Deregulation

The re-regulation of an industry for the benefit of producers as opposed to consumers.

We must constantly assuage the feelings of the bond market

While a lot of talk has been going on about inflation, where there is no inflation to be seen, and the reason that we worry about inflation is because of the bond markets, why is it that we are not hearing more about the debt ceiling date and the possibility of the United States Defaulting. Its as if the bullshit just gets painted on without any consideration of constancy.

Of course we can trust the banks

HT/ Atrios

Sectional Politics

For a while it was a truism in Democratic politics that it was necessary to nominate a southerner for president in order to get some white southern votes and therefore the white house. Now that the south has become even more polarized politically with southern whites voting overwhelmingly Republican and southern minorities, primarily african americans, voting overwhelmingly Democratic and with the presidency of Barack Obama a northerner who relied heavily on minority voting to win the presidency, it does not seem that Democrats need the deep south.

The question is though, is it now necessary for the republicans to nominate someone outside of the south in order to get non southern votes?

Time for Every Southerner to Speak

Every year there comes a time for every right thinking southerner to express either in passing or in public a central truth about our history. The Civil War, begun in South Carolina, was a war only incidentally about states rights and instead particularly about Slavery. (I capitalize Slavery because the particular institution as it developed in the United States was a particular type of slavery and while all slavery is evil it can be said that the kind that developed in North America was a special brand of evil) The Civil War was not about States Rights. If it was then the South would not have been so enamored previously of the Fugitive Slave Act, an imposition of federal law on other states whose laws were abrogated by southern legislators desire to make sure that the rights of slave holders where paramount over every other right.

Those that claim innocently that federalism and devolution of power to the states is the best and right way to run a government may at times be excused for their ignorance. But ignorance is only a partial excuse and more often is a willful blindness. The fact is that States Rights is the rallying cry of the elite who wish a smaller playing field and fewer combatants on the political stage. Across the country there are too many groups and interests for one states elite to bend everything to their will. Once you've bought a state legislature it seems a waste to have to try and buy the national one. Most of the time that takes far too much money. So instead you wax rhapsodic about the wonders of Spanish moss and happiness when the federal government didn't do much. That anyone with knowledge of Spanish moss knows that its full of bugs and shouldn't be played with too much is an afterthought. With distance comes myth and a smoothing over of the cracks and crimes.

There are few with the courage anymore to truly defend slavery. Oh they'll elide and obfuscate around the crime and say that slaves where happy with their lot or that many slaves fought for the confederacy, which even if true begs the question of how a slave can fight for or against anything in that context. The entire culture of the South, its class divisions, its violence, its misogyny, was built on slavery. It was built on the backs of men and women who the ruling class decided where not worthy of a voice even to lament their lot. When one did, safe from the whips and chains and hangman's rope, oh boy did they scream. Forget any notion of rights, forget any notion of right, forget any notion of the proper place of federal government, it was time to protect that particular institution. The only right in the south that was respected was the right to own slaves. There was no right to free speech. There was no right to bear arms. There was no right to a jury trial. There was no right that couldn't be superseded by the immediate need to make sure that the rich had their property safe and neutered.

That is the truth of slavery in the south.

A question

Why is it that the fed can't create a 0 interest bond to banks that requires them to place in every account 1000 dollars. This would be stimulus. The bond would be paid back at 1 cent a day. If the particular account did not have that cent then the bank would have to pay that cent without crediting the particular account.

Citizens United. Money=Speech

Will Wilkinson tries to give what is to his mind a charitable reading of why progressives or liberals have a problem with the Citizen's United Case.

I say tries because like most people who attempt to conceive of why someone else might think the way they do he believes that they must think in someway the same way he does. So be begins with a conception of state power and its limits as the first principle. Most people do not work from first principles.

Most people in my view, and that includes myself and anyone who claims to speak from first principles, is a mishmash of barely held together biases and prejudices that fight one another at every moment. In a partial sense I agree with Hobbes when he says, "In deliberation, the last appetitie or aversion immediately adhering to the action, or to the omisson thereof, is what we call the Will, the act (not the faculty of willing)".

