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Honest Abe: Now here's a man who inherited some problems!

 

"Debate over the Uniform Monday Holiday Bill in 1968 touched on the fear that George Washington would be forgotten in the schoolrooms and future generations would not know about the Father of Our Country," notes a National Archives history of the commercially-driven transmogrification of Washington's and Lincoln's birthdays into the generic, one-size-fits-all Presidents' or Presidents Day celebrated here last [see how nebulous it is?] next Monday. "With the traditional ten-day buffer between Lincoln's February 12 and Washington's February 22 birthdays eliminated, the erosion of America's memory began." (Koons Baltimore Ford President’s [sic] Day New Car TV Commercial)

"Now here's a man who inherited some problems! As opposed to Obama, who is causing the problems!" quips Looking4Sanity in the roused and rousing comments of Publius's "Friday Free-For-All: Lincoln Edition" at Big Government in celebration of Abraham Lincoln's 201st birthday. Our two cents' worth:

And now what we youngsters of the fifties and sixties used to celebrate as Lincoln's Birthday is just another day in the life of schoolchildren with no sense of where they come from, no understanding of the exceptionalism of the Shining City Upon a Hill they were lucky enough to be born to.

Presidents' Day: Blagh ... Clueless North Carolina education "leaders" proposing to revamp the state's 11th-grade curriculum by skipping the Revolution and Civil War and covering U.S. history "only from 1877 onward."

As the late Librarian of Congress Daniel Boorstin put it: Trying to plan for the future without a sense of the past is like trying to plant cut flowers.

The comments are coming in fast and furious, a seer's cup of tea leaves to divine what's in the hearts and minds of Tea Party Nation.

"The women now went willingly into the field," revisited

"The daily news is like the wind-whipped whitecaps on the ocean, a lot of violent froth on the surface, dangerous to surfers and small craft, but having nothing to do with the larger movement of the sea," we quoted Baron Bodissey at Gates of Vienna in our post "A lot of violent froth on the surface" last year, where we used the above image of a reproduction of the Mayflower at sea from The History Channel's "Desperate Crossing: The Untold Story of the Mayflower.

Editorial Note: This post — first published on August 15, 2007 — on the role of Adam Smith's "invisible hand" in shaping the American character — is timelier than ever today. Cross-posted at Annie Gottlieb's Cloven Not Crested.

"I thought that this passage reflected an early-American lesson that most people in the world did not learn until late in the 20th century," writes TigerHawk of the "tragedy of the commons" experience that taught the Pilgrims -- literally on the ground -- how Adam Smith's "invisible hand" works. We're not sure that "most people" -- yes you, Hillary -- have learned that lesson to this day, but before we get to that, here's the bottom line, from the book TH is currently reading, Nathaniel Philbrick's Mayflower: A Story of Courage, Community, and War:

The fall of 1623 marked the end of Plymouth's debilitating food shortages. For the last two planting seasons, the Pilgrims had grown crops communally -- the approach first used at Jamestown and other English settlements. But as the disastrous harvest of the previous fall had shown, something drastic needed to be done to increase the annual yield.

"In April, Bradford had decided that each household should be assigned its own plot to cultivate, with the understanding that each family kept whatever it grew. The change in attitude was stunning. Families were now willing to work much harder than they had ever worked before. In previous years, the men had tended the fields while the women tended the children at home. "The women now went willingly into the field," Bradford wrote, "and took their little ones with them to set corn." The Pilgrims had stumbled on the power of capitalism. Although the fortunes of the colony still teetered precariously in the years ahead, the inhabitants never again starved.

"Is it possible that collectivism never caught on here because early American utopians such as the Pilgrims tried it and learned that it did not work?" asks the Hawkman. One can only hope, but certain members of every generation seem immune to the Pilgrims' lesson. Besides, "there is something very American about the utopian movement," as Michael Kavanagh wrote re a Beinecke Library exhibition, "No Place on Earth," which "takes as its subject the American utopian dream, as expressed by the Shakers as well as some twenty other groups across four centuries:

The New World was the land of the frontier, that clean, clear space beyond which one could remake oneself into a better human being. America itself can be seen as the biggest utopian experiment of all -- embodied in the credo of the Land of Opportunity is the promise that it is always possible to reinvent one's relationship to society, work and nature.

Attempts to "reinvent one's relationship to society, work and nature" are fine as long as the reinventors don't deny the economic logic of nature and human nature and try to impose their "vision" of "the greater good" on the rest of us. That's why "progressive" governmental interventions — like the "'universal' health-care dreams in Illinois, Wisconsin, Pennsylvania and other states [see 'Arnold's Health Flop' in today's WSJ] that were unveiled to hosannas but flopped once the fine print and costs were exposed" — are best left to the states, where well-meaning if clueless Utopianators can test their fantasies on a smaller scale. As for Hillary, the Mother of all Utopianators, The Barrister at Maggie's Farm explains:

Socialism advances via invented crises to alarm the people, or to seduce the people, into foregoing the markets for goods and services.

