Big Teacher

Panic creates a desire for protection, but that doesn't mean it has to be compulsory. Tonight on Kudlow and Company (I'm having a lot of Kudlow articles lately), former Labor Secretary Robert Reich debated Steve Moore from The Wall Street Journal editorial board on the topic of financial literacy.

Illinois recently passed a law that anyone taking out a loan must take a mandatory counseling. Reich smartly argued against the mandatory counseling but strangely argued in favor of banning "predatory loans." If Big Brother has no place in forcing adults to learn about options (and I don't think they do), then what a conclusion it is to claim the government does have a role in denying people options altogether.

Alienation of Economics

The sloppiness that appears in time of a change in the market continues to astound me. Tonight on Kudlow and Company Senior Market Strategist at Delta Global Advisors, Michael Pento, argued our economy is weakening because more and more foreigners are staking a claim to federal debt. Twin deficits (the budget deficit and the so-called trade deficit) are the poison of the economy.

I agree that the high level of government spending is a bad sign, but what difference does it make who's lending Congress the money? The best way to counteract this sloppy spending is to grow the economy with trade and technology, not by retreating to isolation at the expense of American people. That would be a double hit to the economy.

Weller On Incentives

Tonight on Kudlow and Company, Christian Weller, senior economist at the Center for American Progess, argued there would be no moral hazard problem if the government bailed out people's mortgages.

I'm not sure what's going through Weller's mind but when you pay for people's bad decisions, you don't create much of a reason for them to avoid mistakes in the future. And you certainly can't expect other borrowers (or lenders for that matter) to be cautious in the future after you proved there's a safety net just aching to spring up.

A Gutierrez Gaffe

Carlos Gutierrez was on Kudlow tonight discussing various trade-restricting bills floating around Congress. While he defended the importance of free trade, he also made the mistake in claiming the US has free trade. Not even close.

The point that stuck out the most was when he mentioned the value of anti-dumping laws. According to Gutierrez, this is consistent with free trade. Indeed, the WTO approves anti-dumping law to counter "unfair" prices (whatever that means) and government subsidies. But this is not free trade, no matter what the law says.

Free trade is the absence of government regulation concerning international exchange. Anti-dumping laws don't "cancel" subsidies and it certainly doesn't add to free trade. Their only saving grace is a threat: stop creating barriers or we'll create more. But this might not work and one legal distortion is better for both sides than two.

Governing Trends

Tonight on Kudlow and Company, Larry Kudlow and a legion of commentators discussed the 2008 election. One of them, John Fund from the Wall Street Journal, expressed concern that many voters haven't experienced a true economic downturn (only corrections and short-run recessions). Thus, they are more likely to vote Democratic.

It makes a lot of sense because it's easy to forget that good times won't last forever and more government can undo economic growth in an instant. Democrats, who are more likely to grow the government than Republicans (especially with a Democratic Congress) can hamper the very growth that got them elected.

I've often said that from the mind of the voter, government is a luxury good. All things being equal, a wealthy society is more interested in growing the government than a poor society. While wars and other crises confound this rule, in general people are much more willing to see the government grow when they are making a lot of money themselves. It's a dangerous trend because it's easy to get trapped in: governments are easy to grow and difficult to shrink.

Commentator's Dilemma

Tonight Larry Kudlow discussed the firing of Don Imus and the quality of media debates. Paraphrasing, Kudlow asked if civilized, adult debate possible. Can we evade name calling, slurs, and low brow "arguments"? Can debates, especially in the political sector, become conversations and not yelling matches?

The whole thing is classic prisoner's dilemma. If two pundits agree to be civil, then there's a lot to gain for the defector. If one person is trying to keep the conversation high brow while the other calls him a jerk, then, to many people, the former looks soft and the latter looks like she knows what she's talking about. So they both act like jerks.

One way to get out of this dilemma is to force people to respect each other: introduce a moderator. But good luck finding someone who can be trusted to be neutral about such high-profile issues.

Eyeing Rudy

Larry Kudlow of Kudlow and Company aired his interview of Rudy Guiliani this evening. Guiliani looks like an excellent free market president; Kudlow compared his policies to ones that Hayek, von Mises and Friedman would support.

Here's a few:
-Against government health care.
-Against erecting trade barriers of any kind.
-Against any new taxes, including a carbon tax.

He did, however, speak of "energy independence" but if it happens spontaneously thanks to a deregulated power plant industry (he mentioned the virtues of nuclear power by name), then I don't really care. Besides, no politician is anywhere near close to perfect.

He was probably talking solely to Kudlow's audience and this was all just a lot of fluff. But in this new political climate-where democrats and, by extension their ideas, are very popular-it says a lot for him to disagree with them so consistently.

Note: I will be traveling a lot in the next two or so weeks and as such my blogging will be very erratic, if it appears at all.

Reichnomics

On Kudlow tonight, Robert Reich insisted that states should spend their growing surpluses on schools, roads and other infrastructure and not tax cuts. His justification is one needs to do this to keep the economy going well.

I'm not really sure what Reich thinks people do with the money they save because it doesn't go to taxes. Burns it, I suppose. But I do know what they actually do the money. They save it or spend it, creating the next economy or pushing this one to greater heights.