That is we are only sometimes reasoning creatures. So for liberals the problem is two fold. The first is the sense that corporations, thought of only as money making corporations, have more power and more influence than the people. The people, if a political party has won a majority, who have the actual governing right. A government being in existence by the consent of the people who are not corporations.

If I am a person a corporation is not a person because he is not like me would be one way of putting it. (If all of this seems confused and jumping around it is because I believe that the reasons themselves, if they are called reasons, jump around. Also I believe that libertarians are just as subject to this and the supposed logic from principles that most libertarians will reason from is itself is merely barely contained prejudice and passion) Think of reasons for this. I cannot poison an area and claim a monetary justification and be merely fined for killing people. I'd be put in jail, the news reports would give me a snappy name and the trial would be everywhere, if enough people died or got sick. Even if through negligence I kill someone, time in prison not a fine would be the probable outcome. I then am more liable for my actions than a corporation.

So then to speech. If a corporation is not treated as a person in respect to their responsibilities then how could they have the same rights? Now some might say, as one commenter at Wilkinson's does that how could a group of individuals somehow lose their rights when they incorporate that they had when they were individual. The reason, if they are given privileges over and above in respect to liability for their group actions then they must conversely lose certain rights as a group.

Now I as an individual am slightly more sanguine about the ruling than many others. For the federal government I don't think that it will have much effect. For state governments, well most of them are already captured by corporate power. We will see what the effect is.

A intellectual problem I've been having recently

It used to be intuitive to me that there was a difference between state government control, federal government control and the private market. But that intuitive difference is having trouble when I think about it too much. For example, in South Carolina we do not have enough interests to really fight against full on regulatory capture. So in certain cases the government sets the rules to help the current economic winners in bills which the current economic winners' lobbyists probably wrote. So functionally, what is the difference.

Another conundrum. I have to eat. I have to eat food. There is probably some level of food buying that at a minimum I have to do in order to survive. How is that fundamentally different from a tax? I have to pay taxes because the penalties are worse than paying them, and as with eating. . .

Isn't this the case with a number of economic goods. Electricity for example. Theoretically I could go without and live in the woods in a tent, though how I'd pay the property taxes and keep my marriage going I don't know, but really there isn't a choice between paying and not paying for electricity. I get the power from a local monopoly. Why is that not a tax?

And so on to health care, which would be a tax if I could figure out how in my budget there was money for it.

I was just reading Delong

He quotes a post by Karl Smith who in a humble manner confesses that he does not understand how economists such as John Cochrane believe that a fiscal stimulus cannot effect aggregate demand. Brad Delong says that the problem is that Cochrane has believed this for years and it should be noted that no matter Cochrane's genius in other issues of economics he is completely out of his mind on this issue.

My problem has to do with trying to understand how someone could believe that deficit spending or could not in the right circumstance have an expansionary effect. You either have to believe that people have infinite time horizons, perfect information (which in part goes along with infinite time horizons) or that directed infusions of money into the economy taken from another area are washed out like taking a drop of water from one end of the pool and placing it on the other end.

Delong says that the misconception could occur because they are taking the savings investment identity as more than it really is which is a short hand for a much more complicated behavior. In the current conditions or at least the conditions we saw a couple of months ago you would have to have had your head under the rock to believe that the identity perfectly described the actual behavior of the economy.

Odd Thought About Red Dawn

I've never seen Red Dawn. But I have seen enough references to get a basic understanding of the plot and a sudden thought has occurred to me. If there were some type of invasion from some outside source, the first thing I imagine that conservatives in their current mood would do is to find the nearest liberal and shoot them. Of course not all liberals are unarmed but still.

I can imagine a seen in the woods of a couple of partisans in the woods after the tanks have rolled through burning the town. They're the couple that prudently fled rather than fight the onslaught that killed everyone else. I can see them around the camp fire.

Partisan 1: This wouldn't have happened if the gays didn't do their thing.

Partisan 2: I'm not sure that has a hell of a lot to do with out situation.

Partisan 1: Your one of those commie Obama supporters.

Partisan 2: Yeah I supported him, he disappointed me right and left but hell I generally hope the president does what right.

