Saturday, March 14, 2009

Thomas Woods' "Meltdown": Buy It Now!

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Tom Woods has written a timely and timeless book - timely because it addresses the most pressing issue of our day, and timeless because he explains economic cycles and the nature of money in plain language.
The first chapter quickly identifies fractional reserve central banking as the main driver of the current and previous economic downturns. It's a long-overdue call to debate the necessity of our Federal Reserve system.

The second chapter addresses the housing bubble, and how the loudest voices on all sides of the debate are proposing solutions to the symptoms instead of recognizing the real problem.

The third chapter addresses the government's futile reactions to the financial and economic crisis in the last months of 2008
The forth chapter alone is well worth the price of the book. Mr. Woods explains in plain language that economic cycles are not natural phenomenon, but are caused by artificial manipulation of the money supply.
Order it now and RTWT. As an indispensible guide to the economic crisis, this is in a class with -- even arguably better than and that's saying something -- the John Allison lecture in the "Classics" section on the right sidebar.

In fact, I think you need to read this so badly that I will buy a copy for the first ten people that email me requesting a copy. How's that for an endorsement?

Who WIll Watch The Watchers?

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It's gotten so comical that Bernanke is now asking for another agency to regulate him!

European Socialism: That's How We Got Here...

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Not only did Europe lead the way, but this rule change was actually an attempt to increase regulation rather than to decrease it. Sound nuts? Well, let’s take a look [emphasis mine]:

But does the adoption of this relaxed net capital rule show that the SEC was “captured”? The problem with this simple hypothesis is that the SEC’s adoption of the CSE program in 2004 was not intended to be deregulatory. Rather, the program was intended to compensate for earlier deregulatory efforts by Congress that had left the SEC unable to monitor the overall financial position and risk management practices of the parent companies controlling these investment banks. Still, if the 2004 net capital rule changes were not intended to be deregulatory, they worked out that way in practice. The ironic bottom line is that the SEC unintentionally deregulated by introducing an alternative net capital rule that it could not effectively monitor.
So the new rule was an attempt to regulate more, not less

Tea Time: The Lousy Sign

Now It Makes Sense

President Emily Ogabe

They told Glenn that if he voted for McCain we'd have a President who was an out-of-touch cheerleader for the economy.  And they were right!

Let's roll the tape - this is John McCain last September, in comments subsequently and routinely derided by Obama:

"You know," said McCain, "there's been tremendous turmoil in our
financial markets and Wall Street and it is -- people are frightened by
these events. Our economy, I think, still the fundamentals of our
economy are strong.

And here is President Emily Litella speaking yesterday:

After meeting with Paul A. Volcker,
one of his top economic advisers, Mr. Obama said, “There are a lot of
individual families who are experiencing incredible pain and hardship
right now.”

“But if we are keeping focused on all the fundamentally sound
aspects of our economy,” he added, “all the outstanding companies,
workers, all the innovation and dynamism in this economy, then we’re
going to get through this. And I’m very confident about that.”

Rogers: Hyperinflation Will Consume Us

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If we don't have a world war first of course... -Ed.

We Surround Them

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The Biden Challenge

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Joe Biden warned us that Barack Obama would get tested by unfriendly nations in the first six months of his administration because of his inexperience.  That prediction now looks like sunny optimism.  Just days after China aggressively challenged the US Navy in international waters in the South China Sea, Russia now says they may start basing bombers in Venezuela — and Cuba:

A Russian Air Force chief said Saturday that Venezuelan President Hugo Chavez has offered an island as a temporary base for strategic Russian bombers, the Interfax news agency reported.

It took John Kennedy more than a year to precipitate a military standoff with the Soviet Union over Cuba in the 1962 missile crisis.  It’s taken the Obama Amateur Hour less than two months.