It is a deceptive strategy designed to prey on the worst, most infantile instincts of Americans . . . Hillary goes Shrillary over socialized medicine: Gateway [be sure to click over to watch and listen in horror as the junior Senator from New York doth protest too much that her plans for a national one-payer system have nothing to do with socialism].

I have no doubt that Hillary is a socialist, whether she admits it to herself or not. Anyone who wants the State to take over the medical businesses, which are 16% of our economy, and the oil industry, which is ? % of our economy, has a good start on taking over all of it.

As we said in TigerHawk's comments:

The lesson about human nature learned in the school of hard knocks by the Pilgrims -- "It takes incentives" -- has been lost on Hillary & Company, whose "It takes a village" collectivism would destroy this shining city upon a hill from within.

Is the electorate teachable? Get Prof. Thomas Sowell on the phone.

Update: "Women like to do for their families. So do men," comments Bird Dog at Maggie's in a Monday-morning linkathon.

It's the incentives, stupid

Did you say something about bailing out fat cats? Is there food involved? Baby Cakes stares down from atop the kitchen cabinets this afternoon in the afterglow of a crazy-hour episode that saw him galloping down the back stairs, banking with spinning wheels around the corner into the kitchen and then leaping from floor to counter to cabinets in the twinkling of an eye.

"I saw you on C-Span this morning, keeping your head while all around you -- Nancy Pelosi and Barney Frank the first among equals -- were losing theirs," we emailed Minnesota Congresswoman Michele Bachmann, a member of the Financial Services Committee, this morning. Her bio — working mother of five, first Republican woman to be elected to the US House of Representatives from Minnesota, "reputation as a 'principled reformer' who stays true to her conservative beliefs," induces incoherence in leftist elitists — is reminiscent of Sarah Palin's. She voted "no" on the bailout yesterday, and she calls a toad a toad at her TownHall.com blog, citing Investor's Business Daily's "'Crony' Capitalism Is Root Cause of Fannie and Freddie Troubles":

"In the past couple of weeks, as the financial crisis has intensified, a new talking point has emerged from the Democrats in Congress: This is all a "crisis of capitalism," in socialist financier George Soros' phrase, and a failure to regulate our markets sufficiently."

Incentives are all. Reward bad behavior, and you get more bad behavior. It depends upon what your definition of bad behavior is, of course. One man's (Tuck's) delight at Baby'e "Mr. Paw" begging for treats off his dinnerplate is another man's shock at poor table manners.

The true believers — those "Honest Leadership and Open Government" Democrats we blogged about yesterday and their fellow travelers in the media — are predictably projecting responsibility for the unintended consequences of their own bad behavior onto "the private sector" (Barney Frank) and, of course "the Bush Administration’s failed economic policies" (Nancy Pelosi). As Jonah Goldberg writes in "No one's clean in this mess":

Frank, chairman of the House Financial Services Committee, has spent the last few years ridiculing Alan Greenspan, John McCain and others who sought more regulation for Fannie Mae's market-distorting schemes — the fons et origo (source and origin) of this financial crisis. Now he says "the private sector got us into this mess." His partner in crime, Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.), a chief beneficiary of Fannie Mae lobbyists' largesse, claims this mess is the result of poor oversight — without even hinting at the fact he is in charge of oversight of banks. They sound like pimps complaining about the prevalence of STDs among prostitutes.

And let us not forget that the Democrats, with a 31-seat majority, could not get 95 of their own to vote for the bailout, largely because it didn't provide enough taxpayer money to their left-wing special interests. Would that they thought about the country.

The one man who truly tried to treat this crisis like a crisis — McCain — was ridiculed by Senate Majority Leader Harry Reid, who implored him to come to Washington to help in the first place. And the news media, which now treat any Republican action that threatens a Barack Obama victory as inherently dishonorable, uncritically accepted the bald Democratic lie that McCain ruined a bipartisan bailout deal last Friday.

What does go on in that black hole we call the "progressive" mind? We got a glimpse from a confessional offering by Ariannna Huffington, who's convinced following her conversion that only more government can save us:

Ronald Reagan, in his first inaugural address, famously declared that "government is not the solution to our problem; government is the problem."

Twenty-seven years later, in the midst of the worst economic crisis since the Great Depression, and seven-plus years into the reign of Bush and Cheney, Reagan's anti-government battle cry should be on trial. But, stunningly, it is not …

The shift in my own thinking on the role of government was what led to my disillusionment with the Republican Party and the transformation in my political views. I've always been progressive on social issues: pro-choice, pro-gun control, pro-gay rights — even when I was a Republican. The big difference is that I once believed the private sector would address America's social problems. But the hope that people would roll up their sleeves and solve this country's social ills without the help of government was never fully realized. There were never enough volunteers or donations — and the problems were just too massive and intractable to tackle without the raw power of appropriations that only government can provide.

A fiscal conservative/social liberal mind is a terrible thing to lose.

