Quotulatiousness

August 3, 2013

Obama may avoid meeting Putin at the G20 summit

Filed under: Government, Russia, USA — Tags: , , , , — Nicholas @ 09:35

An interesting sidelight to the suddenly more acrimonious relationship between the Russian and American leaders:

Now that Edward Snowden has been granted temporary asylum in Russia and he has been allowed to leave the airport, things are starting to hot up between the US and Russia. Washington has expressed that they are ‘disappointed’ by the reaction of Moscow and there have been allusions to the fact that President Obama may even go as far as to snub President Vladimir Putin and refuse to meet with him in September 2013.

Russia agreed yesterday to grant Edward Snowden asylum but as a consequence this has put a strain on the relations between Russia and the USA, despite the fact that Putin said that he wanted in no way to jeopardize the relations with the US. Although, sometimes, unbelievably in politics what a politician states is neither firstly necessarily what he thinks nor secondly necessarily what he does; or neither at the same time in the majority of the cases.

But, certainly Putin is probably thinking of himself rather than Obama at the present time. Sheltering Snowden means that he will be able to publically slap Obama in the face and send a strong message of propaganda to his own citizens, telling them that he is not the only one in the world not to respect human rights. If the US does it, then anyone can do it. Secondly, there are 90% of Russians that believe that Snowden’s actions are positive, rekindling the great East-West divide of old, or at least keeping that ideological fire burning bright. There is also the added bonus of it being now possible for Putin to rally up some support in the wake of criticism for arresting opposition leader Alexey Navalny and slapping a five-year prison sentence on him. Putin also has to wage war upon the detractors of his economic policies and face criticism of the slowing down in the Russian economy, with a 30% possibility that the country will enter a recession in 2014 (up from a 20% risk last month), according to a survey by Bloomberg. This affair will help Putin rally support, but it will also galvanize his status in world affairs. He will be empowered to declare that Russia is still a force to be reckoned with and a role to play in geopolitical affairs taking place.

In a recent poll in Russia (Levada Center) there were 43% of Russians that supported Russia’s granting of asylum to Snowden towards the end of July. Only 29% were against it.

But, Putin had very little choice, didn’t he? Snowden was almost barred from leaving the country and flying elsewhere. Either Putin took the decision to hand over Snowden to the US authorities or to provide a safe haven for him in Russia. The first solution would have destroyed his public image and made it look as if he were obsequiously obeying Uncle Sam. The second was the only one that would boost the troops at home.

Now, Washington has hinted that Obama may snub a private meeting with Putin when Obama makes his first public visit to Russia since Putin was reelected in March last year, when Moscow hosts the G20 summit. According to sources at the White House, Obama is presently weighing up the “utility” of the meeting and may even cancel going all together to the summit.

Wendy McElroy on the “invasive weed” threatening public schooling

Filed under: Bureaucracy, Education, Government, Liberty — Tags: , — Nicholas @ 00:01

Her most recent article in The Freeman talks about homeschooling in the United States:

To government, homeschooling resembles a weed that spreads and resists control. To homeschooling parents, it is the flowering of knowledge and values within children who have been abandoned or betrayed by public schools. A great tension exists between the two perspectives. Homeschooling’s continued growth has only heightened it.

The federal government has reacted by attempting to increase its control over homeschooling, for example, by pushing for increased regulation of homeschool curricula. But the federal government is hindered by certain factors. For one thing, education is generally the prerogative of individual states. Nevertheless, the federal government can often impose its will by threatening to withhold federal funds from states that do not comply with its measures.

But homeschooling parents cannot be threatened by a withdrawal of money they don’t receive. As it is, they are paying double. They pay taxes to support public schools from which they draw no benefit and they pay again in homeschooling money and in terms of lost opportunities such as the full-time employment of both parents. The “profit” they receive is a solid education for their children. What they want from the government is to be left alone.

The federal government is also hindered by not being able to play the “it’s for the children” card that justifies so many intrusive policies. Homeschooled children routinely display better development than public school students.

A 2012 article in Education News called the “consistently high placement of homeschooled kids on standardized assessment exams … one of the most celebrated benefits of homeschooling.” Education News compared the quality of homeschooling to that of public schooling. “Those who are independently educated typically score between the 65th and 89th percentile on such exams, while those attending traditional schools average on the 50th percentile. Furthermore, the achievement gaps, long plaguing school systems … aren’t present in the homeschooling environment. There’s no difference in achievement between sexes, income levels, or race/ethnicity.” Studies also indicate that homeschooled children are better socialized with both peers and adults.

