And many of the NRA think training people about guns is sufficient to allow everyone to be armed. No one is more trained than police officers! And while texting in movie is rude, it does not deserve a death sentence.
Link to Story
Tuesday, January 14, 2014
Sunday, January 12, 2014
Sunday Musings 1/12/14 Too Big To Fail?
Gretchen Morgenson of the New York Times has almost written as much as I have on the Great Recession causes and what is needed to prevent another one. But whereas, I simply want good regulation on systemic issues, she wants heavy regulation and nothing to be too big to fail.
In a capitalistic economy, you cannot regulate private capital except on certain basic things such as activities being legal, prudent diversification and adequate capital in a regulated entity. Absolute size will be a function of return on capital generated by revenue generation and expenses. Maintaining a positive margin on that is what management gets paid the big bucks to do.
The SEC is looking at which asset management firms might be too big to fail. The answer is none of them. They hold their investor's money and if the asset value goes down, the investors will lose money, the Asset Management Firm will not fail unless they have borrowed money and invested it in the fund, which most do not.
But Ms. Morgenson believes the SEC should regulate these asset management firms because the Federal Reserve had to provide liquidity to money market funds in 2008. In her mind, that made them too big to fail.
What she is missing is an understanding of the lender of last resort function. Most of the support the government provided in 2008 was fulfillment of the lender of last resort function which only the government can provide. There is nothing wrong with this.
When an economy suffer a systemic shock and everyone is afraid to lend to everyone because everyone is staring into the abyss of a systemic failure, only the government can provide the liquidity necessary to fund the raising of cash that will occur by owners of capital. The government must do that to maintain the system that allocates capital to the economy. If the assets of the entity receiving the lender of last resort capital are bad, then the institution will fail as those assets default. Yes, the government might lose money, but the people will still trust the credit allocation firms and leave their assets in the credit worthy ones preserving the system.
Two points to make: 1st, when a system does not allocate capital freely, you have a depression, many people do not have income, and asset values become extremely impaired (even the rich lose big). 2nd, in 2008, the lender of last resort function worked well, the government lost some money in a few places where asset values were permanently impaired (AIG, GMAC), but made money other places and overall had a profit. Even if they had not made a profit, maintaining a functional credit allocation system would have been worth the cost in order to avoid a depression.
The Regulatory system should be focused on preventing systemic risks from ruining the capital allocation system. What are the systemic risks? Government Debt, mortgage debt, and concentrations of credit risk in the global capital allocation system. So China is systemic, just as the U.S. and the EU are systemic. That is why the IMF exists.
Asset management firms are not systemic.
In a capitalistic economy, you cannot regulate private capital except on certain basic things such as activities being legal, prudent diversification and adequate capital in a regulated entity. Absolute size will be a function of return on capital generated by revenue generation and expenses. Maintaining a positive margin on that is what management gets paid the big bucks to do.
The SEC is looking at which asset management firms might be too big to fail. The answer is none of them. They hold their investor's money and if the asset value goes down, the investors will lose money, the Asset Management Firm will not fail unless they have borrowed money and invested it in the fund, which most do not.
But Ms. Morgenson believes the SEC should regulate these asset management firms because the Federal Reserve had to provide liquidity to money market funds in 2008. In her mind, that made them too big to fail.
What she is missing is an understanding of the lender of last resort function. Most of the support the government provided in 2008 was fulfillment of the lender of last resort function which only the government can provide. There is nothing wrong with this.
When an economy suffer a systemic shock and everyone is afraid to lend to everyone because everyone is staring into the abyss of a systemic failure, only the government can provide the liquidity necessary to fund the raising of cash that will occur by owners of capital. The government must do that to maintain the system that allocates capital to the economy. If the assets of the entity receiving the lender of last resort capital are bad, then the institution will fail as those assets default. Yes, the government might lose money, but the people will still trust the credit allocation firms and leave their assets in the credit worthy ones preserving the system.
Two points to make: 1st, when a system does not allocate capital freely, you have a depression, many people do not have income, and asset values become extremely impaired (even the rich lose big). 2nd, in 2008, the lender of last resort function worked well, the government lost some money in a few places where asset values were permanently impaired (AIG, GMAC), but made money other places and overall had a profit. Even if they had not made a profit, maintaining a functional credit allocation system would have been worth the cost in order to avoid a depression.
The Regulatory system should be focused on preventing systemic risks from ruining the capital allocation system. What are the systemic risks? Government Debt, mortgage debt, and concentrations of credit risk in the global capital allocation system. So China is systemic, just as the U.S. and the EU are systemic. That is why the IMF exists.
Asset management firms are not systemic.
Friday, January 10, 2014
Are Conservative Think Tanks Starting to Think About Solutions to Problems?
David Brooks thinks so.
See his column by hitting this link.
Link to Brook's Column
Bridgegate
And I thought Chris Christie was off the hook after yesterday's mea culpa. After all, what is more stupid than creating unnecessary bumper to bumper traffic during rush hour in a community that needs ready access for 1st responders to get where they need to be. But the Daily News just rips his mea culpa with facts (but no smoking gun) on how this onion was revealed that leave them wondering what has not been revealed.