Dr. Ogabe

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Instead? Instead we have a president who’s taking the Spaghetti Approach to staffing his Treasury Department — throwing stuff up against the wall and seeing what sticks. And instead of using his moral authority to soothe the markets, Obama has thrown it away, in the opinion of Dick Morris, as “his every remark and the constant preoccupation of his Cabinet is to heighten the sense of crisis and to escalate the predictions of doom.”

Imagine for a moment you suffer from clinical depression. You go to see your shrink, and instead of giving you Prozac and his home phone number, he hands you a straight razor and a terse, “don’t call the office, there won’t be anyone there.” That’s what Dr. Obama has done for the nation.

Gekkoed Galt

At times, Summers sounds like he could be quoting from Ayn Rand’s The Virtue of Selfishness. In reality, he’s promoting a program which has already caused Rand to rise from her grave.

Ordinarily, making Rand required reading around the White House would be considered a good thing.  However, such reading could turn into what Wikipedia describes as:

The political manipulation of language, by obfuscation, e.g. WAR IS PEACE. Using language to obfuscate meaning or to reduce and eliminate ideas and their meanings that are deemed dangerous to its authority.


The encouragement of “doublethink,” whereby the population must learn to embrace inconsistent concepts without dissent, e.g. giving up liberty for freedom. Similar terms used, are “doublespeak“, and “newspeak

America is still falling prey to the “charlatans, quacks and hustlers” Williams described.  Instead of using altruistic devices, the bad guys now seem to be toying with the use of Orwellian tactics.

Of Bailouts, Rent Seeking And "Opportunity"

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At this point, it is often easier for corporations to satisfy their greed by lobbying for government funds than by engaging in productive activity. As Gordon Gekko put it in his speech, “[t]he new law of evolution in corporate America seems to be survival of the unfittest.” Failing firms are using their very failures as justification for seeking bailouts.

It is also ironic that Summers cites an excess of “fear” as one of the main dangers facing the American economy. Ironic because the administration he serves has itself been stoking that fear in order to undercut opposition to its programs. As White House Chief of Staff Rahm Emanuel puts it, the crisis is “an opportunity to do things you could not do before . . . You never want a serious crisis to go to waste.” An obvious corollary to this notion is that the “opportunity” will be even bigger the more “serious” people believe the crisis to be.

I repeat: Capitalism without bankruptcy is like Christianity without hell -- it doesn't work very well...

What Guantanamo?

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“It appears on first reading that whatever they call those they claim the right to detain, they have adopted almost the same standard the Bush administration used to detain people without charge — with one change, the addition of the word `substantially’ before the word ’supported.’ This is really a case of old wine in new bottles.”

Also: “Maybe President Bush should just have changed the name of Guantanamo. Then he could have announced that there were no longer any enemy combatants at Guantanamo.”

Friday, March 13, 2009

Crapping Collectivists

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China expresses some … um … “concern” about whether or not it will ever see its money back:

The Chinese prime minister, Wen Jiabao, expressed unusually blunt concern on Friday about the safety of China’s $1 trillion investment in American government debt, the world’s largest such holding, and urged the Obama administration to provide assurances that the securities would maintain their value in the face of a global financial crisis.

“We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.”

Just a little? There’s an old saying to the effect of “if you owe the bank $1 Million, then the bank owns you; if you owe the bank $1 Trillion, then you own the bank.”

In short, China’s not just “worried” about the current fiscal mess. It’s crapping its collectivist shorts.

The Honesty

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TYPICAL: “A New York Times editorial blames America’s gun lobby for 11 deaths in Alabama — but ignores 16 deaths in ‘gun free’ Germany on the same day.” The honesty we’ve come to expect on these issues.

You'd Think They'd Get This One Right...

After the Gordon Brown debacle, you would think the White House would put a little more thought into planning for visits by visiting heads of state. But Brazil is already grumbling about the treatment of President Luiz Inacio Lula da Silva, who will sit down with Obama this weekend and is the first Latin American leader to visit the White House under the new administration.

