Steve Forbes on the Crisis

In his December 10, 2009 Fact and Comment column, In-Credit-Able, in Forbes Magazine, Steve Forbes clearly communicated several points worth capturing.  Here’s on on the mortgage crisis:

Government-sponsored enterprises Fannie Mae ( FNM news people ) and Freddie Mac ( FRE news people), with their implicit government guarantees, were able to totally dominate the mortgage market. They could borrow cheaply and leverage up on a scale no private company could. When they went bingeing on subprime mortgages, they ended up twisting and then destroying the housing market. The private sector was quite capable of generating players that could have performed Fannie’s and Freddie’s roles. And because they wouldn’t have had Uncle Sam’s moral-hazard safety net, they would have been infinitely more cautious, even with the Fed creating floods of liquidity and the credit rating agencies forgetting their raison d’être. Yet Congress is determined to keep these beasts alive and under government sway. Washington is also taking over the student loan market.

This is not a well understood point.  Having the implicit guarantee of the government short-circuited the prudence that would take place in a free market.  All the bright bulbs that condemn free markets for causing the crisis, don’t seem very bright to me because they not only miss the true cause of the crisis, but they blame the very thing that could have prevented it.  Removing prudence from a free market through a government action will always end badly.

Here’s some clear thinking from Steve on health care:

The prospective government de facto takeover of health care will extend Washington’s reach into the credit markets. Health insurers will be reduced to federal vassals by being forced to offer policies at prices and terms dictated by Washington. As a reward they will have first call on the credit markets, with the same sort of implicit guarantees that once so benefited Fannie and Freddie.

It’s easy to forget, businesses like insurance companies are in business to make a profit for their shareholders.  If they don’t make a profit, there’s nothing forcing them to stay in business.

Advertisements

Walter Williams on Education

In his column today, Black Education, Walter Williams touches on some of the same things I touched on last April in my post on how to save education.

They have parents with little interest in their education. These students not only sabotage the education process, but make schools unsafe as well. These students should not be permitted to destroy the education chances of others.

I agree for any student that is disrupting others.  Education is expensive.  We pay $10,000 – $15,000 per student per year of K-12 education.  In return for spending this money, we should expect students to be on their best behavior and problem kids need to be removed from the population so other can learn.

Another issue deemed too delicate to discuss is the overall quality of people teaching our children. Students who have chosen education as their major have the lowest SAT scores of any other major. Students who have an education degree earn lower scores than any other major on graduate school admission tests such as the GRE, MCAT or LSAT. Schools of education, either graduate or undergraduate, represent the academic slums of most any university. They are home to the least able students and professors. Schools of education should be shut down.

This goes along with my belief that we need to remove bad teachers and reward good ones.  Teachers seem to hate the idea of performance measurement.  It’s not hard to see why based on Williams’ paragraph above, they aren’t that good.  Teaching is not an entitlement.

Yet another issue is the academic fraud committed by teachers and administrators. After all, what is it when a student is granted a diploma certifying a 12th grade level of achievement when in fact he can’t perform at the sixth- or seventh-grade level?

Agreed.  In my post, I wrote that teachers need to assess accurate grades that truly reflect the students’ proficiency of the subject matter.  There should be no other criteria when giving a grade.

In summary, public education is not good because it has stifled or simply has wrong-headed ideas on several important levels of feedback.

  1. Student grades.
  2. Student behavior.
  3. Management of teacher quality.
  4. Ultimately, the most important level of feedback that is stifled is funding.  Public education receives funds no matter what.   #4 enables #1 – 3.

Sarah Palin on Oprah

I finally got to see Sarah Palin on Oprah.  Decent stuff.  I noticed the same thing that several conservative talk show hosts noticed as well, there was no shots of the audience.  The way it was edited, it seemed like there was no audience at all.  I’d be interested to know the real story on that.  Conservative talkers seemed to think Oprah didn’t want to show an audience full of people nodding in agreement with Sarah.

Here are a few observations I have.

1.  People need to wake up to the heavily clouded media lens. If you haven’t seen this Oprah, watch it and listen closely to Sarah’s side of story about the Katie Couric interview.  The journalistic standards in the country are very low.  I’m not saying that Couric should have taken it any easier on Palin.  But, an honest viewer has to see that the media did take it much, much easier on Obama and Biden to the point of propaganda.  I think only now, a year later, the media is starting to fidget with the idea of asking Obama some tough questions.  All you need to do is simply imagine if Palin or Bush would have been remotely tied to an organization like ACORN.  We would have heard the end of it.

2. Would-have, could-haves. When Palin explained her side of the story about her response to Couric’s question about what specific magazines and newspaper Palin read, I believe her.  She said she was frustrated.  She thought it wasn’t a question that would have been asked any other candidate and felt it was an insult to her and Alaskans.  Oprah did us a service in showing that footage from the Couric interview and Palin’s story fits with the reaction and body language I saw.  If I could do it over again for Palin, I’d just simply have turned the question around on Couric.  What magazines and newspapers do you read?

3.  Recommendation for Palin. Figure out how to clearly communicate why you stepped down as Governor.  Whatever it is that she’s saying doesn’t come through well.  I can’t tell if it’s because the attention that followed her from the campaign was hindering her ability to lead Alaska’s government or if she felt she could have a bigger impact in the U.S. in a private role.  Whatever the reason, it still isn’t coming through in a compelling fashion.

4.  Oprah? Oprah was harping hard on the degree to which Palin said she was handled during the campaign, like how she was scripted and clothes picked out and provided for her.  Oprah.  Wake up.  Your guy is handled as well.   He doesn’t pick out or pay for his suits.  Michelle doesn’t either.  He has a team of speechwriters, consultants, stylists and advisers to make him and her appear as they do.  Oprah, look at yourself, you don’t do all the work to make you look good all by yourself.  You have a rather large team to make it all happen.