July 31, 2013

The congressional defenders of privacy

Filed under: Government, Law, Liberty, USA — Tags: , , , , , — Nicholas @ 11:12

Jacob Sullum in Reason:

“This is not a game,” Mike Rogers angrily warned last week, urging his colleagues in the House to vote against an amendment that would have banned the mass collection of telephone records by the National Security Agency (NSA). “This is real. It will have real consequences.”

I hope Rogers is right. Despite the Michigan Republican’s best efforts to portray the amendment as a terrifying threat to national security, it failed by a surprisingly narrow margin that could signal the emergence of a bipartisan coalition willing to defend civil liberties against the compromises supported by leaders of both parties.

Rogers was not surprised by the recent revelation that the NSA routinely collects information about every phone call Americans make, just in case it may prove useful in the future. As chairman of the House Intelligence Committee, he knew about the program for years, and he had no problem with it.

Not so two other Michigan congressmen: Justin Amash, a 33-year-old libertarian Republican serving his second term, and John Conyers, an 84-year-old progressive Democrat first elected in 1965. These two legislators, conventionally viewed as occupying opposite ends of the political spectrum, were outraged by the NSA’s data dragnet, especially since representatives of the Bush and Obama administrations had repeatedly denied that any such program existed.

The measure that Amash and Conyers proposed as an amendment to a military spending bill would have required that records demanded under Section 215 of the PATRIOT Act, which authorizes secret court orders seeking “any tangible things” deemed “relevant” to a terrorism investigation, be connected to particular targets. Although it was a pretty mild reform, leaving in place the wide powers granted by Section 215 while repudiating the Obama administration’s even broader, heretofore secret interpretation of that provision, the amendment was viewed as a quixotic effort.

July 30, 2013

The real, long-term source of damage to American interests from the NSA revelations

Filed under: Business, Government, Technology, USA — Tags: , , , , , — Nicholas @ 10:10

In The Atlantic, James Fallows explains why the NSA’s digital overreach has likely harmed US long-term interests in many different ways:

In short: because of what the U.S. government assumed it could do with information it had the technological ability to intercept, American companies and American interests are sure to suffer in their efforts to shape and benefit from the Internet’s continued growth.

    American companies, because no foreigners will believe these firms can guarantee security from U.S. government surveillance;

    American interests, because the United States has gravely compromised its plausibility as world-wide administrator of the Internet’s standards and advocate for its open, above-politics goals.

Why were U.S. authorities in a position to get at so much of the world’s digital data in the first place? Because so many of the world’s customers have trusted* U.S.-based firms like Google, Yahoo, Apple, Amazon, Facebook, etc with their data; and because so many of the world’s nations have tolerated an info-infrastructure in which an outsized share of data flows at some point through U.S. systems. Those are the conditions of trust and toleration that likely will change.

The problem for the companies, it’s worth emphasizing, is not that they were so unduly eager to cooperate with U.S. government surveillance. Many seem to have done what they could to resist. The problem is what the U.S. government — first under Bush and Cheney, now under Obama and Biden — asked them to do. As long as they operate in U.S. territory and under U.S. laws, companies like Google or Facebook had no choice but to comply. But people around the world who have a choice about where to store their data, may understandably choose to avoid leaving it with companies subject to the way America now defines its security interests.

Update: Also in the aftermath of Edward Snowden’s revelations, you’d think that Senator Ron Wyden would get the credit he clearly has been deserving all this time:

For many, many years we’ve covered Senator Ron Wyden’s seemingly quixotic attempts to signal to the American public (and press) that the NSA was doing a hell of a lot more surveillance than most people believed, even those who were carefully reading the laws. Because secrecy rules meant that he couldn’t directly reveal what he’d learned while on the Senate Intelligence Committee, he had to issue vague statements, documents and speeches hinting at things that were going on that he couldn’t actually talk about. Of course, now that Ed Snowden leaked a bunch of documents, it’s shown that Wyden was absolutely correct in what was going on (and that the American public wouldn’t like it).

You’d think that would lead people to have a lot more respect for the incredible efforts he went through to alert people to these issues without breaking the secrecy laws. And, in fact, many more people are aware of those efforts. The Washington Post has a nice article about Wyden’s attempts to bring these issues out and to get a real debate going on them.

However, towards the end, the reporter talks to two different former top lawyers at the NSA, who both appear to be really, really angry about Wyden daring to suggest to the public that the NSA wasn’t playing straight with the American public. First up, we’ve got Stewart Baker, the former NSA General Counsel and top Homeland Security official, who is so anti-civil liberties and pro-surveillance that he’s almost a caricature of himself — including claiming that the Boston bombings prove that Americans need less privacy and that civil libertarians complaining about too much surveillance are the real cause for the September 11 attacks.