Silva aides said the trip was pushed forward from Tuesday because of
the St. Patrick's Day holiday - making Latin America once again look
like an afterthought. Then, the White House announcement misspelled his
name as "Luis Ignacio" and put "Lula" - a nickname that decades ago
became a legal part of the Brazilian leader's name - in quotes.

I'm sure he'll feel better when he gets his DVDs.

... since the U.S. has now become Brazil. Only including a saviour of course...

Honor Our (Politician's) Words?

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BEIJING (AP) - China's premier expressed concern Friday about its massive holdings of Treasuries and other U.S. debt, appealing to Washington to safeguard their value, and said Beijing is ready to expand its stimulus if the economy worsens.

Premier Wen Jiabao noted that Beijing is the biggest foreign creditor to the United States and called on Washington to see that its response to the global slowdown does not damage the value of Chinese holdings.

"We have made a huge amount of loans to the United States. Of course we are concerned about the safety of our assets. To be honest, I'm a little bit worried," Wen said at a news conference following the closing of China's annual legislative session. "I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets."

Good luck with that...

Isn't Any

"The argument that this budget doesn't have tax increases [on everyone] is, I think, an 'Alice in Wonderland' view of the budget," he said.
He challenged the budget's math on cutting the debt: "When you take the deficit and quadruple it and then you cut it and half, that's like taking four steps back and two steps forward. That's not making any progress; you're still going backwards."

Gregg questioned why any foreign country would continue to buy up U.S. debt: "Because if I'm in the international marketplace, and I'm looking at this budget, I'm saying to myself, ‘Where's the discipline? Where's the containment?' There isn't any."

Thursday, March 12, 2009

Move Along Now, Nothing To See Here

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SMOOTHEST TRANSITION IN HISTORY! “As a third top Treasury nominee withdraws from consideration (see Mark’s item, below) and Vivek Kundra, President Obama’s Chief White House Information Officer, takes a leave of absence following the FBI’s raid on his former office, the administration announces that attorney Tony West, who volunteered his services to represent John Walker Lindh (the so-called “American Taliban” convicted after making war against his country), is the president’s choice to lead the Civil Division at the Department of Justice.”

Not Until The Pitchforks And Torches Appear

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Knowing that the Greenspan Fed would bail out the markets after any bust, they went from one excess to another. So, the Long-Term Capital Management collapse in 1998 begat the easy credit that led to the dot-com bubble and bust, which in turn led to the extreme ease and the housing bubble.

Austrian economists assert the current crisis is the inevitable result of the Fed's successive efforts to counter each previous bust.

In the meantime, both Western democracies and autocratic governments such as China are actively utilizing the ideas of both Keynes and Friedman alike in enacting massively expansionary fiscal and monetary policies to counter the crisis resulting from the severe contraction in credit.

If these policies are successful, perhaps governments will adhere to Austrian principles to prevent a new boom and bust. That is for the next cycle, however. To paraphrase St. Augustine, governments may be saying, "Make us non-interventionist, but not yet."

OShit On A Stick

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Talk about BS on a stick. If a president signs something into law his watch, it is his and not anyone else’s. To pretend anyone would actually believe that glib nonsense is incredible. But much of the MSM dutifully reported it as such.

He also pushed the fiction that if this bill wasn’t signed, the government would shut down. No it wouldn’t. Congress simply passes a continuing resolution which funds government at last year’s levels. But that’s not what he or Congress wanted. They wanted the 9,000 earmarks and the 8% increase in spending as well - thus the fiction about it being both necessary and last year’s business.

Then to put the proverbial cherry on the dissembling rhetorical sundae, Obama issues his own signing statement after making a press event about dissing Bush’s use of them.


Never Mind

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WASHINGTON (AP) - Confronting misgivings, even in his own party, President Barack Obama mounted a stout defense of his blueprint to overhaul the economy Thursday, declaring the national crisis is "not as bad as we think" and his plans will speed recovery.

Challenged to provide encouragement as the nation's "confidence builder in chief," Obama said Americans shouldn't be whipsawed by bursts of either bad or good news and he was "highly optimistic" about the long term.