Being a member of the red-in-tooth-and-claw community, the Babe has been intimately familiar with the economic logic of nature and feline nature from day one.

Unlike Huffington's later-in-life loss of common sense, the political conversion regarding fiscal philosophy usually goes in the other direction, as playwright David "Why I am No Longer a 'Brain-Dead Liberal'" Mamet and our good friend and fellow Pajamas Media Network blogger  Neo "A mind is a difficult thing to change" Neocon — among other thoughtful former liberals mugged by reality — can attest. As we've blogged here early and often, "The leftist utopian dream was doomed from the start because it denied the economic logic of nature and human nature." It's the incentives, stupid (yes, you, Arianna). Speaking of incentives, we loved Dale Franks's take on the story of the hour [via Fausta]:

So we’re in the middle of this crisis because the Government of the United States created the incentives that caused it.

And with all this current talk of making the bad actors pay for their sins, you’ll notice that no one is talking about changing the government’s policies that caused this. It’s never the government’s fault, apparently. They only create the incentives. And hold a gun to the banks head to comply with them. But they don’t actually, you know, sign the mortgage papers, so they’re in the clear. They can just point at the bankers and say, “It’s the greedy capitalists, man!”

To bail out or not to bail out? Harvard Libertarian Jeffrey A. Miron, one of 166 academic economists who signed a letter to congressional leaders last week opposing the government bailout plan, just says no:

The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.

The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.

… Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.

… Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.

Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.

Even as "Congressional leaders, with advice from their parties' presidential nominees, scrambled" today to salvage the bailout bill, bloggers are having serious second thoughts. The Anchoress, in one of her classic comprehensive, link-rich tour de force superposts that covers all the bases, may be onto something:

The market is calming down all by itself, without congress passing a dubious bill. What will it mean for congress if — before they can pass the thing — we see the beginnings of a turnaround? What will it mean for the candidates?

To paraphrase Mark Steyn: when this many people I don’t trust are telling me something must be done for my own good … I don’t want it. I want to be far away from it.

Hillary's execrable "We're going to take things away from you on behalf of the common good" comes to mind.

Update: Fausta links.

So much disinformation, so little time

"But I think it's fair to say that the scandals that we've seen, both legal and illegal, under the current White House and Congress, are far worse than most of us could have imagined," Barack Obama told fellow Democrats with a straight face last winter at a gathering designed "to shine a spotlight on the Republican culture of corruption and highlight efforts to clean up Washington and get back to the people’s business." (Photo unattributed)

“This bill does not represent a new and sudden departure from free market principles as much as it represents an emergency response to congressional actions that have ignored free market principles, and our Constitution, for decades," says Senator Tom Coburn (R-OK) in a statement released today [via Ed Morrissey]:

If anyone in Washington should offer their resignation it should be the members of Congress who peddled the fantasy of free home ownership without risk. No institution in our country is more responsible for the myth of borrowing without consequences than the United States Congress.

As much as members of Congress want to find scapegoats, the root of this problem is political greed in Congress. Members of Congress from both parties wanted short-term political credit for promoting home ownership even though they were putting our entire economy at risk by encouraging people to buy homes they couldn’t afford. Then, instead of conducting thorough oversight and correcting obvious problems with unstable entities like Fannie Mae and Freddie Mac, members of Congress chose to ignore the problem and distract themselves with unprecedented amounts of pork-barrel spending.

Roger Kimball explains "Who caused 'the biggest financial crisis since the Great Depression'” in a must-read Q&A pullout of key data points from this video that names names, including the blusterous House Financial Services Committee Chairman Barney Frank, who protests "The private sector got us into this mess. The government has to get us out of it," even as Jeff Jacoby observes "Frank's fingerprints are all over the financial fiasco":

As the Massachusetts Democrat has explained it in recent days, the current financial crisis is the spawn of the free market run amok, with the political class guilty only of failing to rein the capitalists in. The Wall Street meltdown was caused by "bad decisions that were made by people in the private sector," Frank said; the country is in dire straits today "thanks to a conservative philosophy that says the market knows best." And that philosophy goes "back to Ronald Reagan, when at his inauguration he said, 'Government is not the answer to our problems; government is the problem.'"

There you go again, Mr. Frank. Meanwhile, the unspeakable Speaker of the House seemingly sabotaged her own efforts to lock up enough bipartisan votes to pass the $700 billion bailout bill, angering potential Republican allies with a boilerplate pre-vote finger of blame pointed squarely at "the Bush Administration’s failed economic policies — policies built on budgetary recklessness, on an anything-goes mentality, with no regulation, no supervision, and no discipline in the system." But the most egregious revelations of recent days concern the trajectory of Barack Obama's early career as an Alinsky-inspired community organizer, as James Simpson at The American Thinker explains in his eye-opening "Barack Obama and the Strategy of Manufactured Crisis" [via The Anchoress]:

When seen together, the influences on Obama's life comprise a who's who of the radical leftist movement, and it becomes painfully apparent that not only is Obama a willing participant in that movement, he has spent most of his adult life deeply immersed in it.