July 29, 2013

Why Germany is the venue for the loudest denunciations of NSA surveillance

Filed under: Europe, Germany, Government, Media, USA — Tags: , , , — Nicholas @ 09:14

Alex Harrowell explains the deep suspicions among Germans which long predate the NSA surveillance revelations:

Obviously, privacy and data protection are especially sensitive in Germany. After the Stasi, the centrality of big databases to the West German state’s response to the left-wing terrorists of the 1970s, and the extensive Nazi use of telephone intercepts during the seizure of power, it couldn’t really be otherwise. Privacy and digital activism is older and better established in Germany than anywhere else — in the US, for example, I consider the founding text of the movement to be the FBI vs. Steve Jackson Games case from 1990 or thereabouts, while the key text in Germany is the court judgment on the national census from ten years earlier. But the UK has a (strong) data protection act and no-one seems anywhere near as exercised, although they probably should be.

So here’s an important German word, which we could well import into English: Deutungshoheit. This translates literally as “interpretative superiority” and is analogous to “air superiority”. Deutungshoheit is what politicians and their spin doctors attempt to win by putting forward their interpretations and framings of the semirandom events that constitute the “news”. In this case, the key event was Snowden’s disclosure of the BOUNDLESS INFORMANT slides, which show that the NSA’s Internet surveillance operations collect large amounts of information from sources in Germany.

The slides don’t say anything about how, whether this was information on German customers handed over by US cloud companies under PRISM orders, tapped from cables elsewhere, somehow collected inside Germany, or perhaps shared with the NSA by German intelligence. This last option is by far the most controversial and the most illegal in Germany. The battle for Deutungshoheit, therefore, consisted in denying any German involvement and projecting the German government, like the people in question, as passive victims of US intrusion.

On the other hand, Snowden’s support-network in the Berlin digital activist world, centred around Jacob “ioerror” Applebaum, strove to imply that in fact German agencies had been active participants, and Snowden’s own choice of further disclosures seems to have been guided by an intent to influence German politicians. Der Spiegel, rather than the Guardian, has been getting documents first and their content is mostly about Germany.

In this second phase, the German political elite has shifted its feet; rather than trying to deny any involvement whatsoever, they have instead tried to interpret the possibility of something really outrageous as being necessary for your security, and part of fundamental alliance commitments which cannot be questioned within the limits of respectable discourse. The ur-text here is Die Zeit‘s interview with Angela Merkel, in which Merkel argues that she knew nothing, further that there was a balance to strike between freedom and security, that although some kinds of spying were unacceptable, the alliance came first. The effectiveness of this, at least in the context of the interview, can be measured by astonishingly uncritical questions like the one in which she was asked “what additional efforts were necessary from the Germans to maintain their competitiveness”.

H/T to Tyler Cowen for the link.

It’s the same joke over and over again … but it’s funny because it’s true

Filed under: Government, Humour, Media, USA — Tags: , , , — Nicholas @ 07:54

H/T to Nick Gillespie for the link.

July 27, 2013

Municipal bonds and the economic law of gravity

Filed under: Economics, Government — Tags: , , , , — Nicholas @ 10:48

In the US, municipal bonds — bonds issued by city or other municipal governments — have been widely viewed as “safe” investments. Detroit may cause that view to change drastically. Reggie Middleton has been sounding the alarm for a few years:

Following up on my timely post “Here Come Those Municipal Defaults That Everyone Said Couldn’t Happen, Pt 2“, I comment on Meredith Whitney’s OpEd in the Financial Times. If you remember, she — like I — warned of municipal defaults years ago and was ridiculed for such. Ms. Whitney is quoted as saying:

    “As jarring as the reality may be to accept, Detroit’s decision last week to declare bankruptcy should not be regarded as a one-off in the U.S. municipal market.” she said.

    “There are five more towns like Detroit in Michigan alone. There are many more municipalities across the country in similar positions.”

    “The bill for promises past is now so large for some cities and towns that it is crowding out money for the most basic of services — in the case of Detroit, it could not even afford to run its traffic lights,” she said.

    “Will [lawmakers] side with taxpayers, unions or the municipal bondholders? If they back residents, money will be directed to underfunded public services at the expense of pensions and bondholders. If they side with the unions, social services will continue to be cut and the risk to bondholders will increase considerably. If they side with bondholders, social services and pensions are at risk.”

    In the case of Detroit, elected officials, for the first time in a very long time, are siding with residents, Whitney said. This is a new precedent that boils down to the straightforward reality of the survival and sustainability of a town or city, she said.

