Co. analyst Craig Moffett crunches some numbers and looks at the value of each NFL game for various broadcasters. In addition to the Manning Bowl, two big money games are Giants vs. Bears in week 10 and week 17's Giants vs. Skins, which Moffett says is a $210 million game. Maybe it is a buy signal on GE after all.

Football and capitalism. Beautiful.

Too Long in Coming

Excellent. Now let's get BUILDING!!

You Can't Win At Chess With All Pawns

It was nice to see Paul at Powerline make the same point I made in this post about the notion that we "are creating more terrorists." In a typically fine post today he says:

"But the real issue for purposes of assessing our safety is not the number of terrorists world-wide but their capacity to inflict harm on Americans."

Exactly. If I could eliminate a seasoned terrorist trained in advanced weaponry and replace him with an inept boob who couldn't operate a toaster oven (or two or five or ten), I would make that trade all day. Destroying terrorist capital, both physical and human, can only be viewed as progress. It bewilders me that this logic gets so little respect in the debate over the GWOT and takes a back seat to winning the idealogical battle. I agree that we have to focus on that too, we have to provide Muslim societies an alternative vision, but don't short change the demoralizing effects of success against capabilities. We can't give short shrift to the fact that people generally don't desire to join a team that consistently loses and is constantly deprived of resources. Making terrorism a futile business will keep its ranks restrained while we fight their idealogy with a competing idealogy.

French Economic Vitality is Inverse to French Verbosity

If you want to know why the French economy is a hobbling, crippled mess and why promising young French men and women have to flee to the US, England or elsewhere to make best use of their talents, look no further than this mind-numbing factoid. What is it with French ponderous verbosity? First that monster of a constitution for the EU and now this. The French need the equivalent of my seventh grade English teacher, who would cut down on classroom verbosity with an admonishing "fifty words or less" when calling on you, governing their national affairs.

The Manning Bowl Effect on the Bottom Line

OK, maybe it is not quite a "buy" signal for GE, but NBC has alot riding on Sunday Night Football, and the Manning Bowl augurs well.

"This Sunday night, NBC has arguably the most marquee regular season game of the year: the Indianapolis Colts versus the New York Giants (Go Big Blue!). That game pits the Colts' star quarterback Peyton Manning against his little brother, Giants' quarterback Eli Manning."

Then there is this:

"And later in the season, NBC will have the option of cherry-picking marquee games from Sunday afternoons and moving them to Sunday nights. That's a huge plus for NBC since it means fans won't be forced to watch games featuring a great team against a complete patsy or two mediocre teams playing each other like they did in seasons past."

Hmm. Maybe NBC should promote "Rematch: Bush vs. Gore" on Dec. 3rd? Smart marketing if you ask me.

Hungary for Sustainable Energy?

The government of Hungary is finding that sustaining sustainable energy is unsustainable.

The Big Human Resources News of the Day

Katie Couric? Big yawn. The big news yesterday in terms of pivotal personnel changes was the appointment of Alan Mulally as the new CEO of the Ford Motor Company. Mulally did a fantastic job restoring the success and prestige of an American icon, Boeing's commercial aviation division, while all sorts of turmoil and intrigue was swirling around the parent company. He rightly deserves to be top dog at a major, important American company and clearly Ford needs reinvigoration. It's a perfect match. I've bought a little Ford for the ole' retirement kitty, now get to work Mr. Mulally!

And Kudos to Bill Ford for finally realizing that he doesn't have the chops, albeit about two years too late.

1980s Nostalgia Item: Defecting Russian Athletes

I thought Russia was free and, y'a know, like a democracy. So why did this guy have to "slip away" ala some defecting Olympic athlete circa 1980?

No Blood for Sugarcane!

I encourage my fellow citizens to DEFUND THE WAR!!

Economics, Psychology, What's the Difference?

The self back-patting felt so good, why not go for a little extra...

Here is what I said about income inequality:
"Aside from the fact that income inequality is perfectly consonant with the founding ideals and longstanding cultural heritage of the US, it is only the most outlandish economic theories that purport income inequality to be damaging to society."

Witness the argument that has caused this latest hoopla. Got that? Rich people make poor people feel bad. They might dress this up in the fancy teminology of academic economics, calling this 'feeling bad' a "negative externality", but this is mumbo-jumbo, mystical voodoo conjuring of the most ridiculous kind. Outlandish indeed. This is about as desparate and grasping as the one where capitalism is bad because we have too many types of mustard to choose from.

Julian Simon's Ghost Haunting Peak Oil

Peak Oilers love to say that "there just aren't any big finds left out there." The logical conclusion then is that oil production will decline. Well, you can't produce oil if you don't look for oil. Exploration has been declining for decades, so why should we not expect declining production? If we actually looked for oil and did so aggressively on a sustained basis, we wouldn't be facing declining production. Technology plays a huge role. The state of the art allows us to look only so many places and only so deep into the earth. Peak Oilers may have a point about our steady state existence, akin to saying we are pedaling as fast as we can on the bicycle. But what if somebody invents a motorcycle? The critical flaw in the Peak Oil theory is that it doesn't account for getting off the bicycle and mounting the motorcycle. As the state of the art in exploration and extraction technology advances, we can drill in more places and look deeper into the earth. If we've previously been constrained at, say, 8000 feet, who's to say what moving that constraint to 20,000 feet will yield us? Maybe nothing or maybe previously unimaginable availability of resource. Very likely it will be somewhere in between.

Well, today comes news about that motorcycle and what it may mean for us. Chevron, Statoil, and Devon have tapped what looks like a monster reservoir at an astounding depth. The implications are enormous, and I'll leave it at that, but suffice to say that the Peak Oil theory has two strikes and human ingenuity seems to still be throwing 95 mph heaters.

A Little Self Back-Patting

Talk of income inequality is busting out all over the economics blogosphere (see here, here and here for example). Loyal readers of "Now Batting for Pedro Borbon..." (all nine of you) would have been well-prepared for this outbreak given this, this and this.