But even this doesn't fully describe the extreme nature of this candidate. He can be tied directly to a malevolent overarching strategy that has motivated many, if not all, of the most destructive radical leftist organizations in the United States since the 1960s …

This method not only has its proponents, it has a name: the Cloward-Piven Strategy … David Horowitz summarizes it as: "The strategy of forcing political change through orchestrated crisis. [It} seeks to hasten the fall of capitalism by overloading the government bureaucracy with a flood of impossible demands, thus pushing society into crisis and economic collapse.

"Cloward and Piven held that poor people can only advance when society is afraid of them," writes James H. Walsh at Newsmax:

By advocating massive, no-holds-barred voter registration campaigns, they sought a Democratic administration in Washington, D.C. that would re-distribute the nation’s wealth and lead to a totalitarian socialist state. Their strategy to create political, financial, and social chaos that would result in revolution blended [Chicago radical activist Saul] Alinsky concepts with their more aggressive efforts at bringing about a change in U.S. government.

… how many voters know that Obama, during his four-year tenure in Chicago as a community organizer, worked as a trainer for the Association of Community Organizations for Reform Now — the infamous ACORN, whose affiliate, Project Vote, is known for voter fraud — the same ACORN from which a mighty mortgage mess has grown.

Was this year's sub-prime mortgage meltdown ACORN's insidious project all along? And what about what Victor Davis Hanson describes as Obama's "Strategy of Preemption," including threats "to go to the courts after the NRA ads, to swarm Milt Rosenberg’s radio station in Chicago to badger guest Stanley Kurtz, or to unleash Missouri law-enforcement on McCain’s campaign ads?" Are these efforts the fruits of Obama's schooling in the intimidation tactics of community organization? So much disinformation, so little time. It's downright Gramscian.

Just stumbled upon from Newsmax: "Former Republican Sens. John Danforth of Missouri and Warren Rudman of New Hampshire are running the McCain-Palin 2008 Honest and Open Election Committee":

Both Rudman and Danforth voiced concern that there is or may be a pattern of registering people who are not entitled to vote, noting that of particular concern is an organization called The Association of Community Organizations for Reform Now (ACORN).

“We are concerned that ACORN has been connected with Senator [Barack] Obama and that he has ties to it,” said Danforth.

Danforth tells a doubting Colmes of Hannity & Colmes on Fox News this evening that his committee isn't accusing Obama of any wrongdoing and in fact hopes to reach out to members of both parties in a spirit of cooperation. Good luck.

Update: Dr. Sanity reaches out to the inmates of the asylum in the latest Carnival of the Insanities.

"Were it not for McCain's gambit . . ."

In Harvard's Sanders Theater this afternoon, bottles of Poland Spring water, microphones and name cards await an all-star panel of "some of the nation's leading scholars and practitioners in finance, policy, law and other fields relevant to the current situation." It's virtually open to the public. Starts at 4 p.m. Details below.

"I invite you to join us Thursday, September 25, for a live webcast of a special panel discussion entitled 'Understanding the Crisis in the Markets: A Panel of Harvard Experts,'" Harvard President Drew G. Faust emailed "alumni and friends" this afternoon:

We are fortunate to have on campus some of the nation's leading scholars and practitioners in finance, policy, law and other fields relevant to the current situation, and several of them have generously agreed to participate in a special session for the Harvard community to help us understand and interpret recent developments in the U.S. and world markets.

The panel will begin at 4:00 p.m. EST and will include the following faculty members:

Robert Kaplan, Professor of Management Practice
Jay Light, Dwight P. Robinson, Jr. Professor of Business Administration and Dean of the Faculty of Business Administration
Gregory Mankiw, Robert M. Beren Professor of Economics
Robert Merton, John and Natty McArthur University Professor
Kenneth Rogoff, Thomas D. Cabot Professor of Public Policy
Elizabeth Warren, Leo Gottlieb Professor of Law (To Be Confirmed)

I hope that you will take advantage of this opportunity to hear from some of Harvard's leading experts by visiting this link. The webcast will not be password-protected and will be recorded and made available for future viewing. Real Player is required.

Since we aren't a fly on the wall of that 4 o'clock White House meeting of the Leader of the Free World with "old Navy pilot John "OODA Loop" McCain, former community organizer Barack Obama and other members of Congress this afternoon, this will have to do for now.

This just in on Fox: "Stocks jump on word of possible bailout compromise." Sheperd Smith guessed they're "reacting to the belief that this deal is about to be done." Reporter Carl Cameron, on the trail with McCain says "Were it not for McCain's gambit yesterday, it wouldn't have reached the point it has." It looks like the Friday debate is on!

Update via Drudge (Associated Press 02:58 p.m.): "Lawmakers: Financial bailout agreement reached.