Partisan 1: That's it. (Pulls gun from holster and shoots Partisan 2)

Obviously this is bad writing and pretty piss poor dialogue. But the general Idea won't leave my mind.

Ah Healthcare

I don't have health care. Or I should say I don't have health care that would be useful to me outside of an emergency. I could of course find myself in an emergency room where I would be treated for whatever horrific issue caused me to be there, but in general, I don't go to the doctor because I can't afford it. I can't afford to get my wisdom teeth out. I could if I went to Charleston and went to the medical school where I would pay for a dentist to tell me that yes my wisdom teeth need to come out and then I could go to the surgeon who would take them out and the whole thing would cost probably around $500 not including gas to get to Charleston. I don't have $500. And so if Megan McCardle wants to privileged folks who haven't been born before me then then I hope to god she ends up on the street without real financial help at some point so that she can actually understand the world.

Seems like a different world but its ours

Republican Failure

One thing I’ve never understood about the Republican strategy is how limited the analysis of their situation is. In 93 they were riding a shift in voting habits in the south and west. Pure rejection could work because they were up against a president whose popularity was in the toilet in the area that they needed to pick up. Now, not so much.

It is generally better, in my mind, to think of American politics as pre-election coalition building. Where in other countries the coalition will be made at the top after the election when the various parties come together in order to form a government. In the US though each party has a pretty well set base of members. Its only when certain events come about that the coalitions will shift. The Civil Rights movement and Roe V Wade are two of them that helped the republicans. Not because there was a majority pushback on those policies but because if you can keep a certain part of the your coalition and add others then your going to build a larger party. The Civil Rights movement pushed the south into the republican column because of the history of race based voting in the south. The reaction to Roe V Wade, I believe, was an attempt to peel off disaffected evangelicals and Catholics by the republicans and an attempt to solidify Democrats amongst women.

That taking of the south is problematic historically for any party. The democrats were unable to produce consistent vote majorities for a number of years because the political culture in the south is so different from much of the other country. Only with the advent of the great depression which allowed for much of the differences between the south and the north to disappear under the rug for a while allowed the democrats to create consistently large voting blocks.

Unless the republicans can figure out a way to appeal to groups outside of the south without giving a chance for the democrats to be competitive they are in for a long minority.

One thing to think about, the republicans have never been able to take the south to the extent that the democrats did for so many years. Does that make it actually harder for Republicans to create broader coalitions outside of the south? If your party is made up of hard core revanchists in the south without a total lock on their votes can you move away without alienating them?

Remember Sleep is Wrong

That last post sucked

And it did.

The main point is that possible options for power are constrained by the particular structure of power that exists. In an autocracy that path to power is total agreement in public with the autocrat. In an Oligarchy the path to power is to agree with the objectives of the oligarchs. In a system that constrains power to two groups the path to power is to align yourself and your views with one of those two parties.

Our system constrains us to two parties because of how we elect people. First of all we elect individuals rather than representatives of a party. Though of course we also do that. The old joke about yellow dog democrats is a testament to the power of voting for party rather than individual, but as William Jefferson found sometimes it is not enough to just be part of the right party.

The other reason that we are constrained to two parties is that we have a plurality voting system. That is probably the worst form of voting if you want to accurately reflect majoritarian (this word is misspelled) interest.

Does anyone care part II

Looking back at the previous post I think one thing I haven't really made clear is the extent to which the shape of the governing regime impacts thinking. It is always natural for people to pick a side because it gives a sense of social acceptability and power. If your side is up then you have some kind of reflected power from the fact that your group is in power. The fact that you agree with the views of your group makes you an insider in that group. Of course it doesn't necessarily have to be that you agree with your group you just have to be a part of it.

In the United States we vote for individuals with whoever gets the most votes even if they aren't in the majority wins. This necessitates a system where two people face off. If you have three and all three get somewhere around 33 percent then you have a problem in terms of legitimacy. So in general a race will have two people.