    “After decades of near-third-world conditions in the richest country in the world, the city finally stood up and said enough was enough,”

Well, this is the problem. Defaulting on revenue bonds where the underlying asset (ex. a housing project, utility, or infrastructure project) is not generating the sufficient cash flows is part and parcel of the risk of investing in said class of bonds. This is widely accepted and understood, which is likely why those bonds have a slightly higher yield.

For some obscene reason, defaulting on the general obligation bonds which purportedly carry the “full faith and credit’ of the municipality as a back stop is deemed as wholly different affair. The reason? Who the hell knows? This is a point I tried to drive home in the original “Here Come Those Municipal Defaults That Everyone Said Couldn’t Happen” article in 2011. Backing by the full faith and credit of a public entity does not make an investment risk free. To the contrary, if said entity is fundamentally insolvent, the investment is actually “riskful” as opposed to risk free.

Treating these bonds as unsecured in the bankruptcy is essentially the way to go. If you don’t want to do that, well you can still consider them backed by the full faith and credit of the insolvent municipality, which is essentially unsecured — and move on anyway — particularly as many potential collateral assets of value would have likely been encumbered by agreements with a little more prejudicial foresight.

July 26, 2013

Justin Amash and the attempt to rein-in the NSA

Filed under: Government, Politics, USA — Tags: , , , , — Nicholas @ 10:19

Dave Weigel looks at the unexpectedly close vote in congress that would have forced the NSA to “walk back” some of its current domestic surveilance operations:

For a few minutes on Wednesday afternoon, Rep. Justin Amash thought he might have killed the National Security Agency’s metadata collection program. He’d optimistically expected maybe 90 Republicans to back his amendment to the Department of Defense budget. Ninety-four of them did. But he ran out of votes eventually — the Democrats didn’t come through — and by a 217–205 margin, the House killed his amendment.

Amash loaded the confetti cannon anyway. “My friends and colleagues stuck with me on my NSA amendment and changed the dynamic of the debate with tonight’s close vote,” the Republican congressman tweeted. “What an amazing staff I have. Thank you, thank you, thank you. You guys are awesome.”

[…]

Defenders of the NSA program are furious that Amash even got that far, and are working to undermine him. According to Politico’s Jake Sherman, Amash started this process with an “unworkable amendment” that would have failed easily, until staffers “held his hand” to fix it. That’s their story, but it doesn’t reflect what led up to the amendment. In the wake of Edward Snowden’s disclosures, every member of Congress who’d been sitting on some security state reform picked it back up and reintroduced it. In the Senate, Utah’s Mike Lee (a Republican) and Oregon’s Jeff Merkley (a Democrat) brought back the Ending Secret Law Act that they couldn’t pass when FISA was reauthorized. Oregon Sen. Ron Wyden and Colorado Sen. Mark Udall, both Democrats, introduced legislation to restrict NSA data collection unless the material contained a “demonstrated link to terrorism or espionage.”

At the time, the lack of quick action on those bills suggested that the Snowden story had been a blip. Privacy advocates in Congress now refer to those bills as the first wave, part of a strategy of attrition that will make the current policy politically untenable.

Amash proved the NSA will have to concede some ground when his amendment moved quickly from obscurity to reality to being under attack from the administration. On Monday night, before the Rules Committee voted on which amendments to bring up, Amash was told to meet with Speaker of the House John Boehner on the floor. He returned from that meeting convinced (and surprised) that he’d get a vote after all.

July 24, 2013

Colby Cosh on the constitutional monarchy

Filed under: Britain, Cancon, Government — Tags: , — Nicholas @ 08:17

I suspect Colby will be getting lots of hate mail from republicans after this column:

The secret of constitutional monarchies is not that they indulge the dynastic impulse, but that they have found a means of circumscribing it without losing the advantages. Chief amongst these, I think, is a sense of historical continuity: we still so clearly remember the new prince’s gin- and horse-loving great-great-grandmother, born in the reign of Victoria, and now comes R.B. himself, unlikely to warm the chair of St. Edward until even the youngest of you reading this are pensioners (if you’re lucky, and if “pensions” are still a thing). It provides a natural, almost enforced occasion for a species of “long now” panoramic, intergenerational thinking that various nerds and hucksters like to profit from.