Update II: In the flesh, the webcast is technically useless. It keeps signing off. Maybe we can catch it later on C-Span? But all is not lost, by any means. On Fox we are being treated to the Divine Ms. W, Rep Maxine Waters (D CA), shouting at Neil Cavuto.

"Either he doesn't know what he's talking about or he's misrepresenting the facts"

Unconcerned with what talking heads are calling "the mess we're in," GOP (grand old pussycat) leader Baby Cakes shares the platform with the Republican base ("Ivory" elephant memento of our Kenyan Holiday last century).

"To paraphrase John Maynard Keynes, it is much easier for a man to fail conventionally than to stand against the crowd and speak the truth," writes the WSJs Jeremy J. Siegel, explaining how "bad risk management, and a failure to understand the high risks of an overheated real-estate market [are] the root cause of our current problems":

We can argue about who was responsible for the overleveraging of the financial industry and the poor-to-nonexistent credit standards that prevailed in real estate. Certainly the regulatory agencies, including the Federal Reserve, should have sounded a warning. But the lion's share of the blame must go to the heads of the financial firms that issued and held these flawed credit instruments and then, in many cases, "doubled down" by buying more when their price was falling.

It is shocking that firms that withstood the Great Depression are now failing in what economists might not even call a recession. But their failure was not caused by lack of demand for their services. It was caused by management's unwillingness to understand and face the risks of the investments they made. The names of the players will change, but the future growth of the financial services industry is assured.

But don't confuse John McCain or Barack Obama with the facts. They've got some people out there that need to be fooled all of the time.

Forget about Government bail outs. Just keep rubbing behind that ear.

And what to make of the Fed's $85 billion rescue last night of American International Group? Another one of those entities "too big to fail"? Don't ask us. We're with Fox fox Martha MacCallum, who tells viewers "I don't know exactly what to make of these developments, but I do expect the people who are running for president to know more than I do." No such luck. As we blogged last winter, Senator McCain revealed his "contempt for the business of America in a schoolboyish attempt to cut his better, Mitt Romney, down to size" with his supercilious "He bought and sold, and sometimes people lost their jobs." Mitt's doing his best to shore up McCain's econo creds, but it's an uphill battle. Moving on to Obama, we agree with fellow Pajamas Media Network Blogger Webutante, who asks rhetorically "Who and What are really to blame for the current banking and mortgage crisis? Candidate Obama hasn't got the faintest clue." Both candidates could learn something from her personal insight into what talking heads are now calling "the mess we're in" that, in her words, "all began in Washington back in the 90s":

Several years after [my father] retired as chairman [of a small-town bank that for 120 years had had "a reputation as good as gold" with a record of making good loans at about the rate of +90% or more], the Feds in the Clinton Administration came in and started dictating to this bank as well as banks across America: they had to start making a certain percentage of bad loans even if management knew the loans would never be repaid. In essence the bank was told to start a policy that in effect was the same as giving a portion of its money away. If my hometown bank failed to comply with this insane new banking policy, it would face stiff penalties from the Feds.

Then, the Feds came in and strongly urged another insane policy: my hometown bank and over 8,000 other banks across this nation were strongly urged to buy millions of dollars of Fannie Mae preferred stock.

I and my fellow stockholders in this small, conservatively run bank are going to eat the excesses of $5,000,000 of the Fannie Mae preferred. We'll do our part to take the hit from others' gross mismanagement far away in D.C. and in the investment banks that are falling.

To hear Nancy Pelosi tell it, of course, the who, me? Democrats' hands are clean:

Pelosi (D-Calif.) ripped President Bush's "mismanagement" of the economy and a lack of regulation that led to the current situation.

"I think the American people have had it with this situation where the middle-income people in our country are not protected from the ramifications of the risk-taking and the greed of these financial institutions," Pelosi told MSNBC.

When asked whether the Democrats "deserve some responsibility" regarding the economic crisis, Pelosi responded: "No."

"John McCain said that this is a result of overregulation by the Democrats in Congress," she added. "Either he doesn't know what he's talking about or he's misrepresenting the facts as he knows them. But it's simply not true."

Projecting again, Mrs. Pelosi?

Update: Looking for something that's REALLY too big to fail? Modulator's Friday Ark #209 is fully stocked with all things bright and beautiful.

"Without the advice of Congress or new regulation"

"Charles P. Kindleberger, an economic historian who advanced the study of international finance and helped to devise the Marshall Plan for Europe's reconstruction after World War II … was also known for investigating the role of mob psychology in financial manias and panics, dating back to the tulip crisis in Holland early in the 17th century." Image: Semper Augustus, "the most expensive tulip sold during the tulipomania" (Anonymous Dutch Artist, opaque watercolor on paper, Norton Simon Art Foundation)

"The banking system is reforming itself right before our eyes, without the advice of Congress or new regulation," write the WSJ editors. "Nor is this largely the fault of the Bush Administration, as Barack Obama claims, or of some lack of regulation, as John McCain asserts." What a relief to have someone who knows about these things explain what we knew in our bones, BDS notwithstanding:

The immediate priority is to calm markets and prevent a crash, and to do so it helps to recall how we got here. We are not living through some "crisis of capitalism," unless policy blunders make it so … These politically convenient riffs do nothing to reassure the public.

