Rebel Yid

Rebel Yid has Moved

2009-08-17T01:00:00.002-05:00

I have moved - to continue viewing posts of Rebel Yid go here .

Thanks for reading.

Political Greed and Crony Capitalism

2009-08-16T04:00:00.000-05:00

Ever since Michael Douglas’s character Gordon Gekko in the movie Wall Street declared “Greed is Good” capitalism has been cast in a sinister role that it has yet to overcome.

The movie speech was rumored to be taken from a speech given by Ivan Boesky at a college address. Boesky was indicted for insider trader, served time in jail and paid millions in fines.

Capitalism is not about greed; it is about economic self interest, and this is far more than a semantic distinction. When you take a job paying $10 an hour over the job paying only $8 an hour you are displaying economic self interest, not greed. And when you decide to take the job paying $8 and hour over the job paying $10 an hour because you like the conditions or the work at the lower paying job enough to sacrifice the higher pay you are also acting in your own economic self interest. Economics is about far more than money.

When you decide to take a steady job in a traditional workplace rather than make much more money in drugs and prostitution you are also acting in your economic self interest. It is when your economic self interest disconnects from moral and ethical considerations that it becomes greed.

The ultimate power is the power over your own destiny and environment, but power is most often considered in the control over others. Whereas economic self interest in about control over your own destiny, political self interest is about controlling others.

Capitalism is about people acting in each other’s own self interest and the society benefiting as a result. This works because achieving your self interest requires serving others.

Advanced economic theory also realized that self interest and sharing is not mutually exclusive. In “A Beautiful Mind” John Nash had a Eureka moment courting ladies at the beer hall with his college buddies. He realized that Adam Smith was wrong, or at least incomplete. He developed a theory of equilibrium in competitive game theory. Basically this meant that he realized that your best outcome was not to grab as much as you can for yourself, but that your chance of success was enhanced by assuring at least some success for your competitors. Not only are consumers’ well being enhanced by competition, but the outcome for the competitors themselves is improved.

In order to profit you have to provide a product or service some one else values. Bill Gates, Michael Dell, and Stephen Jobs are very, very wealthy because everyone values Microsoft Windows and Office, iPhones, Macs, and laptops.

Few people complain about the wealth of these techno entrepreneurs because they all provide value we understand. The same can be said of Warren Buffet.

Yet we are outraged at the fortunes made in the financial industry where record amounts of value have been destroyed while CEOs made millions in bonuses. We do not understand derivatives, collateralized debt obligations, and financial models: Apparently neither did the CEO’s and boards of the companies selling these products.

The Wall Street mess was the product of “crony capitalism” which is to capitalism what National Socialism (Nazism) is to socialism. Crony Capitalism is a perversion of the principles of capitalism that includes the freedom “for every man to make himself” to use the phrase of Abraham Lincoln. “Crony capitalism” has its roots in the mercantilist tradition of Alexander Hamilton. During our early years Hamilton saw a need for financial interests and the government to work “closely”. He favored a central bank and such “public private partnerships.”

Hamilton was strongly opposed by Jefferson who favored decentralization and saw the favoritism fostered by mercantilism and the influence such financiers could have over our government as a threat to liberty.

Fannie Mae for example was given special treatment and access to low interest funds available to no other financial institution, and exempted from both SEC and FDIC regulation, Fannie Mae lobbied Congress and plied their special regulators with large campaign contributions. Senator Chris Dodd, head of the Senate Banking Committee and then Senator Barak Obama were the two largest recipients.

But the real damage was not compromising two high profile Senators. Fannie Mae was given special privileges in order to carry out the political will of Congress to make housing affordable for people who shouldn’t buy homes. They created the hunting grounds for the unscrupulous.

Bonuses and bailout funds for Fannie Mae did not elicit near the outrage of AIG and the Wall Street Banks. The public still thinks it was the Gordon Gekko greed of Wall Street rather than the political greed of K Street.

We still blame the economic self interest instead of the political self interest. Articles decry the old capitalism and herald the new era of state capitalism. The last time we heralded state capitalism was in Italy in the 1920’s and 30’s.

Crony capitalism was not limited to Fannie Mac and Freddie Mac. There has been a revolving door between Wall Street and Washington for decades. As long as the complicated instruments served the political greed, political leaders were willing to ignore prudent financial principles and assume that the overpaid magicians knew what they were doing.

The financial scandals of the 1980’s, the S&L collapse under George H Bush, the collapse of Long Term Capital in 1998, The collapse of the High tech Bubble should have been a warning that high salaries and bonuses are not synonymous with competence.

But the solution is not to promote more crony capitalism, also called state capitalism or my favorite term used in The New Republic, “Libertarian Paternalism” (my vote for oxymoron of the year).

