Milton Friedman at his Best

So long as the Democrats rule the political landscape in Congress and in the Executive branch, I’m willing to pull out my magical 8-ball to make a few predictions.

1. Obama won’t do anything for the economy. Don’t worry, we’ll hear how terrible our condition is and how we have such a long process to recovery but Obama’s policies will do very little to encourage anything remotely related to economic recovery. Economic recovery does not come from attempting to spend your way out of the doldrums. Trust me. I have a few thousand examples stacked up neatly in credit card bills that still arrive monthly. The difference is that I can’t walk away from my debt or ignore it or my credit rating suffers. Congress seems to think it has no credit rating.
2. Republicans will make a half-assed, half-hearted attempt to rally under the conservative banner only to mock it by electing more incompetant, mediocre representatives to office who are still bitter about homosexuals obtaining equal rights.
3. We’re going to gain a few civil liberties. We’re going to lose a lot more.
4. Democrats will raise taxes on the wealthy – only to realize the wealthy will only pay the same amount of tax if not less due to their incomprehensible economic policies.
5. Government will grow to new heights even leaving George W. Bush shaking his head at the size of government.
6. The war on drugs will continue to incarcerate a disproportionate number of minorities while ignoring the real costs and effects that it is leaving on our society. As long as Obama ignores the reality and complexity of the situation his presidency will degrade from historic to nothing more than the same.
7. Keynesianism will reveal its ugly head only to run into the same problems in created in the first place. You can’t spend your way out of debt. Balanced budgets don’t cut it when you have nearly 57 trillion dollars of debt piled up over the past 20 years or so.
8. A horribly neutered and irriducibly irrelevant health reform bill will make it through Congress that will be sure to make mediocre health care the standard rather than the occasional case. The only people who will be happy with it will be the insurance lobby and the medical community. A congressman will then tell us that we’re somehow better off now without ever substantiating the claim and ignoring the reality taking place right behind his back. (Think officer Brady from South Park)
9. All branches of government will continue to ignore the GAO.
10. Public schools will still be their mediocre selves.
11. Earmarks will reach a new height in dollars while the stupidity level of what Congressmen are earmarking funds for will remain the same (abyssmally high).
12. The Pentagon will pay some ludicrous sum of money for something ironic and moronic and then plead for more money to ensure they can equip our soldiers. The whole Rumsfeld painting is exempted – this was under Bush’s watch.
13. The Federal Student Loan system will teeter on the edge of failure only to be rescued by the same dolts who created it in the first place: government bureaucrats.
14. A giant corporation will collapse in a smoldering heap of failure after some stupidly arrogant crime is committed by an overpaid, well-parachuted executive. The executive will take a leap to safety on the parachute while stockholders will get bilked out of their equity. There will be plenty of fist shaking and a revision to SOX to ensure that all of those businesses who are doing honest business are punished for the crimes of a very small few.
15. Our tax system will continue to grow more complex leaving IRS employees more confused on just what money they are not entitled to.
16. The federal government will continue to pass off surplus and used military gear to local police departments who will be more than happy to deploy anti-personel armor and weapons for no-knock drug raids only to find a small amount of marijuana residue and a violently dangerous dog who was shot running away from the officers assaulting the home.
17. Police officers will continue to be held to some other standard rather than the law. The “Blue exception” to the law will prevail more often than not.
18. Paul Krugman will continue to write political pieces while completely ignoring the laws and rules of the very academic science he is known for: economics. He will violate at least 3 different economic laws or make at least 3 arguments that violate economic fallacies. To go one step further but not included in this prediction – I’ll guess he’ll violate the such staid axioms of economics like the “Broken window fallacy”, “The law of supply and demand”, and, oh, let’s say a contradiction of “opportunity costs”. The media will be quick to point out that he is a Nobel Laureate without paying attention to the fact that whatever he is commenting on directly violates one of many rules of the science of economics for which he won the Nobel.
19. A new drinking game will evolve from Obama speeches in which the rules dicate you must drink once every time Obama says “hope”; two drinks when he says “change”;  drink whole beer every time he attempts to relate to some historical situation as if today is as hard (or harder) than the past.
20. And one for the technology crew: Some new-fangled Internet service will take 10% of the population by storm. This service can do one stupid thing pretty damned well. Someone or some company will buy this other company only to realize that they have no way to monetize the damned thing and have a giant, gaping whole in their books where something like revenue or profit should be.

Now if you made it this far, you’ll realize that I think I can have most of these crossed off as accomplished in about a month or so. My larger point is that if you expect there to be some great change afoot, you’re probably more wrong than I am.

I always love watching Republican values at work. Sarah Palin’s daugher has a baby out of wedlock. This was released just after news arrived that Virginity pledges don’t work.  I wonder if Google has an irony detection system – I was browsing Google and found this:

Oh the irony of Republican reproductive values

LA Times runs an article where David Axelrod, an Obama advisor states:

Appearing on NBC’s “Meet the Press,” David Axelrod, a senior advisor to Obama, said, “We have to act. Every economist from left to right agrees that we have to do something big in terms of job creation, but we want to do it in a way that will leave a lasting footprint.”

I bet I can think of at least two economists who disagree with Axelrod’s assumption. And there are a host of other economists who disagree, whether they view the Austrian tradition in a positive/negative light.