The current panic is the ugly aftermath of the credit mania that took flight in the middle years of this decade. As students of economic historian Charles Kindleberger know ("Panics, Manias, and Crashes"), financial manias throughout history have shared one trait: the excessive expansion of credit. This bubble was no different.

The Federal Reserve kept interest rates too low for too long, creating a subsidy for debt and a global commodity price spike. The excess liquidity and capital flows this spurred became the fuel for the wizards on Wall Street and in mortgage-finance who created new financial instruments that in turn fueled the housing bubble. As long as it lasted, nearly everyone inhaled the euphoria of rising asset prices and soaring profits. Normal risk assessment gave way to the excesses that always attend manias.

The petals of Semper Augustus were "broken" or variegated, later discovered to have been caused by a virus spread by aphids. "In 1637 the year of 'tulipomania,' it is recorded that a bulb sold for 10,000 florins, the price of a desirable house and gardens in central Amsterdam."

"Lehman's bankruptcy filing is another sign of progress," says the Journal:

The Treasury and Fed have signaled they can say no. While Lehman's failure has spooked markets, the lesson that a storied investment house can fail without a federal rescue is its own crash course in risk management.

"Amid this turmoil and uncertainty, the challenge for policy makers is twofold":

Protect the overall financial system from the fallout of individual bank failures, and protect the larger economy from recession caused by financial distress. They each require different policy levers …

Meanwhile, a new RTC [Resolution Trust Corp, endorsed yesterday by Former Fed Chairman Paul Volcker] would provide a buyer for securities for which there is no market, set a floor under the market, hold the securities until markets stabilize, and liquidate them in an orderly fashion, perhaps at a profit. Failed institutions and managers would not be bailed out. There's always a risk that the politicians will meddle, which is one reason for the Bush Administration to do this now so it can insist on enough political insulation.

"As for the larger economy, the last 13 months are a guide to what not to do":

The Fed recklessly cut interest rates, while Congress and the White House dropped "rebate" checks from helicopters. The rate cuts ignited another oil and commodity spike that walloped middle-class consumers, while the rebates did nothing to change incentives or lift investment.

But try telling that to a mewling electorate looking for "quick fixes and someone to blame," as we blogged a month back:

As we wrote during the heat of the primary season last winter, referencing yet another Sowell column, "Unfortunately for the future of the Republic should McCain or either of the front-running Democrats — who all of them seem to believe a President can and should 'manage' the economy rather than step back and let the invisible hand create wealth — should one of them become Leader of the Free World, we'll have an Economics 101 gap in the Oval Office, and THAT worries us and Thomas Sowell, whose Basic Economics: A Citizens Guide to the Economy ought to be at the top of the Arizona senator's [not to mention Obama's] must-read list" …

Rewarding bad behavior only encourages more bad behavior.

Just in time, master satirist Scott Ott of ScrappleFace delivers the "news" we were longing to hear:

Yesterday Sen. John McCain called for a high-level commission to investigate the current economic crisis and to propose solutions. Today, the commission released its final report calling for the federal government to immediately withdraw from Wall Street, the home mortgage market and “other sectors where government intervention has undercut the principles of free-market capitalism.”

The panel, comprised of a truck driver, a Wal-Mart People Greeter, a self-described public school “cafeteria lady” and “that old guy who’s always sitting by himself at Cracker Barrel,” noted that “as long as people don’t have to bear the consequences of their behavior, or they think that the government will bail them out if they fail, they’ll take irrational risks.”

Weren't we just saying?

Update: "I deal with many business people in my work, and it is my conclusion that the biggest obstacle to business creation, and thus capital creation and job creation and wealth creation, is the government," writes The Barrister at Maggie's:

Note that the biggest screw-ups of the year, Fannie Mae and Freddie Mac, were government agencies. So much for government's role in the financial industry: it inevitably becomes politicized, mediocratized, and corrupted — as with any government involvement in any industry. Few people in government could figure out how to run a candy shop, much less a complex enterprise.

It's the creative destruction, stupid.

"He is a politician, not an economist"

Gratuitous cute kitty pic of golden girl Tiny out in the yard this afternoon staring at things we don't see.

"He makes everything so clear and commonsensical," we emailed Goomp this morning re Thomas Sowell's latest dissection of candidate Obama's Economics 101 deficit:

Since Obama can do no wrong in the eyes of many of his supporters, they resented [anchorman Charles] Gibson's having asked him … why [he] was advocating a higher capital gains tax rate, when experience had shown that the government typically collected more revenue from a lower capital gains tax rate than from a higher rate.

Senator Obama acted as if he had never thought about it that way. He probably hadn't. He is a politician, not an economist.