It’s true that a domestic Canadian dynasty would do that job about as well, and this is the source for much of the odium in which our system is held by republicans. Dammit, Royal Baby isn’t even Canadian Royal Baby! Barring the overthrow of our Constitution, we are never likely to have a “Canadian” head of state who has grown up entirely amongst us. When you are finished having a cry about that, I would suggest reflecting upon the possible benefits: an indigenous Canadian head of state would have to be some particular person, wedded to one of our regions and official languages and political tribes and social classes and, indeed, component nations. Surely there is some merit in having ultimate last-resort legitimacy — an important plus of monarchy, as the Second World War taught — vested in an outsider. Maybe every country should have a king or queen from somewhere else, someone extremely intimate with its constitutional traditions and language but otherwise neutral; rooted, for safety, in other soil.

Or maybe that is the dumbest idea you’ve ever heard. But republicans do need to take the “particularity” factor into account in weighing their long-term chances. Until the debate over the fundamental Constitution gets serious, the choice is “imaginary elected president from my personal fantasies, perhaps a genetic cross between Barack Obama and Justin Timberlake” versus “actual living family that has had various difficulties and embarrassments.” This is inherently good ground for anti-monarchists to fight on, but only when there is no actual fight.

If we had an Australian-style referendum on the monarchy, the republicans would not only have to present an actual alternative system for criticism — which is what befouled the hopes of Australian republicans — undecideds would also be obliged to start imagining a world in which the personal fountainhead of political legitimacy might end up being Don Cherry or Rob Ford or George Stroumboulopoulos. I personally will take my chances with little R.B. God save the Queen.

July 23, 2013

Future monarchs and present-day “republicans”

Filed under: Britain, Government, Media — Tags: , , , — Nicholas @ 09:48

As you may have noticed, I haven’t devoted any space on the blog to coverage of the Duke and Duchess of Cambridge and their son. It’s not that I’m a rabid republican — I’m as much of a mild monarchist as a libertarian can be. What I have found even more tedious than the celebrity pregnancy coverage of the royal baby is the spitting and moaning coming from the “republican” side. Brendan O’Neill (a noted republican) points out that the moaners don’t actually represent real republicans:

So, the royal baby is finally here, and across Blighty the little people will have made themselves virtually bald through frenzied forelock-tugging, or perhaps busted their backs by bowing and scraping before their mewling future king. At least, that’s the impression that has been given by a certain breed of observer, the ironically public-allergic republicans who seem to hate the monarchy primarily because of the behaviour and emotions it induces in the plebs. Once, being a republican meant trusting the public (the clue was in the name) and believing it had the capacity to think and act rationally. Today, if the ostentatious chattering-class wailing about the mob hysteria over Kate’s baby is anything to go by, it means the opposite — it means despairing of the public and shaking a snobby head over its Stepford-like enthralment to all things monarchical.

As soon as it was announced that Kate was expecting, these shallow republicans started bemoaning the mass hysteria that would ensue. Britain will once again become ‘a nation of forelock-tuggers’, clever broadsheet people warned. Apparently, ‘forelock-tugging is all the rage’ in this supposedly modern nation, where the daft blob formerly known as the public is being kept non-angry about the recession and other horror stories through being dripfed info about Kate, Wills and their baby. In the words of the Mirror’s poetic Brian Reade, ‘Our austere country need not grieve, for Wills’ missus can conceive’. That has been the central message of most of the apparently rad commentary on Kate — that the plebs are easily bought off with photos of a pregnant princess and smiling prince. One columnist wrote of the ‘ready-to-whoop peasants’ waiting for news of Kate’s babe. A writer for the Independent said of Kate’s pregnancy, ‘Everyone laps it up… it makes plebs of us all’.

[…]

There are two annoying things about all this. The first is that it’s plain wrong to depict today’s media and public interest in Kate’s baby as a resuscitation of old-world royalist sentiment. Most of the public relates to Kate in the way they relate to celebs — not as a godly bearer of a babe whom we will one day bow before, but as another preggers celeb in nice clothes we can read about in our spare time; a posher Kim Kardashian, if you will. The House of Windsor has self-consciously cultivated a celebrity image for itself in recent years, sensing that its old imperial, mysterious, God-derived powers and so-called right to rule are on the wane in this era of profound crisis for traditionalism, and that celebrity is now a far more powerful source of authority than kingliness. Indeed, the popularity of Kate as just another celeb, albeit a super-A-list one, speaks to the moral diminution of monarchism as it was once understood, to the emptying-out of its alleged magic and power, not to its rehabilitation.