But on the other, I think the handling is telling of our society.  Politicians are products.  They are made up by polls and focus groups. They are, generally, who we want them to be (or who their consultants think we want them to be).  They’re phony.  It would be refreshing to see a real person running for office.  I would love to hear a politicians say, “This is what I believe in, this is what I’m going to do, this is what you’ll get if you vote for me.  If you don’t want those things, vote for the other candidate.”

Amazing Hoodwinking

It’s amazing to me that we continue to let Congress go down this path of rushed legislation.  “We must do this now!”  “We have to sign it before Christmas!”  They’ve used the same pattern for every piece of rushed legislation this year since the initial TARP programs last year.   TARPS I and II.  Stimulus.  Overextended budget.   Cap and trade (though not signed yet).  Health care.  “We can’t afford to stop and think about this.  We must act now!”

It’s the same argument global warming believers use with the planet.  “It will only happen gradually for the 50 – 100 years, but if we wait 5 more minutes it will be too late.”

In a former job we had a lot of “fire drills.”  The bosses would come with these important pieces of work that had to be done now!  They would get us all frothed up so that we were cranking out absolute crud until 2:00 am.  I coined a term for those projects:  JALJA (Jumping Around Like Jackasses).  “Here comes another JALJA,” became common lingo in my group.  Most of us eventually wised up and realized the JALJA’s weren’t important and moved onto to work for bosses who could use their resources effectively.  The JALJA leaders couldn’t figure out what was important and what wasn’t, so everything was, even when it wasn’t.  They didn’t know what they were doing, so they did a lot of it to keep people guessing.

The Congressional pace over the past year reminds me a lot of those good ole JALJA’s.  People seem to be wising up, based on Obama’s declining poll numbers.  I hope it will translate into results at the 2010 Congressional elections to restore a balance of power in Congress.

At the very minimum, maybe we will get back to the days where Congressman and Senators would at least read, if not come to fully understand the stuff they’re voting on.  It seems like such a basic expectation.

Monstrosity

At this point, I’d take Britain’s health care system over the 2,000 page monstrosity in the Senate.  I remember my Grandpa use to say that he was worried about the world because he was afraid what it would be like when the next generation took over.  Looks like he was right.

I never thought I would write this, but at least in Britain, it’s pretty simple.  You pay a tax and you go get your cruddy health care with no fees at the point of service and, I believe they have a private system that you can pay extra for if you care to receive better care.   

We are fools.

Senator Jim DeMint on Dennis Miller

I listened to the podcast of Dennis Miller interviewing Republican Senator Jim DeMint.  DeMint was plugging his new book, Saving Freedom.

While I enjoy Dennis Miller’s show, some of his beliefs remind me of a younger, more naive version of myself.   He said a few things that I would take him to task on.

First, he said that he doesn’t mind giving up some of his money to help the poor.  It’s the clueless he doesn’t want to help.

DeMint responded well in stating that he understands his desire to help the poor, but that government is an ineffective way to do that.  If Miller didn’t have to pay as much money to government, then he could voluntarily give it to the poor how he see fit.

Miller then responded that if he didn’t give some money to the government, then he would be giving the poor money through bars because they would wind up in prison.

Miller should read more from Walter Williams.  He explains how government programs and intervention have unintended consequences that hurt the poor.  He actually explained this rather well in a PBS video series circa early 1980s.

I don’t think Miller has developed the appreciation for the positive outcomes of voluntary activity that I have.  Many good things come from voluntary activity be it voluntary trade in the purchase of goods and services or voluntary contributions to charity.

Voluntary activity encourages profit and non-profit activity alike to run better.  Poorly run businesses and charities will not sell or attract donations and they go away.  The well run organizations that  truly deliver valuable and positive results stick around.

Government is ineffective because it doesn’t have that natural incentive structure of rewarding the outcome.  Government rewards intentions.  Well intended, but poorly run government organizations often stick around and grow so they can “be fixed”, when the best fix of all is to get rid of the poorly run organization.

But, that rarely happens.  It’s easy to sell why well intended program must not be abandoned.  In fact, it’s tempting ever so tempting for politicians to use these very same sales pitches to remind us of all the good they are doing.  The populace buys it.

“We  must have public schools.  We can’t abandon the kids.”  Most people buy that.  They don’t bother to look around at all the goods and services not provided via government that don’t have the problems of public education.

What people don’t consider is the problems with public education are caused by public education – the system.

Excellent Video Series on Keynes and Hayek

This makes the second link I’ve made to PBS Newshour in the past week.  The link will take you to a series of five video segments with economists Lord Skidelsky and Russ Roberts hosted by the Lehrer.  They discuss Keynes, markets, the financial crisis and a host of other topics and, as my previous link to an interview with George Shultz, is hosted by Paul Solman.

In one of the videos, Solman describes himself as a “dispassionate reporter.”  From what I’ve seen of his work so far, I agree.  Journalism needs more like him.  After watching over an hour of his interviews now, I can’t tell if his personal beliefs lean one way or the other.  What’s more, he seems to understand the subject and is interested in getting the real story out, rather than a stylized version of the story meant to fit a predetermined narrative.  Nor does he practice “gotcha” journalism.

One quote from Russ Roberts that I will take with me is, “Capitalism is a profit and loss system.  The profits encourage risk taking.  The losses encourage prudence.”

I highly recommend watching the video series if you are the least bit interested in economics or gaining a better understanding of the the true causes of the financial crisis.