By now we should have learned that when business gets in bed with the government, somebody gets screwed.

Gun Grandstanding

2009-08-13T04:00:00.000-05:00

Retail sales are down sharply. Steel mills are running under 50% capacity. Auto sales have skidded to a stop. Several restaurant chains have shut down. Circuit City has closed, abandoning its newest local location without ever turning on the lights. Bankruptcies and unemployment are still rising to historical highs.

Yet there is one business that is doing very well: guns.

Gun dealers are having record sales. In fact certain sizes of ammunition are almost impossible to find. .380 caliber used in many small semi-automatics is practically unobtainable, and 9mm, also commonly used in small concealed carry weapons was getting harder to find.

It isn’t hard to figure out why. There is a perception, right or wrong, that a Democratic House and Senate with a Democratic President will eliminate or sharply restrict the right to bear arms. On the campaign trail Obama spoke of a big tax on ammunition; today we have a shortage as consumers are hoarding guns and ammo.
Even controversial rights become dear when we fear we are about to lose them. Just the discussion of curbing gun ownership is enough to create the demand and fear that leads to hoarding.

The last time we saw such activity was during the Clinton administration’s enactment of the Brady Bill. Guns sales went through the roof. People who had never thought of buying a gun bought several because they thought they were about to lose their right. Many of these people knew little about the weapons they were buying.
The Brady Bill restricted the magazine capacity you could buy with a gun to ten rounds; yet you could buy a higher capacity magazine later and use it with the gun. A .223 rifle with a wood stock was a hunting rifle and Ok but the same gun with a black plastic stock was deemed an assault rifle.

Few voters realized that fully automatic weapons had been banned since 1938, and that such weapons were very rarely used in criminal activity except on television fiction.

But the irony here is that two relatively anti-gun Democratic presidents both earned the gun salesman of the year award (figuratively). Clinton and Obama have each done more to sell more guns to more Americans than any other president. And President Obama has barely mentioned the gun issue since his election.

There are a few lessons:

1. The law is not the only or the best way to enact social change. We have reduced smoking through education and public policy campaigns without outlawing cigarettes, though we have restricted where they can be used.

2. People will often ignore an option or a right until they fear losing it. The cost of a public perception of losing the right to own a firearm undid any potential intended result of reducing firearm ownership.

3. There is a difference between making a political statement and achieving a desirable political result. Such laws as the Brady Bill touted the aims of moral supremacists who wanted fewer guns in American society. Some believe that independent citizens should not be trusted with such power; some just want a reduction in gun violence. While the Brady Bill made a strong political statement it did not achieve the result of reducing gun ownership or have a material impact on gun violence. In fact it dramatically increased gun ownership.

Gun ownership symbolizes a uniquely American relationship with their government. It says that our government does not fear an armed citizenship because they can be removed from office with a very non violent vote. Even such controversial close elections as the Bush Gore decision was resolved peacefully. The power of private gun ownership is more about the sanctity and power of the vote than about the importance of being able to freely own a snub-nosed .38 or a Glock with a laser sight.

Other than perceived pending legal threats to gun ownership the only other motivation to own a gun (other than collectors’ value) is safety. It is a commonly accepted myth that a gun is more likely to be used against the owner than in his defense. Privately held guns stop more crime than the police, most often without ever being fired. Several different researchers have documented this. (Gary Kleck, John Lott, Lee Nisbet)

Making the streets safer will reduce gun ownership far more than restricting the clip capacity of a new pistol. Guns crimes should carry stiff penalties. It seems odd that many of the moral supremacists who object to gun ownership the most are the most lenient towards violent criminals.

We can also reduce gun ownership by stopping the absurd political grandstanding on gun control. If American feels safe in their homes they will see less need to own guns. If Americans are secure in their gun ownership rights they will see even less need to exercise it.

It Just Takes One Voice

2009-08-10T04:00:00.000-05:00

The episode of Joe McCarthy’s communist witch hunt including the blacklisting of Hollywood writers with suspected, rarely proven (as if that should even matter), communist ties was one of our most embarrassing episodes in our recent history.

McCarthy was able to capitalize on the fears of world communist domination to scare us into trashing our most basic liberties such as free press and due process. The actual arrest of a few communist spies was just like adding gasoline to the fires of fear.

Anyone who opposed McCarthy was deemed suspect and thus was dissent squashed and reason trampled. Apparently the witch hunt started with an uneventful speech that was surprisingly given legs by unexpected press coverage. But once the story got legs McCarthy rode it for all it was worth until the fateful hearings when the Senator starting charging the Army with harboring communists; It was then that Joseph Nye, the army's chief legal representative, startled the Senator and the Chamber with his famous smack down, “"Let us not assassinate this lad further, Senator. You've done enough. Have you no sense of decency, sir, at long last? Have you left no sense of decency?"