Too Late!

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Invited by a reporter Monday to criticize President Obama’s economic plans, the chair of the White House Council of Economic Advisers, Christina Romer, naturally brushed the question aside. “You want me to tell you what's wrong with the fiscal stimulus package?” she said. “SO not going to do that!"
Too late! As it happens, the lecture Romer had just finished delivering at the Brookings Institute on Monday afternoon was criticism enough.
An expert on the Great Depression, Romer organized her lecture around six lessons distilled from the era. The administration she serves seems to be disregarding every one of them.
Of course, it's a good thing we're ignoring some of her lessons. But on balance, it's hard to point to anything O proposes that won't make things worse.

Wednesday, March 11, 2009

Nerdy Awesomeness

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Welcome Aboard

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The Map

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USA Today points out that, last year, just 32 counties accounted for one half of all foreclosures in the United States. Those counties are outlined in red below. Even among them, there are some areas that are worse than others: "Eight counties in Arizona, California, Florida and Nevada were the
source of about a quarter of the nation's foreclosures last year."

When It Is Controlled By Government

Even the New York Times was sounding the warning. Nine and a half years ago.

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Ah. Well. If only there had been more regulation. If only. I can tell you one thing for sure: that the whole financial mess proves capitalism doesn't work. When it is controlled by government.

OClueless With Plugs On Top

Vice President Joe Biden says only 5 percent of the Taliban is incorrigible and not susceptible to anything other than being defeated
"This does not require any response or reaction for this is illogical," Qari Mohammad Yousuf, a purported spokesman for the insurgent group, told Reuters when asked if its top leader Mullah Mohammad Omar would make any comment about Obama's proposal.

"The Taliban are united, have one leader, one aim, one policy...I do not know why they are talking about moderate Taliban and what it means?"
Just wondering... Does Team "O" have any idea who we are at war with?

The Second Derivative

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Somebody had to say the obvious. Barack Obama is tying himself in knots. Andy Grove does in the Washington Post.

We have gone through months of chaos experimenting with ways to introduce stability in our financial system. The goals were to allow the financial institutions to do their jobs and to develop confidence in them. I believe by now, the people are eager for the administration to rein in chaos. But this is not happening.

I made a similar observation in past posts, and wrote, not long ago, that Obama’s desire to turn the economic crisis into a laboratory for his own political vision was a disaster waiting to happen. Andy Grove understands the dangers well. But does Obama? I wrote:

Maybe part of the reason the White House is frazzling itself into the ground is that they’re trying to remake everything. Everything has now become part of the delta. Everything is changing. Now they are facing the revenge of the second derivative: the rate of the rate of change.

Esther Today

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There was no way to negotiate a modus vivendi with the antisemites;  the royal decree had given them the chance to kill the Jews, and they intended to do it.

I have many Iranian friends, across that country’s marvelous ethnic kaleidoscope.  They are variously Persians, Kurds, Azeris, Balouchis, Lur, Ahwazi Arabs, and so on.  Many of them take particular delight in pointing out that Persia is the only country to have had a Jewish queen.  Esther.  While antisemites undoubtedly rule Iran, I do not think there is mass Jew hatred in contemporary Persia, and I do not think the descendants of Agag and Haman would hold meaningful power if the Iranians were free to choose their government.  But they do not have that option, and they may live through the latest battle in the ancient war between the Jews are their enemies.  Their story, and perhaps their destiny, too, is part of the Book of Esther.  Most of them, I think, are rooting for the good queen against the Amalekites.

10 To The Millionth

We are constantly told, by those who mock "the sanctity of human life," that chimpanzees share 98 per cent of our DNA. But the key instructions on brain-growing are in the remaining two per cent, as we discovered from the Human Genome Project. All neurons start from a single cell in an embryo, but the human ones are instructed to keep doubling for more rounds than any monkey, and to create in due course a brain whose cortex alone co-ordinates a billion synaptic connections, and whose overall complexity exceeds that of any object known in the entire Universe. It yields an instrument capable (according to the calculations of Edelman and Tononi) of some 10 to at least the millionth power of possible neural circuits: a number hyperastronomically beyond the total number of particles in the universe.