The problem here is that our new administration is posturing this as a Global Warming-type “scientific consensus” issue that has already been used and beat into the ground. I’m sure Axelrod will start backpedaling and trying to reign in the comment with something to the effect of “the best economists” or the “brightest economists” to properly qualify the statement. Unfortunately, those definitions would be at the sole discretion of Axelrod and only as qualified as Axelrod is to determine who is the best and brightest.

The problem is that we don’t turn to scientific study to determine what the future is. We infer from the data that we have in an attempt to predict, with some reasonable probability, of future events.  There is a significant difference.  Prediction carries the inherent possibility of chance – the product or outcome of the unexpected is a distinct probability.

With this in mind, an economist’s opinion is only that – the opinion of the scientist. To assume an economist can predict the future with any certainty, which Axelrod appears willing to assume through the “consensus” opinion, is nothing short of malarky. If you believe that an economist knows the future any better than a carnival fortune teller, you are sadly mistaken.

If anyone knows anything, it’s that Wall Street is the largest house of gambling in the United States. We don’t call it gambling but certain segments of the market are nothing but betting pools. Commodities (futures, options, derivatives) are pretty much nothing more than a place to wager bets and hedge bets you have already made. Oil is no different.

When we hear of so-called “speculators” coming in and manipulating prices, we often miss the point of what the market is and why it works the way it does. This is especially true of oil. When you hear of oil trading, you may picture large barrels of oil moving from port to port every day. Yet when we’re talking about futures, what you see are “bets” on where oil will be in price at a certain point in time in the future. These bets are always “matched”. For every person who expects oil to rise in price, there is a matched bet predicting a decline in price.

While it may be a gross over-simplification, the wisdom of such bets gives you a lot of information wrapped up into a numeric value. When prices rise, you typically expect a large sentiment of “negative” information in the marketplace. When prices fall, you typically have a balance of “good” information in the marketplace.

To illustrate this point, let’s quickly look at corn. With the heavy push towards cleaner fuels and the heavy support for ethanol subsidies, farmers had the incentive to plant more corn this year. This may seem like good news, but the subtle realities were immediately apparent to the market: While there is an expectation of more corn coming to market, the corn will need to meet the needs of both the food production market and the rapidly growing fuel market. This stress is reflected in the price of corn, which has shot up in price despite the probability of having more corn coming to market this year.

But what happens when farmers plant more corn than, say, soybeans? It means the farmer grows fewer soybeans. We’re already beginning to see these effects in the marketplace where other commodities have shot up in price because farmers are planting less of these other crops.

To someone who works in an exchange, they could probably care less about the physical corn or potatoes they are betting on. What they care about is the the information in the marketplace associated with the product being traded. The trader then carefully places a bet on which direction they expect the price to go based on as much information as they can gather about the underlying product. No one person can have all of the information at hand. These gaps are filled by others who and bet according to their information which may be similar, but not always the same as the next person.

The price of oil is not necessarily the real price of the product but reflects the sentiment of what price will be based on the information at hand. Recently USA Today and other media outlets reported that drivers in the United States are driving far fewer miles this year than prior years and the number is significant. If this is the case, and the supply of oil is constant, you would expect the price to fall. However, in this case you have several other factors involved: the Iraq war, difficulties with Iran, aging refineries and the slowing ability to expand refinery production, limitations on oil drilling, government policy and regulation, a retreat from the housing market and so on.

So when we hear what the price of oil will be in the future, it is based on the information in the marketplace today. Right now. This very minute!

When politicians push to put pressure on the market and lob accusations of impropriety into the marketplace, it essentially creates a scenario where your favorite politician is working under the assumption that he or she knows more about the collective interests of the marketplace than the collective marketplace knows about itself. But you have to think big; the collective information of the market is represented by millions of bets on which direction the market is going with millions of people and automated systems all responding to information accumulated. If you think a politician can fix the so-called problem of speculation, you are grossly uninformed.

Betting is one of the oldest forms of collective wisdom, oil or not. And complaining about a short losing streak is a surefire way to cause more problems in the marketplace when you invite politics into the game.

Musharraf imposes emergency measures – Yahoo News

The United States “does not support extraconstitutional measures,” Rice said from Turkey, where she was participating in a conference with Iraqs neighbors.

Maybe someone in the Bush administration should muzzle her; the number of “extraconstitutional” acts the Bush administration has taken in the past 7 years makes her comments on the subject a bit farcical.

 Hot off the wire, more issues for Gonzales:

FBI director contradicts Gonzales – Yahoo! News
The developments marked a troubling turn for Gonzales as well as the administration, which has been on the political defensive since congressional Democrats launched an investigation seven months ago into the firings of U.S. attorneys.

I’m not convinced that this was any type of “turn” at all. A downward spiral is still a downward spiral.

Pauli Cannoli has a good interview with Steve Kubby up. It discusses Kubby’s endorsement for Ron Paul in the Republican primaries and elections, due in part to the number of (l/L)ibertarians who will be crossing lines to vote for Paul. I’ve thought about registering Republican just for the primaries and then switching back to Independent afterwards….

Steve Kubby Endorses Ron Paul « paulie cannoli

TheAgitator.com: Childhood Now a Sex Crime: Comments

Radley has a link to a story whereby a couple of juvenile males were arrested for a sex crime for patting girls on the ass in the hallway. It sounds like football coaches are safe for the time being.

Marginal Revolution: FDA Delay

Sad story of how the FDA logic works.