That comment was greeted with applause, and McCarthy quickly descended into shame and oblivion, and faced censure in the Senate. Edward R. Murrow also took a courageous stand on his show, “His primary achievement has been in confusing the public mind, as between the internal and the external threats of Communism. We must not confuse dissent with disloyalty. We must remember always that accusation is not proof and that conviction depends upon evidence and due process of law. We will not walk in fear, one of another. We will not be driven by fear into an age of unreason, if we dig deep in our history and our doctrine, and remember that we are not descended from fearful men. [...] We proclaim ourselves, as indeed we are, the defenders of freedom, wherever it continues to exist in the world, but we cannot defend freedom abroad by deserting it at home. The actions of the junior Senator from Wisconsin have caused alarm and dismay amongst our allies abroad, and given considerable comfort to our enemies. And whose fault is that? Not really his. He didn't create this situation of fear; he merely exploited it — and rather successfully.”

In spite of a free press and unlimited sources of information we have not escaped the dangers of a sycophantic press who fear being called ‘racist’ for challenging the reason or policy of a minority, or a ‘denier’ (i.e. as in ‘holocaust denier’ ) for challenging the claim ‘the debate is over’ (Al Gore's response to challenges about global warming) when in fact the debate never occurred. Such accusations bring the same chill to dissent as 'communist' did from Joe McCarthy.

Any challenge to a political orthodoxy must come from within its own party to be effective. The opposition is never taken seriously and in this new era where most seek or filter the news to confirm their existing opinion, calls for change and contrary evidence cannot even be heard.

But we should remember Joseph Nye and Edward Murrow that it just takes one voice to expose a fraud and stop it dead in its tracks.

The Real Cost of Raising the Minimum Wage

2009-08-07T04:00:00.000-05:00

July 13, 2009
The wages of guessing
Randall Hoven
From American Thinker

read the accompanying article here

A Cuban Tragedy

2009-08-05T04:00:00.001-05:00

A Cuban massacre we never heard about..

from American Thinker

July 13, 2009
Anniversary of a Castroite Massacre
By Humberto Fontova

read whole story here

excerpt:

So what's the alternative if you can't flee Cuba? Well, in 1986 Cuba's suicide rate reached 24 per thousand - making it double Latin America's average, making it triple Cuba's rate during the unspeakable Batista era, making Cuban women the most suicidal in the world, and making death by suicide the primary cause of death for Cubans aged 15-48.

At that point the Cuban government ceased publishing the statistics on the self-slaughter, disguising them as "violent deaths," etc. The implications horrified even Cuba's Stalinist rulers.

A Death of a Thousand Cuts

2009-08-01T04:00:00.000-05:00

The question that belies the new administration’s infinite number of programs is whether each additional initiative adds followers or deletes them.

Will the gain of union support for the attempt at the card check legislation be more than offset by the loss of business owners, managers, and entrepreneurs? Will the quasi nationalization of the major auto companies gain or lose support? Will his stand on the Middle East gain or lose followers? Will his huge deficits attract or detract supporters?

Obama won with 52.9 % of the vote, and that was running against a very unpopular party tied to a very unpopular war with a disastrous economic collapse just months before the election. Many supported the new president, hoping he would govern more to the center than he ran.

There are liberals who are disappointed that he has not been as aggressive in winding down the war as they hoped, that he has not fully endorsed gay marriage as much as they wished. And there are independents whose support dwindles with each new program.

The danger of so many and such ambitious programs is that each one will erode a little support and the total will turn his support upside down.

Yet even this erosion may be moot if the Republicans cannot articulate a clear alternative and present a leader that can effectively deliver the message. Recycling Newt and Sarah will not work.

While the Republicans still seem lost in the wilderness, every new program Obama announces may be costing him support. With such an ambitious agenda he may sow the seeds of his demise- one cut at a time.

The Great Compression and Its Aftermath

2009-07-30T04:00:00.001-05:00

Paul Krugman referred to the period between 1930 and 1980 as the Great Compression, referring to a flattening of the incomes from the very rich and the very poor of the Gilded Age and the growing income inequality from the Reagan era onward.

In “the Conscience of a Liberal” he credits this compression to FDR’ New Deal and its higher taxes on the wealthy and on the rise of unions in the American workplace.
He further notes that the higher wages and benefits had no negative consequence for the auto and steel industries. While that seems foolish in light of GM and Chrysler being bankrupts wards of the government it is correct for the period between 1930 and 1980.

But that economic environment was also very different. The stock market crash like our recent collapse brought the rich down much faster and further than the poor. And while the unions were able to bargain better conditions and wages they were bolstered by the wartime demand stimulation and more so because all of American industry’s overseas competition was destroyed by the war.