And secondly, this pleb-mauling republicanism is not republicanism at all. It is very often fuelled by an anachronistic desire to protect Kate from the prying eyes of the princess-hungry throng. We are putting poor Kate in a ‘gilded cage’, lefty columnists fret. Others claim we are hounding her — we have clearly ‘learned nothing since Princess Diana’. It’s a very odd republicanism which feels empathy for individual members of the royal family and disdain for the public. For me, editor of the uber-republican spiked, republicanism is not about sneering, but rather is about engagement, taking ourselves and the public seriously, talking about how society should be run, and by whom. And as the American revolutionary John Adams said, pursuing such republicanism means believing the public can be ‘sufficiently enlightened to disabuse themselves of artifice, imposture, hypocrisy and superstition’. Sadly, too few British republicans believe that these days.

Full points to Private Eye for their royal baby cover:

Private Eye

Update: Charles Stross — another republican — has an almost sympathetic view of the new prince’s future:

The kid is not going to have anything remotely approaching a normal life. For one thing, under current UK law, he isn’t eligible to vote. His ultimate career path is already known and if he doesn’t want to put up with it, tough: the pressure to conform to expectations is enormous — he was born under a life sentence. When he ends up in that final occupation he won’t even be eligible for a passport (for long and complex constitutional reasons). He’s going to be the subject of paparazzi attention for the rest of his life. He’s almost certainly going to be sent to a private boarding school of some variety (probably Eton, as with his father), to ensure that he’s exposed to normal people (for “public schoolboy” values of normality); this is normal for the royal family, and it’s worked on previous generations. The usual recipe is for it to be followed by university, then officer training in one of the branches of the military, before joining the Old Firm and learning the onerous duties of public ceremonies and diplomatic receptions. The royals get a particularly brutal work-out in return for their privileges: what other family business would expect an 87 year old great-grandmother to make over 400 public appearances per year?

But those are the traditional parameters of a crown prince’s upbringing. This prince is going to find things a little different because he’s going to be the first designated future British monarch to grow up in a hothouse panopticon, with ubiquitous surveillance and life-logging …

I expect there to be Facebook account-hacking attacks on his friends, teachers, and associates — and that’s just in the near term. He’s going to be the first royal in the line of succession to grow up with the internet: his father, Prince William, was born in 1982 and, judging by his A-level coursework, is unlikely to have had much to do with computer networking in the late 1990s. This kid is going to grow up surrounded by smartphones, smart glasses (think in terms of the ten-years-hence descendants of Google Glass), and everything he does in public can be expected to go viral despite the best efforts of the House of Windsor’s spin doctors.

The real aftermath of Iceland’s banking collapse

Filed under: Economics, Government — Tags: , , , , — Nicholas @ 09:01

Simon Black contradicts the media narrative that Iceland has “recovered” from the melt-down of their banking sector:

It was a spectacular collapse. And the first of many. Ireland, Greece, Cyprus, etc. were soon to follow.

Yet unlike the bankrupt countries of southern Europe, Iceland dealt with its economic emergency in a completely different way.

Politicians here are proud that they never resorted to austere budget cuts that are so prevalent in Europe.

They imposed capital controls. They let the banks fail. And, as is so commonly trumpeted in the press, they ‘jailed their bankers and bailed out their people.’

Today, Iceland is held up as the model of recovery. Famous economists like Paul Krugman praise the government for rapidly rebuilding the economy without having to resort to austerity.

This morning’s headline from The Telegraph newspaper sums it up: “Iceland has taken its medicine and is off the critical list”.

It turns out, most of these claims are dead wrong.

[…]

Meanwhile, the government ended up taking on massive amounts of debt in order to bail out the biggest bank of all – Iceland’s CENTRAL BANK.

This was a bit different than the way things played out in the US and Europe.

In the US, the Fed conjures money out of thin air and funnels it to the government.

In Iceland, since the Kronor is not a global reserve currency, the government had to go into debt in order to funnel money to the Central Bank, all so that the currency wouldn’t collapse.

As a result, Iceland’s state debt tripled, almost overnight, in 2008. And from 2007 until now, it has increased nearly 5-fold.

Today, the government is spending a back-breaking 17.3% of its tax revenue just to pay interest on the debt.

And this is real interest, too. Iceland’s central bank owns very little of the government debt. The rest is owed to foreign creditors… putting the country in an extremely difficult financial position.

At the end of the day, the Icelandic people are responsible for this. They were never bailed out. They were stuck with the bill.

Meanwhile, although unemployment in Iceland is low, wages are even lower. And the weak currency has brought on double-digit inflation.

So while people do have jobs, they can hardly afford anything.

This is most prevalent in the housing market, most of which is underwater. Interest rates have jumped so much that many Icelanders are now on negative amortization schedules, i.e. their mortgage balances are actually INCREASING with each payment.