That is a single glimpse into what emerges from a human embryo. These numbers alone should fill us with horror at what is being done in our labs.

Our Average Saviour

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The narrative that is now building is one of an administration overwhelmed, still in a campaign mode and rudderless. It began with the UK’s Telegraph last week and it seems to be gaining momentum.  Unless Obama and the administration can do some pretty fancy work over the next 50 days, he may emerge from his first 100 days with that being the conventional wisdom.  If so, he’s going to have a long 4 years ahead of him.

UPDATE: Interesting Gallup Poll - totally average:


Again And Again -- Or Worse

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We periodically recoil in horror at government’s failure to protect foster children or care for veterans or the mentally ill. But then we turn around and assume government will perform better in areas more complicated.

Why does the failure of government so often lead so many to believe we need more government?

Like the hair of the dog for the alcoholic, it may calm the trembling hands for a moment but it inevitably leads to another spree and another hangover.

Or worse.

And, as Hayek said, we’ll again see “how little [men] really know about what they imagine they can design.”

Again And Again

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It is understandable that those who derive their power from government would use this recession as an excuse to further government’s reach. But they act as if government has been absent — as if they’ve been absent — from the role of regulator and legislator.

He’s precisely right - it wasn’t a problem with lack of regulation or lack of legislation. It was a lack of proper regulatory oversight and a willful decision by legislators to ignore the building crisis coupled with government distorting the market and actually incentivizing risk taking far beyond that which is prudent that led us here. And now that they have us in this position, all of them, Greenspan included, are engaged in a flurry of finger-pointing and name calling at every one but the right ones. This wasn’t a crisis which happened in just the last 6 months or 8 years. This one has been building for a while.

We had Democrats in charge and then we had Republicans. Again and again.

Put Greenspan In The Clink Next To Barney

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When I did my “Blame Game” series, I put Alan Greenspan near the top of the list for his mismanagement of monetary policy over his tenure, always bringing back the punch bowl too fast, and never letting enough marginal entities go into insolvency.  His tenure corresponds to the fast climb in the total leverage of the US economy.  When debtors realize that the Fed will not deliver any real pain, they quickly pile on the debt, leading to the overleveraged condition we are experiencing now.

In a WSJ editorial today, Greenspan has the temerity to say that his monetary policy did not cause the housing bubble

As I noted at RealMoney during 2004-2006, the yield curve flattened the hard way, with the Fed raising rates, and the long end falling.  I noted that China was acting as a second central bank for the US, stimulating as the Fed withdrew stimulus.  But the Fed did little to counteract China’s influence

Say It Ain't So

Thomas Joscelyn reports that a former Gitmo detainee, Abdullah Ghulam Rasoul, has become the Taliban's chief operations officer in southern Afghanistan, where violence has been spiking in the last year. In response to that spike, thousands of U.S. troops are preparing to deploy to southern Afghanistan. Their task will be all the more dangerous because, according to The Times (UK), Rasoul is "responsible for increasingly sophisticated explosives attacks on British soldiers in Afghanistan."

As a detainee, Rasoul went before a military tribunal. He presented the familiar litany of ridiculous defenses. Though captured in the car of a Taliban leader while holding a gun, he claimed he was forced to carry the gun. Rasoul reportedly also possessed two Casio watches similar to those used in al-Qaida bombings. He claimed he was holding the watches for a Taliban member who lacked pockets. Rasoul also said he was the victim of unscrupulous bounty hunters.