The growth of global completion changed everything as we tended to import low wage jobs and export high wage jobs, increasing the wage spread. The growth of the technology sector added to the spread.

Like the Crash of 1929 we are seeing a replay of a flattening of incomes but it should not be compared to a period stimulated by war and protected by the destruction of its trading partners.

There has been outrageous bonuses and pay on the high end, but the market will likely correct it without government interference.

Higher taxes and union pressure should not be expected to yield the same result as it did in very different time. Without the protections enjoyed during the Great Compression it would have just been call a longer Greater Depression.

Heebs of the Revolution

2009-07-28T04:00:00.001-05:00

Our trip to Cuba was sponsored by the United Jewish Communities as an outreach to the Jewish community there. We visited three congregations in Havana and a small community in Santa Clara, about a four hour ride from Havana.

There are about 1500 Jews in Cuba. Before the Revolution there were closer to 15,000. Many left when the getting was good between 1959 and 1965. Because of Castro’s compression of incomes many professionals departed until the brain drain caused such a problem that Castro called a halt to emigration. Many more Jews were assimilated into the ultimate of western egalitarian societies.

The first Jews probably landed in Cuba during the initial European explorations. Some moved to Cuba during our colonial phase to manage sugar cane fields and other enterprises. But the majority of the Jews ended up in Cuba leaving Europe and Russia before World War II.

There were restrictions on Jews coming into the United States, and the British kept immigration to Palestine very low to appease Arab terrorists in their mandate. Havana became an immigrant hotel for those hoping to get to America later. Havana, before the revolution, was a spectacular city, the Paris of the Caribbean. Only Buenos Aires compared. It was nice enough to stay.

The underbelly of Cuba before Castro was that while industrious it was also corrupt and many of the poor in the countryside were terribly neglected for the lucrative franchises in Havana. Organized crime was welcomed as were large corporations as long as they stuffed the dictator’s coffers. You may recall the scenes in the Godfather II as Michael Corleone struggled with his indecision to invest in Havana with fellow gangster Hyman Rothstein (the character was modeled after Meyer Lansky, a Polish born Jew). Corleone left just ahead of the advancing coup with his money intact. The overthrown dictator Batista, escaped with all the cash he could carry, one estimate was $300 million, and lived the rest of his life off the coast of Spain
But liberation is far from synonymous with liberty and Cuba merely exchanged one dictator for another, even if it was one with a drastically different social and political view.

We saw no signs of anti-Semitism and this was emphasized by several community leaders including one who spoke of Castro’s visit to their congregation with pride. During the rise of the Cuban Utopian Revolution the Communist Party frowned on all religion, and it was hard to rise far if in the party if you openly expressed your faith of any sort. But the Cuban revolution lasted initially only because of the Russian largess and support in search of a base so close to their number one enemy.
During the early 1990’s, Russia pulled their financial support from the Cubans and it caused tremendous hardship on the island. Maybe coincidentally (maybe not) Castro and the party at that time relaxed their stance on religious affiliation and even created a ministry of religious affairs. Perhaps since he could not give them prosperity, he elected to give them religion, the “opiate of the masses”. Religious observance started a rebirth.

With help from the American Jews and others, the Jews in Cuba starting searching for those who had Jewish connections and synagogues started to attract observers. We went to small Jewish cemeteries in Havana and Santa Clara and they both had Holocaust memorials which were small (like a monument) but beautiful and shown with a great sense of pride. The cemeteries were being repaired and were carefully manicured.

An Israeli entrepreneur has partnered with the government to develop orange groves, and it furnishes much of the orange juice served on the island, for tourists like us and a few others than can afford it.

The Jews in Cuba face the same problems as anyone else on the large island. The Communist utopia turned the Paris of the Caribbean to a third world country. Average income is $15 a month, but the state provides health care, education, housing and transportation for free to everyone. The magnificent buildings are commonly in terrible decay, except for public buildings like government offices and museums.
Cuba is a common tourist spot for Canadians and Europeans and sports beaches on the north part of the island. It seems foreign to us because of the embargo, yet it is only 90 miles away. They do not have a free press and there are few news outlets, but there are art galleries- Castro is a big supporter of the arts and art school is also free. I can only assume that most of their knowledge of Americans and world affairs comes from interaction with the tourists and government propaganda.

Yet what strikes any Jew visiting a synagogue in a foreign country is the nearly identical Hebrew prayers and even the melodies to chant them. It’s the same in Mexico, Australia, China, Europe, Africa and … Cuba as it is in Israel. There have been changes but the services would likely be recognizable with prayers in Israel over a thousand years ago. Conversations are peppered with Yiddish expressions that could be heard in any Jewish family gathering.