The maple-flavoured Leviathan

Filed under: Cancon, Government — Tags: , , , , — Nicholas @ 08:22

Richard Anderson on the PM’s latest cabinet shuffle and the media’s focus on the personalities rather than their actual performance:

Perhaps if we looked too closely we might start asking questions. Like why a nation of 34 million needs 39 cabinet ministers? Abraham Lincoln was able to free the slaves, save the Union and encourage the settlement of the American West with a mere eight cabinet ministers. And this with a government run without computers, telephones or even typewriters. Just paper, ink and a few thousand miles of telegraph wires. The population of the whole of the United States in 1860, both North and South, was 31.4 million.

But in those days governments were confined to hum-drum matters, such as winning immensely bloody wars and subsidizing the occasional transcontinental railroad. Today the remit of the state is far more ambitious. Beyond maintaining public order and some key bits of infrastructure, the modern state takes it upon itself to educate, scold, monitor and regulate virtually every facet of modern life. Thus, in a sense, we need 39 wise men and women to govern over us. We would likely need 39,000 and there would still be work left undone.

Except such a feat is impossible. You cannot plan an economy, much less something even more complex such as a whole society, from a few office buildings in Ottawa. When those in charge are non-experts rotated in and out based on political expediency, the result is what Mises called planned chaos. Actual experts might even do worse. No one is really in charge of the Leviathan state. No matter how powerful Stephen Harper seems, he cannot fight against the full weight of bureaucratic inertia. He might, if he felt ambitious, give a few hard kicks.

[…]

Ask any halfway educated Canadian, say the typical university graduate, why exactly Canada needs a Minister of State for Sport and you will get no clear answer, not even a half decent guess. Apply the same question to a professor of political science and you will get no better response. Ask a senior bureaucrat you will get not response at all, except a stream platitudes each less discernible than the last. Yet all will swear that Canada needs a Minister of State for Sport. I mean, what have you got against Sport? Or Multiculturalism? Or Western Economic Diversification?

Since no decent consensus fearing Canadian objects to these things in and of themselves, they do not object to them being supervised, managed, regulated or subsidized by the government. Modern Canada’s true and unquestioned stamp of approval on any facet of everyday life is government authorization. No action or thought is truly noble unless a government department has been consecrated in its name.

Blessed is the name of the Minister of State for Western Economic Diversification.

July 22, 2013

Detroit as Ayn Rand’s “Starnesville”

Filed under: Books, Economics, Government, Media, USA — Tags: , — Nicholas @ 09:59

In the Telegraph, Daniel Hannan quotes Ayn Rand:

Look at this description of Detroit from today’s Observer:

    What isn’t dumped is stolen. Factories and homes have largely been stripped of anything of value, so thieves now target cars’ catalytic converters. Illiteracy runs at around 47%; half the adults in some areas are unemployed. In many neighbourhoods, the only sign of activity is a slow trudge to the liquor store.

Now have a look at the uncannily prophetic description of Starnesville, a Mid-Western town in Ayn Rand’s dystopian novel, Atlas Shrugged. Starnesville had been home to the great Twentieth Century Motor Company, but declined as a result of socialism:

    A few houses still stood within the skeleton of what had once been an industrial town. Everything that could move, had moved away; but some human beings had remained. The empty structures were vertical rubble; they had been eaten, not by time, but by men: boards torn out at random, missing patches of roofs, holes left in gutted cellars. It looked as if blind hands had seized whatever fitted the need of the moment, with no concept of remaining in existence the next morning. The inhabited houses were scattered at random among the ruins; the smoke of their chimneys was the only movement visible in town. A shell of concrete, which had been a schoolhouse, stood on the outskirts; it looked like a skull, with the empty sockets of glassless windows, with a few strands of hair still clinging to it, in the shape of broken wires.

    Beyond the town, on a distant hill, stood the factory of the Twentieth Century Motor Company. Its walls, roof lines and smokestacks looked trim, impregnable like a fortress. It would have seemed intact but for a silver water tank: the water tank was tipped sidewise.

    They saw no trace of a road to the factory in the tangled miles of trees and hillsides. They drove to the door of the first house in sight that showed a feeble signal of rising smoke. The door was open. An old woman came shuffling out at the sound of the motor. She was bent and swollen, barefooted, dressed in a garment of flour sacking. She looked at the car without astonishment, without curiosity; it was the blank stare of a being who had lost the capacity to feel anything but exhaustion.

    “Can you tell me the way to the factory?” asked Rearden.

    The woman did not answer at once; she looked as if she would be unable to speak English. “What factory?” she asked.

    Rearden pointed. “That one.”