Politically, what matters to the left-wing base that Obama has been playing to for decades is sticking it to "the rich." What effect that has on the tax revenues received by the government is secondary, at best.

Inside looking out, Babe the Magnificent catches our camera's eye, the kitchen window screen creating an effect not unlike Photoshop's "Crosshatch" filter.

And voters are only too happy to oblige, preferring — in Dr. Sanity's words referencing a Sowell column last May on why voters don't listen to economists — "quick fixes and someone to blame, not solutions." As we wrote during the heat of the primary season last winter, referencing yet another Sowell column, "Unfortunately for the future of the Republic should McCain or either of the front-running Democrats — who all of them seem to believe a President can and should 'manage' the economy rather than step back and let the invisible hand create wealth — should one of them become Leader of the Free World, we'll have an Economics 101 gap in the Oval Office, and THAT worries us and Thomas Sowell, whose Basic Economics: A Citizens Guide to the Economy ought to be at the top of the Arizona senator's [not to mention Obama's] must-read list." Sowell:

One of the biggest problems with government intervention in the economy is that politicians usually have neither the knowledge nor the incentives to intervene at the right time.

Bruce Bartlett has pointed out that most government intervention in an economic downturn comes too late. That is, the problem it is trying to solve has already worked itself out, and the government intervention can create new problems.

More fundamentally, markets readjust themselves for a reason. That reason is that people pay a price for their misjudgments and mistakes. Government interventions are usually based on trying to stop them from having to pay that price. People who went way out on a limb to buy a house that they could not afford are now being pictured as victims of a heartless market or deceptive lenders.

Rewarding bad behavior only encourages more bad behavior. But who has time to worry about bad behavior when there are voters to pander to?

Update: Rewarding insanity only encourages more insanity. But who has time to worry about insanity when there are readers to entertain at Dr. Sanity's Carnival of the Insanities?

"The facts are irrelevant"

"They are like bookends. They will bring you many years of pleasure," a veterinarian's assistant predicted years ago of then kittens Tiny (above) and Baby (below), out in the side yard this afternoon assuming full bookend posture.

Googling a half-remembered quotation [see caption, above] from our post "An exultation of adolescence" of a couple of years back, we had a eureka moment this evening — unrelated to the quotation itself — reading the words of Dr. Joy Bliss of Maggie's Farm:

What if the part of human nature which wants paternalism, or maternalism, in the State is sometimes, or often, stronger than the part that wants freedom and self-determination?

It called to mind our imail conversation with Goomp yesterday morning as we shared thoughts on Thomas Sowell's latest essay, "Are Facts Obsolete?" First, here's Tom:

As the hypnotic mantra of "change" is repeated endlessly, few people even raise the question of whether what few specifics we hear represent any real change, much less a change for the better.

Raising taxes, increasing government spending and demonizing business? That is straight out of the New Deal of the 1930s.

The New Deal was new then but it is not new now. Moreover, increasing numbers of economists and historians have concluded that New Deal policies are what prolonged the Great Depression.

Babe mirrors Tiny's leonine pose in the countdown to supper.

"It is depressing how ignorant people are of how the world works," Goomp wrote, responding to Dr. Sowell's point that "A politician's problem is how to look like he is for 'the poor' and against those who are 'exploiting' them. The facts are irrelevant to maintaining that political image":

Goomp [channeling Dr. Bliss's question]: It is all because they want to escape from personal responsibility.

We: They want to continue to suckle at the maternalistic udder.

He: And be told how wonderful they are.

And politicians are only too happy to oblige. Flirting dangerously with Godwin's Law, we summed things up awhile back in "What's wrong with the utopianist left world view," our post linked by Dr. Bliss in her own post referenced above:

As we've blogged early and often, the totalitarian instinct runs deep and dark in our species. It is forever raising its ugly head on both ends of the political spectrum, and cheating your way to victory is precisely where it's at. Ends justify the means. That's why commies and Nazis -- not to mention Islamofascists -- parrot the same party line: We educated elites know what's best for you plebes. Bill and Hill's "What if you spend your money wrong?" and "We are going to take things away from you on behalf of the common good" come to mind.

Then there's "libertarian paternalism," a subliminal approach to political persuasion that has "caught the imagination of top politicians" including Barack Obama, according to a breathless London Times interview of behavioral scientist Richard Thaler, co-author with Cass Sunstein of Nudge:

So why the political interest? Because you can influence people's choices without being accused of "nannying" and it is cheap. Or, as the authors put it: "If incentives and nudges replace requirements and bans, government will be both smaller and more modest … In short, libertarian paternalism is neither left nor right, neither Democratic nor Republican. In many areas, the most thoughtful Democrats are going beyond their enthusiasm for choice-eliminating programs. In many areas, the most thoughtful Republicans are abandoning their knee-jerk opposition to constructive governmental initiatives."