See his column by hitting this link.
Link to Brook's Column
Bridgegate
And I thought Chris Christie was off the hook after yesterday's mea culpa. After all, what is more stupid than creating unnecessary bumper to bumper traffic during rush hour in a community that needs ready access for 1st responders to get where they need to be. But the Daily News just rips his mea culpa with facts (but no smoking gun) on how this onion was revealed that leave them wondering what has not been revealed.
Wednesday, January 8, 2014
The World is a Complicated Place: Another Example
I know that the Neo-Cons are itching to blame President Obama for the goings on in the Middle East.
Thomas Friedman's column today liberally quotes a Jordanian Foreign Minister in showing that the Middle East is a very complicated place and US boots on the ground guarantee nothing other than a large US Defense budget and US military casualties.
Link to Friedman Column
And just when will the GOP acknowledge that we borrowed the funds to pay for The War on Terror and we need specific revenues to pay back that debt.
Thomas Friedman's column today liberally quotes a Jordanian Foreign Minister in showing that the Middle East is a very complicated place and US boots on the ground guarantee nothing other than a large US Defense budget and US military casualties.
Link to Friedman Column
And just when will the GOP acknowledge that we borrowed the funds to pay for The War on Terror and we need specific revenues to pay back that debt.
Another Proof that I am Conservative
Despite RedStateVT's maintaining that I am a left wing liberal just because I tend to vote Democratic these days. For the record, I would have voted for the GOP NYC Mayoral candidate if I was a NYC resident.
Anyway, there was a study done 2 decades ago looking at attitudes toward redistribution policies.
"When participants in the experiments were told that resources were very scarce, liberals became less generous and began to make the same judgments as conservatives. Both left and right “denied assistance to people they deemed personally responsible for their plight.” In other words, scarcity and a lack of resources made participants more conservative in their outlook."
"But when participants were told there was “no scarcity,” liberals awarded benefits to everyone, and only conservatives made a distinction between giving to the “deserving” and withholding from the “undeserving.”
For the record, I believe in traditional Keynesian policies that fiscal policy should contract when the economy booms and expand when the economy contracts. Policies that help the unemployed should expand when the economy contracts and shrink to base level when the economy expands. Therefore, in the framework of this study, I am a conservative.
I also believe that the Fed has a responsibility to make sure inflation is held at a reasonable level (that is between 1% & 2% for me) and that the economy does not trip into a recession nor experience disastrous bubbles. I don't know why that belief would have any liberal or conservative connotations, it is just prudent economic policy management.
Anyway, there was a study done 2 decades ago looking at attitudes toward redistribution policies.
"When participants in the experiments were told that resources were very scarce, liberals became less generous and began to make the same judgments as conservatives. Both left and right “denied assistance to people they deemed personally responsible for their plight.” In other words, scarcity and a lack of resources made participants more conservative in their outlook."
"But when participants were told there was “no scarcity,” liberals awarded benefits to everyone, and only conservatives made a distinction between giving to the “deserving” and withholding from the “undeserving.”
For the record, I believe in traditional Keynesian policies that fiscal policy should contract when the economy booms and expand when the economy contracts. Policies that help the unemployed should expand when the economy contracts and shrink to base level when the economy expands. Therefore, in the framework of this study, I am a conservative.
I also believe that the Fed has a responsibility to make sure inflation is held at a reasonable level (that is between 1% & 2% for me) and that the economy does not trip into a recession nor experience disastrous bubbles. I don't know why that belief would have any liberal or conservative connotations, it is just prudent economic policy management.
Tuesday, January 7, 2014
There is a middle path that is conservative
Government's exist because without them there is no order. So we must have some government because no one wants to live in chaos. If we must have government, there can be debate about specific things that constitute the policies and operations of the government, but there should not be debate about the need for government.
Michael Gerson today laid out a path that explains how the current Tea Party and starve the government with no revenue increases are harming the ability of the conservative proposals to get a fair hearing in the political debate as they are drowned out by the "Just Say No to Everything" crowd that dominates the GOP today.
Link to Michael Gerson Column
The reasonableness of this to the conservative cause is that ObamaCare is after all Heritage Foundation/RomneyCare/ObamaCare. It is a plan designed by conservatives as a market based solution to a problem that is very real. If the Republicans were truly ignored, there would be a single payer plan. Democrats universally prefer a single payer plan, but we don't have one today because the GOP had influence in our effort to control health care costs that are out of control. Consumers are not making intelligent decisions and providers are able to extract extraordinary rents from the system. The rest of us pay that bill and it lowers our standard of living. This is what the market based design attempts to improve.
The idiocy of the current situation is that instead of the Republican tinkering with the parts of ObamaCare that do not fit the original Heritage Foundation design (David Brooks explained this a while back), all we get is repeal ObamaCare and an advocacy for returning the country to a place where individuals are at the mercy of Insurance companies, insurance is unavailable for people with pre-existing conditions, and health care costs spiral ever higher as a percent of GDP.