    “It’s closed.”

Now here’s the really extraordinary thing. When Ayn Rand published those words in 1957, Detroit was, on most measures, the city with the highest per capita GDP in the United States.

July 21, 2013

Real competition? In our mobile phone market? It’s less likely than you think

Filed under: Business, Cancon, Government, Technology — Tags: , , , — Nicholas @ 09:31

Canada’s mobile telephone market is a rigged oligopoly of three major companies and a few minor players. One of the big three, Telus, has opened a new campaign against the federal government’s tentative gestures towards allowing a more competitive mobile phone market for Canadians. Michael Geist has the details:

Yesterday, Telus CEO Darren Entwistle was campaigning at the Globe and Mail and National Post, warning of a “bloodbath” if the government sticks with its commitment to allow for a set-aside of spectrum for new entrants such as Verizon. Telus is concerned that a set-aside would allow Verizon to purchase two of the four available blocks, leaving the big three to fight it out over the remaining two blocks. Telus emphasized its prior investments in arguing for a “level playing field” in the auction.

Yet to borrow Telus’ phrase — “scratch the surface of their arguments and get to the facts” — and it becomes clear the fight is not about level playing fields since new entrants have been at a huge disadvantage for years in Canada. Indeed, even with a spectrum set-aside, there would not be a level playing field as companies such as Telus would have big advantages that include restrictions on foreign ownership for broadcast distribution (thereby blocking Verizon from offering similar bundled services), millions of subscribers locked into long term contracts, far more spectrum than Verizon would own, and its shared network with Bell that has saved both companies millions of dollars.

While the companies frame their arguments around level playing fields, the real goal is simply to keep competition out of the country. For Verizon (or any major new entrants), a spectrum set-aside will be crucial since it is the only way to obtain sufficient spectrum (when combined with the existing spectrum from Wind Mobile and Mobilicity) to establish a viable fourth wireless network that could compete directly with the big three incumbents. If Telus gets their way, the removal of the set-aside would kill the government’s stated goal of a viable fourth carrier since there would be little reason for Verizon to enter the country only to face many of the same disadvantages that has hamstrung the smaller new entrants.

[…]

Make no mistake: the Telus lobbying campaign will be joined by Bell and Rogers as the three companies spend millions of dollars in advertising and lobbying to keep the Canadian market free from much needed competition (the Wire Report reports that ten board members each from Telus and BCE have registered to lobby the government on spectrum). The government has insisted that it will do whatever is necessary to ensure greater competition and consumer choice in the wireless sector. The potential Verizon entry into Canada — undoubtedly conditioned on a spectrum set-aside — is precisely what is needed. In this case, sticking with its policy by siding with consumers and greater competition has the dual advantage of being both good policy and good politics.

Reason.tv – Detroit’s Tragedy and How to Fix It

Filed under: Economics, Government, USA — Tags: , , , — Nicholas @ 09:12

The key things about Detroit’s bankruptcy are that it didn’t happen overnight – and it didn’t have to happen at all.

Detroit’s long, sad slide started in 1950, when the Motor City’s population peaked at nearly 2 million people. Now it’s around 700,000.

The hollowing out of the city was on gut-wrenching display in two recent exhibits at the National Building Museum, featuring photographs by Camilo Jose Vergara and Andrew Moore.

In fat times and lean, the city’s pols and power-brokers chose to focus their energy, and the residents’ tax dollars on gigantic, big-ticket development scams while ignoring the basics that let cities thrive — or at least survive.

Detroit’s leaders poured money into a never-ending assembly line of sad-sack projects such as the Renaissance Center, the Fox Theater, Comerica Park, Poletown, the People Mover, and Ford Field.

But unlike Pompei and other cities crushed by Nature’s wrath or God’s wrath, Detroit’s destruction is completely man-made and thus can be reversed. The city that midwifed the Model T and the Cadillac, Bob Seger and Eminem, Ted Nugent and the Insane Clown Posse, still has tremendous assets in terms of infrastructure, location, and people.

Like Buffalo, Cleveland, St. Louis, and other dead cities scattered across the map of the industrial Midwest like so many cigarette burns, Detroit can stage its own comeback by reducing crime and picking up garbage; by freeing kids, parents, and property values from an abysmal school system; and getting the government out of everything that isn’t essential.

In other words, Detroit’s leaders only need to do what they should have been doing for the past 50 years. And the city’s dwindling supply of residents needs to keep them honest this time.

Because Detroit is finally out of next times.

Produced by Jim Epstein. Written and narrated by Nick Gillespie. Additional camera by Meredith Bragg.

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