The Pursuit of Pleasure

On Kudlow and Company today, Larry Kudlow and Art Laffer lamented at a Gallup report that claimed half of all Americans cite "getting rich" as a high priority goal (or the priority goal, I can't remember). "Only half?" they said. "That's horrible." Laffer thought it should be 100%.

Let's set aside the fact that people are diverse and some want to simply retire or raise a family or live a quiet life. Getting rich is expensive and is not a goal for everyone's tastes and lifestyles. Instead I want to point out the hidden success story in that poll.

If lots of people aren't focusing on getting rich, that means they don't see a need to get rich. They can live a happy life much easier than before. We are so wealthy, people can spend their time pursuing things they desire but cannot be bought. That's a sign of our economy's strength, not its weakness.

A Typical New Experiment

On the first anniversary of Katrina, Kudlow and Company dedicated a segment to the role of government in times of crisis. Jared Bernstein of the Economic Policy Institute argued the administration missed a golden opportunity for a "bold new experiment." I'm not sure what he meant by this. Presumably this means more free market activity and less government. Drastically less government, allowing New Orleans to just be rebuilt but reimagined.

Bernstein, however, works for a leftist think tank and has agrued for more spending on "rebuilidng the Gulf Coast" and fewer tax cuts so I doubt he has much faith in the market.

People always tell me the market is great but it can't handle emergencies or disasters. I don't get this. In times of crisis information is incomplete at best. Normal lines of communication fly apart. Scarcity hits new heights. Do we really believe politics, which ignores the pricing mechansim (arguably the best way to convey information) and relies on the good will of bureaucrats to distribute these scarce resources, to be better than the private sector?

Look around you. Virtually every great service or product in our society was forged by free minds in free markets. Virtually every shameful or horrid thing an institution has done was done by politicians of one breed or another. In times of crisis, it simply make more sense to involve the institution that best handles information and scarity. It would certainly be a new experiment to allow freedom in times like those, but the record of markets is so good, so proven, I would hardly call it "bold."

What's the Deal With Ann Coulter?

Ann Coulter was on Kudlow and Company tonight. She seems to be on it a lot. She seems to be on a lot of shows a lot. And I'm not sure why.

It's not that I hate Ann Coulter nor am I a fan. I just don't find her very relevant for understanding the important issues of the day. Ann Coulter is like an episode of Seinfeld. A lot of people either love her or can't stand her and few that are likely to change their minds. She's entertaining (to those who like her) but rarely important. She makes a very big deal about small things which becomes bigger and bigger as she talks to the point of absurdity. Often this results in making fun of others which usually isn't a big deal unless you're trying to learn something.

The only differences here are that everyone on Seinfeld knew they weren't that important and the show's a lot funnier.

Learn to Market "Market"

Tonight, Larry Kudlow ran an online poll for his show asking, "Which is the more reliable economic indicator? Markets or GDP?" The episode concluded with the results; 54/46, favoring of markets.

Larry seemed quite pleased with this result, but I'm just confused. Market for what? Everything? That's just a tautology. Gold? Too ambiguous. Copper? Aluminum? Sodium nitrate? Some combination? Is it a reference to the DOW or Nasdaq?

He's right to look down on GDP, and there are alternatives (copper is my favorite check, at least for short term changes), but don't load the question with the nice-sounding--but ultimately meaningless--description, "market."

Damn Lies and Secrets

Enemies are everywhere, we’re told. Deep dark monsters loom in the shadows, some sanctioned by governments and others nothing more than angry men with bombs.

But it’s never as bad as we’re told it is. Experts exaggerate to keep us in line or to scare us so we buy their counsel. Sometimes they go over the top so no one can blame them for not crying wolf when the shit finally does hit the fan and sometimes scare tactics crop up because it’s expected. Paranoia is rarely justified.

Fear knows no boundaries, no matter how absurd. Today on Kudlow & Company, Jerry Taylor from the Cato Institute and Frank Caffney from the Center for Security Policy exchanged opinions about CNOOC’s buying of Unocal. CNOOC is a Chinese oil and gas company; American Unocal also focuses on those energy commodities.

Caffney accuses CNOOC of being a puppet of the Chinese government (they are heavily subsidized) and this acquisition is but a step in an economic attack of epic proportions. I wish I kept track the number of time he said “strategic,” but it was a great deal.

Taylor made the very good point that you can’t control a market as wide and deep and vague as energy, but he didn’t push it hard enough. If, in the unlikely event, that this is just part of the much larger puzzle and “they” are trying to take our energy, then we have nothing to worry about it. There are endless alternatives to oil and gas; even if I were to make the paranoid assumption that everyone was out to get us, they cannot plunge us into darkness.

It’s fitting that Rep. Richard Pombo suggested that this deal could be the Sputnik of our time. Sputnik I orbited the earth for less than six months. It did little more than gather information about electron density in the ionosphere. It wasn’t a spy satellite, nor could it fire lasers from space. It had absolutely no military application at all. Like this deal, all the danger is in the fear-monger’s heads.