George W. Obama: Signing Statement Edition

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WASHINGTON – President Barack Obama, sounding weary of criticism over federal earmarks, defended Congress' pet projects Wednesday as he signed an "imperfect" $410 billion measure with thousands of examples. But he said the spending does need tighter restraint and listed guidelines to do it. Obama, accused of hypocrisy by Republicans for embracing billions of dollars of earmarks in the legislation, said they can be useful and noted that he has promised to curb, not eliminate them.

On another potentially controversial matter, the president also issued a "signing statement" with the bill, saying several of its provisions raised constitutional concerns and would be taken merely as suggestions. He has criticized President George W. Bush for often using such statements to claim the right to ignore portions of new laws, and on Monday he said his administration wouldn't follow those issued by Bush unless authorized by the new attorney general.

Never Can The People Feed Themselves

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Give me four years to teach the children and the seed I have sown will never be uprooted.

One man with a gun can control 100 without one.

The best way to destroy the capitalist system is to debauch the currency.

The goal of socialism is communism.

The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.

There are no morals in politics; there is only expedience.

No amount of political freedom will satisfy the hungry masses.

The final quote is of special interest because of the way it dovetails with the insights of the Russian writer Fyodor Dostoevsky. Although Lenin was a mere nipper of ten when Dostoevsky wrote “The Grand Inquisitor,” (a chapter from Dostoevsky’s masterpiece The Brothers Karamazov, written in 1880), Lenin seemed to steal a page (or several) out of his book.

Oh, never, never can [people] feed themselves without us [the Inquisitors and controllers]!
RTWT. This gets moved to the Classics.

Fineman Gets His Jones On

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By recent standards—and that includes Bill Clinton as well as George Bush—Obama for the most part is seeking to govern from the left, looking to solidify and rely on his own party more than woo Republicans. And yet he is by temperament judicious, even judicial. He’d have made a fine judge. But we don’t need a judge. We need a blunt-spoken coach.

So he’s “swimming in the middle” while “seeking to govern from the left”?  No wonder people have trouble with his competence.  I’m not even sure how Fineman bases his “swimming in the middle” assessment on policy or tone.  He’s allowed Nancy Pelosi to lock Republicans out of the legislative process on Porkulus and the omnibus spending bill, tacitly allowed Congress to pass the pork-filled omnibus spending plan, and has rolled out a half-baked plan to vastly grow government over the next ten years as a supposed economic stimulus.

That’s only swimming in the middle if you write for Newsweek, or Mother Jones.


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ASKING THE TOUGH QUESTIONS: “How exactly is getting credit flowing to unworthy borrowers going to stabilize the economy?”


For example, banks (now, members of Congress like B.Frank) used to decide who was creditworthy when it came to buying houses. Then, Congress stepped in. There were people who wanted to own a home and were denied based on their creditworthiness. Then Congress decided the American Dream is really an American right and created a situation that allowed banks to loan money to borrowers who should not have been buying a home, or should have been more modest in their home buying. I can’t remember how that movie ended, exactly, but I’m pretty sure it wasn’t a happy one.

Spoiler alert: banks are better at determining who is creditworthy than politicians on Capitol Hill. People who are worried about losing their job in six months have no business buying a new car; just as those who bought houses over the past couple of years who couldn’t afford them should have either a) bought more affordable housing or, b) continued to rent.

The problem, at this point, is not credit. The market is operating exactly how it should be in the current economic climate. The problem is the people and the politicians who insist we can spend our way out of this. If you can’t afford something, don’t buy it (yes, Congress, that means you, too!). ! It’s as simple as that. The beauty is, it has always been that simple. The shocker is, no one seems willing to accept this.

Where Is It Now?

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Plus, at The New York Times: “Showing the same crack journalistic instincts that it did with the Eason Jordan scandal, the New York Times ‘breaks’ the story of Charles Freeman’s resignation … without ever having reported that Freeman’s appointment had generated controversy. If readers relied solely on the Gray Lady, they must have found themselves stunned to see the Obama administration appointment suddenly implode.”

When people tell us that the death of newspapers will mean the loss of hard-news reporting, stories like this make me ask — where is it now?