The Roman enforced Diaspora scattered Jews all over the world to squelch repeated attempts at revolution against the Roman Empire. It is an historical oddity that for 2,000 years the Diaspora would so still define the homeland that Moses led them to after he came down from Mt. Sinai and….

… started a revolution.

New Location for Rebel Yid

2009-07-23T20:08:00.000-05:00

I have moved - to continue viewing posts of Rebel Yid go here .

Thanks for reading.

Understandable Vandalism

2009-07-22T04:00:00.000-05:00

At the Kroger gas station there is the little machine attached to the pump that dispenses engine additives as an upsale to your gasoline purchase. As you go about your normal fueling the machine introduces itself with the annoying four notes and then the irritating digital voice tries to sell you the various products that will get better gas mileage and extend the life of your car.

At the bottom right of the machine is a button that you can push to stop the message in the event you just want to pump gas in peace and quiet. I have noticed that the button to shut up the message has been damaged beyond use on most of the machines I encounter; like someone has stabbed it with a knife or a pen.

I am assuming that this act of vandalism is triggered by the annoying intrusion of the message, and the refusal of the machine to shut up immediately when the consumer pushes the button to end the message. One friend avoids these pumps because he finds them so annoying.

I don’t encourage vandalism but I certainly understand it in this case.

Nassim Taleb on The Best Way to Deleverage

2009-07-21T04:00:00.001-05:00

I have been a fan of Nassim Taleb since I read "Fooled by Randomness". I remember stumbling in it the bookstore at Columbia University in New York. I quickly grabbed his most noted book, "The Black Swan" which continued his philosophy of human behavior and our poor understanding of risk and statistics. His warning of the fragility of our financial system was prescient.

On MSNBC (read and view the interview here) Taleb recommended that the banks convert mortgage loans to partial equity in an effort to drastically deleverage the economy, which he sees and our main problem and very little is being done to address.

I thought it was a great idea. It helps the homeowner get a fresh start. The most debt is not in the Wall Street firms but in mortgage debt to the consumers. Instead of bailing out failing organizations we could reduce crippling bank debt and help consumers at the same time.

Taleb is a great intellect with an uncommon depth on the subject. He may a bit of a hard read for some and many consider him too far out of mainstream to be credible, but look where mainstream thinking got us. I found him insightful and claryfing.

If you are not inclined to read such material for fun, check out his many interviews on YouTube.

Tips to Douglass Ott.

The Twitter World

2009-07-20T04:00:00.002-05:00

I have been blogging for two years and well over a thousand entries. I started Twittering as a means of expanding the number of readers and as an accessory to the blog. I use Twitter to share articles and sources with other readers and gain access to material others send. It has become and extension of my blog.

It seemed initially that you would follow someone who seemed to have an interest that would mesh with your estimated reader profile and then hope that they would reciprocate and then follow you. Then if you actually posted something worthwhile they would forward it around and then you would pick up even more followers.

Twitter is one of those things that if you try to figure it out beforehand you will never do it.

I loaded up a few quotes I collect on a Twitter timing device called Tweetlater. One of the quotes struck a small nerve and was retweeted by several readers (they copied my tweet and sent it the people on their list. The quote was from Edward Murrow, “A nation of sheep will beget a government of wolves.”)

A mother of soldiers in Israel liked the tweet especially in light of the recent Yom Hashoah holocaust memorial. I sent her a copy of one of my original blogs “The Three Most Important Points to Understand about the Holocaust”. It was also an article published in the local newspaper a few years ago.

She complimented the article forwarded it and another Jewish Blogger/ Twitterer in Jerusalem who forwarded it to a Jewish guy in Anchorage, Alaska who also forwarded it with his praises.
The point of this story is trying to understand how these new social networks changes things. The right wingers post their right wing stuff, and the left wing posts their left wing stuff, and somewhere in there are people who just think for themselves and share interesting perspectives and common interests.

But in the course of a few hours I was able to share a perspective with fellow yids and non yids from Anchorage to Jerusalem.

I am not sure what the total significance of this is but I realize it is amazing. The entire internet universe is a virtual magazine with thousands of people with similar interests editing and sending articles and blogs to people with similar interests. The consumers produce and forward content.
The walls between producers and consumers of content are gone.

A different post on the Zayela episode in Honduras is picked up by Twitterers there and pictures and opinions are relayed back as I now quickly connect with eye witnesses and opinion first hand. I now have Facebook postings from new 'friends' in Honduras as a result, though I now need to brush up on my spanish.

The Lost Party ?

2009-07-18T04:00:00.001-05:00

The Republican Party is most assuredly going through an identity struggle, and the pundits obfuscate the issues by speaking in only the most general terms. The controversy within the party is whether it should become more conservative, faulting moderation for its losses, or whether to become more “centrist”, adapting its message for the new demographics and polls.