Michael Gerson today laid out a path that explains how the current Tea Party and starve the government with no revenue increases are harming the ability of the conservative proposals to get a fair hearing in the political debate as they are drowned out by the "Just Say No to Everything" crowd that dominates the GOP today.
Link to Michael Gerson Column
The reasonableness of this to the conservative cause is that ObamaCare is after all Heritage Foundation/RomneyCare/ObamaCare. It is a plan designed by conservatives as a market based solution to a problem that is very real. If the Republicans were truly ignored, there would be a single payer plan. Democrats universally prefer a single payer plan, but we don't have one today because the GOP had influence in our effort to control health care costs that are out of control. Consumers are not making intelligent decisions and providers are able to extract extraordinary rents from the system. The rest of us pay that bill and it lowers our standard of living. This is what the market based design attempts to improve.
The idiocy of the current situation is that instead of the Republican tinkering with the parts of ObamaCare that do not fit the original Heritage Foundation design (David Brooks explained this a while back), all we get is repeal ObamaCare and an advocacy for returning the country to a place where individuals are at the mercy of Insurance companies, insurance is unavailable for people with pre-existing conditions, and health care costs spiral ever higher as a percent of GDP.
Sunday, January 5, 2014
I'm in Trouble (Sunday 1/5/14 musings)
My books to read list already numbers 15 plus an inventory of 4 more already in some stage of process. Now today's book review adds 4 more to that list of desire. How am I supposed to keep up with the news, global markets, and the idiots in Washington and make rapid progress on this reading list?
Maybe that's why the book about Marco Polo has been on the list for 3 or 4 years. Neither relevant to understanding the world today, nor time sensitive. I should buy the book at least.
I was struck today by a story about how 3 writers for gun magazines who each wrote that some common sense regulations on guns was in the best interest of society and how each was fired from their jobs and banished from the industry. Apparently, the supporters of free speech and continued employment by the Duck Dynasty guy do not support the free speech and continued employment by anyone who dares entertain the notion that some gun regulation might be prudent.
I guess if you believe in literal interpretation of the 2nd Amendment of the Constitution, you don't believe in literal interpretation for people practicing their rights under the 1st Amendment of the Constitution. This does not auger well for Thomas Friedman's plea for compromise in 2014 on a Grand Bargain medium term budget plan.
I agree with Ross Douthat's view that there is little Mayor De Blasio's can do about income inequality in NYC. It can only be influenced by Washington policy and even then, it can only be addressed with small things in the near term (minimum wage) and the large things that will help take decades to work; and they work only at the individual level, and are an interaction between things US policy can affect (education) and things that are the result of globalization and therefore out of control of US policy (equalization of global productivity and wages).
Gail Collins and David Brooks wrote an nice interactive conversation on the state of US politics.
And last, and most difficult to read, is the miraculous survival of a fisherman who fell into the Atlantic 40 miles offshore from Montauk. This is hard for me because I have no greater primal fear than that of drowning after David S. could not overcome my play struggle in Boy Scout life saving class but eventually my real struggle to get air broke me free of his grip and I got my air.
Links to columns below;
Purity on 2nd Amendment Required for employment
Friedman
Douthat
Brooks & Collins
A Speck in the Sea
Maybe that's why the book about Marco Polo has been on the list for 3 or 4 years. Neither relevant to understanding the world today, nor time sensitive. I should buy the book at least.
I was struck today by a story about how 3 writers for gun magazines who each wrote that some common sense regulations on guns was in the best interest of society and how each was fired from their jobs and banished from the industry. Apparently, the supporters of free speech and continued employment by the Duck Dynasty guy do not support the free speech and continued employment by anyone who dares entertain the notion that some gun regulation might be prudent.
I guess if you believe in literal interpretation of the 2nd Amendment of the Constitution, you don't believe in literal interpretation for people practicing their rights under the 1st Amendment of the Constitution. This does not auger well for Thomas Friedman's plea for compromise in 2014 on a Grand Bargain medium term budget plan.
I agree with Ross Douthat's view that there is little Mayor De Blasio's can do about income inequality in NYC. It can only be influenced by Washington policy and even then, it can only be addressed with small things in the near term (minimum wage) and the large things that will help take decades to work; and they work only at the individual level, and are an interaction between things US policy can affect (education) and things that are the result of globalization and therefore out of control of US policy (equalization of global productivity and wages).
Gail Collins and David Brooks wrote an nice interactive conversation on the state of US politics.
And last, and most difficult to read, is the miraculous survival of a fisherman who fell into the Atlantic 40 miles offshore from Montauk. This is hard for me because I have no greater primal fear than that of drowning after David S. could not overcome my play struggle in Boy Scout life saving class but eventually my real struggle to get air broke me free of his grip and I got my air.
Links to columns below;
Purity on 2nd Amendment Required for employment
Friedman
Douthat
Brooks & Collins
A Speck in the Sea
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