Considering ourselves among "the most thoughtful Republicans," we are skeptical. So is David Gordon of the Ludwig von Mises Intitute, who notes that "Tocqueville long ago warned against the policies of which libertarian paternalism is an example." Blogger Cassy Fiano gets it just right in her post — with video link — on GWs press conference this morning where he tells mewling reporters that "Americans are smart enough to figure out whether they're going to drive less or not."

Liberals just can’t seem to grasp the fact that people don’t need their all-knowing wisdom-filled genius to live happy and full lives. When President Bush said that it was presumptuous to tell Americans how to live their own lives, I wanted to cheer. It’s something that liberals aren’t able to understand. They think that the American people are idiots who can’t be trusted to be intelligent enough to figure things out on their own, and therefore need liberals to come in and do everything for them.

And now back to Dr. Joy Bliss for the final word:

State parentalism is one step from totalitarianism. And not just psychologically, but also in reality. First, you get the people used to the idea that they can depend on the government to take care of you and to solve your problems (rather than simply to defend you, and to keep life reasonably fair), and, having slowly softened them up, you build on that until you can't smoke a cigarette in your car without getting fined, or find a decent fried chicken take-out in NYC.

We're smart enough, Barack Obama. Oh, and we're not a racist.

Update: Congratulations to the blogosphere's own Noah, our good blogfriend Steve of Modulator, for launching the Friday Ark on its 200th outing!

Update II: Lots more smart talk at Dr. Sanity's Carnival of the Insanities.

"If there were no scarcity, there would be no economics"

Our newly discovered Photoshop toy — the "paint daubs" filter — transforms a quartered cauliflower atop the kitchen counter into a vast, glacial landscape with no anthropogenic melting in sight (cf. unretouched photo below).

Dr. Sanity's commentary yesterday on Thomas Sowell's column on why voters don't listen to economists — they want quick fixes and someone to blame, not solutions — afforded a eureka moment [Or was it an instance of crackpot theorization?] regarding the preference of the BMI-challenged among us for magic pills and fad diets over sensible eating habits. Dr. Sowell:

Is there anything complex about the fact that with two countries — India and China — having rapid economic growth, and with combined populations 8 times that of the United States, they are creating an increased demand for the world's oil supply?

The problem is not that supply and demand is such a complex explanation. The problem is that supply and demand is not an emotionally satisfying explanation. For that, you need melodrama, heroes and villains.

It is clear that many people prefer to blame President Bush. Others prefer to blame the oil companies, who have long been the favorite villains of the left.

Cauliflowerets -- AKA cauliflorets -- unfiltered. Cutting the head into quarters first makes it easy as pie to remove the stems and leaves to make Silky Cauliflower Soup (recipe below). 

Dr. Sanity takes it from there:

This is what passes for heroism these days: finding new and creative ways to avoid reality; exploiting and empowering the inner 'victim' of people who don't want to deal with the real world by changing their own behavior.

I know all about this because I deal with people like that every day in my profession …  They want a pill to make themselves feel better so they can keep on doing what they have always been doing no matter how destructive or irresponsible or counterproductive it is.

Photoshopped image of steamed, puréed cauliflower in the Cuisinart calls to mind the putti in William-Adolphe Bouguereau's The Birth of Venus.

"They want to hear about how their political heroes will stop the villains from 'gouging' them or 'exploiting' them with high prices," continues Dr. Sowell in Part II of his essay today:

Least of all do voters want to hear about the most fundamental reality of economics — that what everybody wants has always added up to more than there is.

That is called scarcity — and if there were no scarcity, there would be no economics. What would be the point, if we could all have everything we want, in whatever amount we want?

Ironically — despite artificial scarcities produced by government mandates — overweight Americans would seem to have the opposite problem: too much of everything they want to eat. "Knowing that another meal was just a few hours later is really important," emails our svelte sister Sue, quoting one of the comments to that WSJ  article we cited in our previous post on "mindful eating" and referencing her own experience:

When I was in college and weighed a hundred boop-boop, I used to eat five full-sized candy bars at a time, as though, after that glutton session, there would be no more cakes and ale.

We are blessed to live in this land of plenty, where our larders remain full, and we can say "yes" whenever we actually feel hungry and not have to hoard and stuff every meal.

The trick, of course, is to recognize when we "actually feel hungry."

A midday Cold Turkey Cookbook plateful of small portions of a variety of good things to eat. Clockwise from left: Silky Cauliflower Soup, Chelsea Baked Beans half sandwich with mayo, half an orange and plain yogurt with a dollop of puréed ready-to-serve prunes.

Silky Cauliflower Soup

Chop cauliflower into quarters, cut out and discard core and leaves, break up into medium-sized florets and rinse in a colander.

Steam florets, together with five chopped roasted -- or fresh -- garlic cloves, in the top of a steamer about 20 minutes until tender.

Purée in a food processor and return to pan (bottom of steamer). Add 1 1/2 cups fat-free chicken broth, a few sprigs of chopped chives and freshly ground pepper to taste and slowly bring to the boil, stirring to blend. Serve hot or cold.

lt's what's for lunch.