Its also true that it costs money to run for office. One of the main reasons is that you have to brand yourself. Tom Jode is a working class guy who gets your problems. It doesn't matter if its true it just has to sell. If you get to put a letter next to your name like an R or a D then a lot of symbolic branding gets to occur without the candidate ever spending a dime. It also gives the candidate a ready made platform of issues. Some of those issues the candidate will care about, others, he or she will not care about. But if you really got them down and asked them they would tell you they cared and they probably would agree that that position on that issue is the correct on. Not because they care or because they have thought about it much but because they have decided that they exist within a group and want to be as much a part of that group as possible.

Most people do this. Most people when they join a group do not merely sign their name on the dotted line. They really invest themselves. There is also the contrary action that when someone finds themselves in full agreement on one issue with a group, even if they previously disliked that group, they will become more likely to agree with the other issues that group holds. Group identity becomes a kind of feedback loop. When that loop is stable then there isn't much chance for another group of grab members of other groups.

When that loop gets cut though interesting things can happen. Why is it that the Republican party became Anti-Abortion. When Roe v. Wade happened there were anti abortion members of both parties. There are two groups though that could most be swayed by this issue that were in the democratic column. Catholics, particularly Irish Catholics in the north. And Evangelicals in the south. There were votes to be had by going anti abortion. And this worked very well for a while. The problem is that having a solid south as part of your voting base is a double edged sword. Over time taking the Anti Abortion issue did nothing for Catholics, they still tend to vote overwhelmingly for democrats, but it did help, along with a number of other issues, take the south.

The reason that the South is a Double edged sword is because the political culture of the south is different from the north in particularly antithetical ways. The South and North have defined themselves so much off of each other that even though most of the issues that once animated that defining no longer exist they still reflexively do so. Some of this has to do with an urban rural split where the south is much more rural than the north and therefore has a lot of very different interests.

If the United States had a different voting system or even a different constitution that did not devolve so much power to the states and localities we would have very different parties. There is nothing that links pro-choice policy with protectionism or free trade.

If the United states had a proportional voting system where people voted for parties rather than people and if a party got 5 percent of the vote then they got a person in the parliament, we would have a radically different split between the right and left. You would have a trade union party that would join with whoever gave them control over trade union policy and the feminist party that would join with whoever if it gave them control over women's issues and so on. More people would have much more idiosyncratic views of issues then exists now in the United States.

So in the United states where we vote for individuals who represent one of two parties the range of opinions represented in the political system is going to be much smaller in general than in another type of system. Issues that rise up on the radar screen can be liked or disliked but will have unclear relationships to actual voting behavior. Polls then don't mean much and never will.

Does anyone care about the bailouts

Poll have always been weird for me because they exist as a kind of pseudo information. People love to say that the American People care about the environment because polls show that most people will say that the environment is one of their big issues. But have you ever seen an exit poll where the environment was the big issue in how people voted. Does the more environmental candidate do better at the polls as a matter of course?

Why have republican made a fetish out rhetorical denunciations of Abortion and describe the dirty whores who kill the poor, desperate children. Because in a national election a good percentage people will vote on that issue over every other issue. I have a friend who may be more liberal than me but will tend to vote for republicans because they are as she says it "pro life".

Now the only reason that that is a tenable position is because a large percentage of people who are pro-choice are either only going to vote for democrats or won't vote on the issue because they don't think that their access to abortion will be compromised.

So when you see this poll




and then you see this one.





It makes you think that the denunciations of AIG may not be that important politically.

Of course its also true that no one thinks that repubs will handle it any better.

What the Hell is Going on With AIG

I have talked to a couple of people recently who have expressed surprise at all of the new information coming out about the counter parties that AIG is paying money out to. I was actually surprised that people where surprised since I had understood that the entire point of bailing out AIG was to actually bail out all of the banks. For example, normally in an insurance agreement, say when you get insurance on your car, the insurance company does not specifically need to have the money that could be paid out to you tied to your policy. What they do have to have is enough money so that if a certain number of policies came due at the same time then they could pay them all off. Normally there is not much chance of this happening but the government regulates the process so that there is enough cash on hand so that there normally isn't a problem.

What actually happens though, most of the time, is rather than have that much free cash lying around, an insurance company will buy insurance on its own policies so that if a huge catastrophe did happen one insurance company wouldn't be on the hook for all of the policies. This was a problem after 9/11. Many insurance companies called reinsurers came calling to the government to be bailed out because they had never considered that there was the chance that that catastrophic of an event could happen. The actuary tables don't normally consider suicide bombers, though I'm sure they do now.