It is fine to call for free markets, but that does not mean unregulated markets, and their message must contain a realistic measure of freedom and oversight. Financial institutions central to our well being should no more be totally unrestricted than our civil institutions. Even our most precious freedoms do have limits. Every town has courts and jails.

The party could start with an honest discussion of foreign policy- what has worked and what has not. Realism is a good word to bring to bear. We must address the relationship between a profligate economy and our place in the world. It is time for Johnny to cut up his credit cards and live within his means.

It is time to realize that promised benefits must be paid for. Sacrifice is sellable if it is shared.

It is time to realize that America’s strength is in its ideas, not wealth nor military power. It is not coincidence that America has originated so many inventions that have been a source of wealth and power. But our ideas did not originate here because of the soil and water content. We struggle to provide better and better safety nets without destroying the human power that has created our nation.

But the Republican Party’s message of freedom must be consistent. We can not ask our soldiers to die for the freedoms of others and then refuse to sell them liquor on Sundays.

It will be harder to justify some choice but not others. Individual freedom means allowing others to make choices that you may not approve of. The tent must be widened to include pro choice and pro life candidates, acknowledging the legitimate concerns of each. Republicans suffer from disparate groups who each have a litmus test.

Democrats have their divisions but they generally disappear for a few weeks in early November.

The perfect is the enemy of the good and suicide is a poor growth strategy.

Yet .....

All who wander are not lost.

Are We As Smart as We Think We Are

2009-07-16T04:00:00.002-05:00

In a very thoughtful reply to a Rebelyid posting about how intellectuals and academics miss seemingly obvious points that ordinary people with common sense seem to readily get, Roy Fickling sent this Marylin Savant math problem.

I have to confess that it took, some thought even after seeing her correct answer to understand why she was right.

I guess the point is that some things are not as obviously right as we may think they are.

from Roy's e-mail. See if you get it.

The question is this: Monty Hall gives you three doors to chose from. Behind one of the three is a bright shiny new car. You chose door #1. Monty opens door #3, which is empty. He give you the choice: do you want to change to door #2, or stay with your first choice?

The question posed to Marilyn was, “should I change my answer?” Marilyn’s response was “of course, change to door #2. Your chances of winning will double if you switch doors.”

Marilyn was publically berated by hundreds of mathematicians and academics. They said that even a grade school math student knows that your chances go from 1/3 to 1/2 when one door is opened. The debate even made it to the front page of the New York Times. Marilyn stood fast and wouldn’t budge. It wasn’t until the results of thousands of experiments and hundreds of computer simulations were revealed that the” math geniuses” finally capitulated. The problem was that the foundations of their training were flawed. Although Marilyn had no formal training in mathematics, she did poses the highest IQ ever scored.

Just for grins, the explanation is as follows:

There are two scenarios on the first guess. There is the right answer scenario (1 in 3 chance) and the wrong answer scenario (2 in 3 chance). The odds of a successful outcome are the same at the first guess, i.e., 1/3 that you get a car, or said differently, 2/3 chance you will get encyclopedias.
Now, Monty Hall opens one of the doors that he for a fact knows contains no car.

If you chose correctly the first time (the right answer scenario) and switch your answer, there is a 100% probability that you will lose. If you chose wrong the first time (the wrong answer scenario) and switch your answer, there is a 100% chance that you will win. Since the chances that you chose wrong in the first place are still 2/3 and the chances that you chose right in the first place are still 1/3, you are twice as likely to be driving away in a shiny new car if you switch your answer.

To see it more clearly, use larger numbers. Say there were 100 doors. Your chances of choosing correctly are 1/100. Then, Monty hall opens all but 2 doors, including the one you chose. The chances are still 1/100 that you initially chose correctly and 99/100 that you chose incorrectly. So, the chances are 99/100 that the car is behind the remaining door that you didn’t initially chose. Switch your answer.

Economic Demorilization

2009-07-15T04:00:00.001-05:00

Larry Kudlow in National Review

July 10, 2009 4:49 PM

The Road to Economic Demoralization
Washington is going the wrong way.

read the whole article here.

excerpts

And China has no capital-gains tax. It only has a 15-to-20 percent corporate tax. The U.S., on the other hand, is raising its cap-gains tax rate to 20 percent.

Fortune magazine recently reported that the number of U.S. companies in the world’s top 500 fell to the lowest level ever, while more Chinese firms than ever made the list. Thirty-seven Chinese companies now rank in the top 500, including nine new entries. Meanwhile, the number of U.S. firms has fallen to 140, the lowest total since Fortune began the list in 1995.

our 40 percent corporate tax rate is already almost 15 percentage points higher than the corporate rates in most of Europe.