Well AIG's Financial Products division had a lot of fun selling insurance to multiple other companies to cover their loans. The reason that all of the banks wanted this insurance was to make sure that the capital requirements set up in their countries regulations where covered. A capitol requirement is basically a requirement that you have enough liquid assets i.e. an asset you can sell easily on hand in a particular ratio to your liabilities or whatever money you owe to someone else. Basically you need have half the value of your liabilities in liquid assets. Or some other ratio it depends on the country.

Normally they wouldn't be allowed to do this because any old insurance on a bond or loan doesn't necessarily mean that it will be paid out. AIG, though, at the time had a Triple A rating from Moodys, the rating company. How Moodys calculates their ratings is unknown to me but there are normally very few companies that have a Triple A rating, having one means that you can borrow money at extremely low rates because everyone believes that you will always be able to pay it off. It also means that if you offer insurance on something it is considered to no longer be a risk and instead can be considered capital.

The insurance contracts that AIG was offering also, because this was all a way for the banks to get around normal capitol requirements, had clauses in them that said that if AIG lost its triple A rating then it would have to begin paying out in order to satisfy the capitol requirements that had been satisfied by the very fact that AIG had a Triple A rating. Right before the United States took over AIG, AIG lost its triple A rating.

Remember how when a company normally sells insurance on something it is supposed to have the money on hand to pay off a certain number of the contracts in case of catastrophe? Well these insurance contracts where called Credit Default Swaps. In the Financial Services Modernization Act of 1999 there was language in the bill that said essentially that there would be no regulation of CDS's. This means that there was no regulation of, well capital requirements on CDS's. Thus, there was no money to pay off these contracts when they came due. The ironic thing is that AIG's credit rating was lowered in large part because of all of these CDS's and because their credit rating was lowered they didn't have the money to pay out all of the CDS contracts.

The ENTIRE REASON WE BAILED OUT AIG was because of the other banks. If they all of a sudden lost all of their capitol because AIG died then they would flood the market with assets in order to recapitalize. If they did that then banks not even involved with this stuff would see their own asset pools fall in value, possibly making the entire banking sector insolvent.

And all of this is why even though I believe that the people who ran AIG into the ground need to drawn and quartered, and by that I mean that need to have their limbs pulled in all different directions until their joints all snap and then they need to be cut into four different pieces, it was neccessary to bail out AIG.

For Elliot Spitzer to be walking around saying that it is horrible that banks are getting money from the AIG bailout, well that was the damn point of the whole bailout. To be upset about it now seems odd.

The Bonuses on the other hand, that is a different story.

Poulenc

There's something

I've been reading recently about the bonuses being paid out to some of the people at AIG. And I read this.

American International Group Inc. will pay $450 million in bonuses to employees in its financial products unit. That division was at the heart of AIG's collapse last fall, which compelled the U.S. government to provide $173.3 billion in aid to keep it running.

Now theoretically you could argue that you need these people to fix the mess that they caused. But I'm actually getting tired of the idea that the only people on earth who understand this stuff are the people who work on wall street. This isn't the creation of Quantum Mechanics where even though the initial math wasn't particularly hard, you have to get over non deterministic causality. This is math, particular math, but math non the less. Give some damn good math people some books, tell them that they have a couple of weeks and then let them go at it. I can't imagine that its that difficult. Lots of people do this stuff they are not magical unicorns prancing through the fucking liquor forest.

And then I hear this.

Chief Executive Edward Liddy told Treasury Secretary Timothy Geithner in a letter dated Saturday that the next payments to employees of the financial products unit -- whose woes caused massive losses at the giant insurer -- are due on Sunday, and added "quite frankly, AIG's hands are tied."

There are people out there called lawyers who from my understanding can twist the law into all sorts of fun shapes. Use them. If you don't it indicates that you don't want to.

This stuff makes me so angry that the hair on the back of my head and arms stands up, rippling like the god damn African savanna. If I could I'd get these people chained and make them walk a fucking Gauntlet.