Here’s the clincher: Year-to-date, Dow Jones stocks are off 8 percent, while China stocks are up 71 percent. The world index is up 4 percent. Emerging markets are up 25 percent. They’re all beating us. None of this is good.

The Missing Ingredient for the Economy

2009-07-14T04:00:00.002-05:00

A friend involved in investment market research believes the stock market is bullish for several reasons one of them being the overwhelming bearish market sentiment. Experienced investors understand that bottoms happen when sellers are exhausted and when bears rule the roost. Tops happen when everyone is bullish- usually.

This time may be different and he was curious what I see on the street. My business is down severely both in unit volume and the margin contribution per unit. This means I am selling less and making less money on everything I sell. I have laid off some workers, ceased matching 401k contributions, frozen wages, reduced uncritical property insurance, changed carriers for cost reductions, and looked at other cost reductions. I would consider this a successful year if I could break even.

From conversations I am the rule and not the exception. This means that the taxes I bitched about paying last year will not be paid this year. It is clear from the street that tax revenues will drop sharply.

Because of the mass of uncertainty we have no plans for expansion, equipment purchases including rolling stock such as vehicles. We keep inventory low which kills output at the steel mills that serve us. Most are running at less than 50% capacity. It also kills rail traffic which transport industrial commodities.
I am more likely to lay off 5 people than I am to hire one. Almost a fourth of corporations have instituted across the board wage cuts. In my 30 years in the business world I have never seen this.

Fewer people will be working and they will be making less.

There is much money sloshing around from money supply growth and the stimulus but people do not invest and risk because money is cheap, they invest because they expect to get a commensurate return and nothing kills the incentive to invest like uncertainty. And there is little certainty in this administration’s policies.

No one knows how this stimulus bill will affect their future interest rates, their inventory requirements, and the return on their investments. If the card check bill comes to pass small business people who are able will shut down and move to the beach; not for calculation of real costs but for fear of losing their autonomy that drove them to open their own business.

And this cap and trade has every business wondering how it will affect their product and costs. How will it affect trade if the same ‘carbon reduction goals’ are forced on other nations who sell to us? Will it cause a trade and affect their exports? Should we delay buying trucks until we know the impact of cap and trade on their fuel costs?

Obama’s ambitious and expensive programs enacted in a severely wounded economy has most business people frozen and I see very little in the future ready to thaw their fear. The mere discussion of these issues is enough to stall employment and investment decisions.

I would not be surprised to see a short uptick in auto sales as the fleets age, and some may be motivated by a combination of low current prices and the possibility of avoiding higher prices later as cap and trade policies raise the future prices. With low returns on cash such a decision is even less costly.

But if this is the only buying motivation it will not last. We will drive less and buy less.

There is some uptick in scrap metal prices and this is usually bullish, but we could be at a ‘dead cat bounce’ that will soon exhaust itself.

We have seen signals in the past that indicated that a bottom was in, but this time we are seeing these signals in the midst of the most dramatic change in the structure of our economy every undertaken.

There is plenty of cash floating around (over 3 trillion in money market funds) out there but if it is going to be spent and invested, we will need confidence the future is sound. That is sorely missing from Obama’s economic policy.

US Foreign Debt

2009-07-13T05:26:00.000-05:00

Obama's Czars

2009-07-13T04:00:00.001-05:00

1. AIDS Czar: Jeffrey Crowley
2. Bailout Czar: Herbert Allison Jr.
3. Border Czar: Alan Bersin
4. Car Czar: Steve Rattner
5. Counterterrorism Czar: John Brennan
6. Cyber-Security Czar: Melissa Hathaway
7. Drug Czar: Gil Kerlikowske
8. Economic Czar: Larry Summers
9. Deputy Economic Czar: Paul Volcker
10. Energy Czar: Carol Browner
11. Green Jobs Czar: Van Jones
12. Guantanamo Closure Czar: Daniel Fried
13. Health Czar: Nancy-Ann DeParle
14. Info-Tech Czar: Vivek Kundra:
15. Intelligence Czar: Dennis Blair
16. Regulatory Czar: Cass Sunstein
17. Religion Czar or Faith-Based Czar: Joshua DuBois
18. Science Czar: John Holdren
19. Stimulus Oversight Czar: Earl Devaney
20. Trade Czar: Ron Kirk
21. Urban Affairs Czar: Adolfo Carrion
22. Weapons of Mass Destruction Czar: Gary Samore

Appointed, not subject to confirmation hearings, unaccountable, yet wielding immense power.

Transparency

2009-07-12T09:37:00.001-05:00

Chavez's Tyranny Drives Away Venezuela's Future

2009-07-12T04:00:00.001-05:00

In the recent Newsweek Mac Margolis notes the brain drain in Venezuela.

Venezuela's Brain Drain

read the whole article here.

Excerpts:

And now after a decade of the so-called Bolivarian revolution, tens of thousands of disillusioned Venezuelan professionals have had enough. Artists, lawyers, physicians, managers and engineers are leaving the country by droves, while those already abroad are scrapping plans to return. The wealthiest among them are buying condos in Miami and Panama City. Cashiered oil engineers are working rigs in the North Sea and sifting the tar sands of western Canada. Those of European descent have applied for passports from their native lands. Academic scholarships are lifeboats. An estimated million Venezuelans have moved abroad in the decade since Chávez took power.

HKO comment- Once realization of Castro's oppression was clear Cuba experienced the same talent drain and never recovered. No amount of oil or resources will overcome the loss of your most talented and productive citizens.

You may rob Peter to pay Paul and get Paul's approval, but count on Peter leaving town.

A "Climate Change" Time Line

2009-07-10T04:00:00.003-05:00

The earth's overall temperature in the last several years has either remained steady or slightly decreased -- depending on which side of the issue is interpreting the data. No one is maintaining that the world is getting warmer and warmer every single year, which was the initial prediction.[i]

Nevertheless, the current administration is risking America's economic future on "green" energy in an effort to solve an unproven crisis. The cap and trade legislation is moving ahead in spite of the fact that the United States is already one of the leading nations in curtailing CO₂ output.

from American Thinker

June 24, 2009

After Global Warming
by Larrey Anderson
see whole article here.

A Republic vs a Democracy

2009-07-09T20:29:00.001-05:00

Pilmer on Climate Change

2009-07-09T06:22:00.003-05:00

Read Article here

Self Reliance is a Matter of Choice

2009-07-09T04:00:00.006-05:00

We are in the middle of a deflating credit bubble. Easy money in the form of easy credit created a condition where neither individuals and families nor government policy makers had to make choices. With enough credit you could have the new kitchen with the marble counters, the more expensive car, and the vacation, without sacrificing the darlings’ college fund.... which you could still get someone else to pay for if you were lucky enough to live in a state like Georgia with a lottery to secure your children’s future.

The government could fight an expensive war, fund unnecessary and expensive subsidies for farmers, pay for an expensive prescription drug benefit, and still ignore the ballooning liabilities of Social Security and Medicare. And this was with the Republicans in office.

We all have to say no to worthwhile choices we can not afford. Politician or parent, we make choices. We can accomplish just about anything, but we can not accomplish everything – at least not at once.

This "have it all" perversion in our culture has permeated our homes and our seats of government. When you reach the point where you are borrowing on one credit card to pay off the debts of another, you pretty much know the game is nearly over.

We have to return to the point where we live within our means. Growth in the money supply that outstrips our growth in productivity is not sustainable. It is considered sane for a short period to soften the blow from shocks such as 9/11 or the current meltdown, but if we are unable to make choices then there will seem to be an endless sequence of urgencies that will prevent us ever getting back on track.

At a time when we need to be borrowing less, both at home and in DC, our solution seems to be to encourage even more credit and borrowing. We are criticizing banks for not lending more money when that was the crux of our problem to begin with. We are now speaking loudly and publicly to get better terms for credit cards. During her campaign Hillary Clinton argued for directing the March 2008 stimulus payment to the poor people because they would spend it, whereas the wealthier citizens would just ‘save’ it or reduce debt.

Well that is largely the reason so many of them are poor to begin with.

But here are a few hard truths about debt.

When you are in debt your life is not your own. You are working to pay financial institutions for your house, your cars, and your business. In business half the game is just staying in the game. In a world filled with random and largely unpredictable events too much debt at the wrong time can take you out of the game just when opportunities to acquire assets and business on the cheap are the greatest.

Debt is addictive. Our whole economy is based on credit and deflating this credit bubble will have serious consequences and may even delay recovery. Yet attempts to reinflate this credit balloon will only shift the pain into future years, and make it worse then. But the inability to take our medicine now will only increase the dosage later, if medicine is even an option.

Economic observers have noted that “nobody wants sound money.” Sound money is a by-product of living within your means which requires those annoying choices that adults used to be required to make.

‘Living within our means’ is the modern expression of the self reliance that used to be a universal American value before being a community organizer became a qualification to be president, and before it took a village to run a household.

I never see ‘community interests’ used as a motive for fiscal prudence; it is more commonly used to justify more expenses that we can not afford. It becomes another reason not to have to make choices.

John Kennedy’s most memorable words were “Ask not what your country can do for you, but what you can do for your country.”

Forty Five years later the best thing you can do is to live within your means and then require that your elected leaders do the same.