The Shoes

Various "the year in review" ideas came to mind for a December 31st blog entry. Yet I kept coming back to a piece that I had not yet written that somehow, in my mind, would not come off quite right in 2009. It is about the shoe throwing incident that took place on December 15th in Iraq by some loser journalist. 

To be sure, a true journalist would have used a journalist's weapons of choice, words, to express disapproval. Instead, this clown could only manage to display his effrontery by heaving his shoes at President Bush during a press conference. An irony is that the fool would have faced instant death had he dared even aim a shoe at Savage Saddam, the very dictator that President Bush had ordered overthrown. 

Two reactions impress me about the incident and its aftermath: (1) President Bush's reaction; and, (2) the reaction by the press and media.

The weasel threw both his shoes at President Bush. Notice the President's reaction throughout. He was open-eyed, square-shouldered, and dodging the minimum required to avoid being hit. He maintained eye contact with the rag-arm in a defiant "you don't impress me nor scare me" posture. Given a chance, President Bush would have knocked the maggot's lights out. No confusion here about who was the man and who was the invertebrate.

George Bush's reaction was totally consistent with how he has dealt with the post 9/11 Islamofascism world - the world that almost exclusively dominated his two-term presidency. Say what you want for all his failings, his poor communication style, ill-timed policies, President Bush kept the homeland safe on September 12, 2001 and every day thereafter. Time seems to play tricks on the mind and distorts how truly important this is as an accomplishment. It is the most important responsibility of a President. When it comes to homeland security, President Bush displayed great purpose, tenacity, focus and resoluteness. He is to be applauded. May President-elect Obama have the same unflinching success.

Of course we all see the slapstick humor in the incident. After all, it is not everyday that some jackass tries to hit a President with his shoes. This is great fodder for Saturday Night Live and late night comedians. However, the gleeful, hand-wringing unadulterated joy that many in the press and media have taken in this does raise an eyebrow. And even some late night comedians, like David Letterman, are betrayed by the elation they feel upon seeing that someone tried to hurt or humiliate President Bush.

You just know that the leftist media would have been ecstatic if the shoe(s) had actually hit George Bush and they would have danced a jig if Bush had been hurt. The same far left media that exalts in harm coming to President Bush would be up in arms if something like this were to happen to a President they embrace -- Barack Obama for example.  But they hate Bush, so they adulate the wimpy shoe thrower.

This very same effete media decries when they, and other who behave in the same deplorable manner, are called "unpatriotic". You see, I did not support Barack Obama, but it would absolutely burn me if some ingrate, worthless journalist tried to harm or humiliate him. Acting like a patriot means that you take offense when someone tries to damage the President of the United States. Anyone. 

Yes, the leftist media fulminates when called "unpatriotic" during times like this. But, hey, the shoe fits.

Confidence, Leverage, and the Seesaw: Part 5 of a Series

"Too much leverage" is an often-cited and intelligent answer. The question is: "Why are the financial and credit markets, and therefore the economy, in shambles? Leverage is the financial term that relates the level of debt owed by an entity (personal or business) to the amount of capital (unencumbered assets) that it owns. 

Expressed mathematically: Leverage Ratio = Debt/Capital. A broader equation would be: Total Liabilities/Total Equity. Both ratios measure the extent by which an entity relies on debt, as opposed to its own capital, as a source of funds.

The key is to understand that the higher the Leverage Ratio, the greater the risk. Traditionally, entities are able to sustain high leverage ratios to the extent that they have steady, predictable cash flow that is timed in tandem with repayment of debt as it comes due. Consider the high-level of cash flow predictability of a utilities company (we all pay our electric bill, or else). Contrast this with the cash flow predictability of an antiques dealer. The former is in a far better position to load up on debt. 

In times of easy credit, debt is frequently repaid by borrowing elsewhere to pay existing debt and then stretching out the payment terms. This only serves to distort an entities' true debt repayment capacity.

Carrying a large amount of debt with minimal capital is not an easy task, but it can de done if conditions are just right. Think of a seesaw. It is possible to put a very light person at one end of the board (the lever) and have that lightweight (Capital Guy) lift a big, huge heavyweight (Debt Guy) as long as the right physical conditions exist: the relative weights at either end make sense, the length of the lever is appropriate, and the height and the positioning of the fulcrum along the lever is right. 

Over many years, and gradually achieved, that seesaw has managed to be calibrated to the point that the weight being lifted by Capital Guy was immense. We just kept adjusting the physical components of the seesaw, always ever so gradually. 

Then it came: JOLT!!!!! The sub-prime mess, Bear Stearns, Lehman, Freddie, Fannie, AIG, Washington Mutual, and many others. The precision of the carefully distributed seesaw proportions was given a swift and mighty shove. Debt Guy started to swing wildly and let out horrific shrieks. Capital Guy could not add enough heft quickly enough to counter. The lever started to gyrate and the fulcrum slid. Capital Guy can no longer carry Debt Guy. 

All of the "certain" seesaw proportions are a thing of the past and no one wants to trust Capital Guy's ability to carry Debt Guy as in the past. Capital Guy needs to bulk up and/or Debt Guy needs to join weight watchers.

Now we must start to re-set the balancing points in order to regain confidence of debt-carrying ability. But the seesaw first needs to stop its convulsions.

Misplaced CONfidence: Part 4 of a Series

Bernard Madoff is all over the news for allegedly swindling up to $50 Billion from investors in his Asset Management business. The term Ponzi scheme fills the airwaves and print media in the description of what Mr Madoff is accused of perpetrating. If true, and he does say he did it, Mr Madoff's will have pulled off the most massive flimflam in history. That word, flimflam, is a bit quaint, correct?

It is most unfortunate that common English usage is akin to alphabet soup. Nearly everything is an acronym: SUV, ADD, ADHD, HDTV, HMO, DVR, DVD, et cetera, et cetera. If not acronymized (might as well make up my own word here), then words are truncated to a pitiful stub: slo-mo, lit (as in English lit), and perp come to mind. Some acronyms have become everyday words and the fact that it started as an acronym is unknown to many: scuba, modem, detox. 

This fallout of this somewhat lazy English usage is not limited to rendering a less eloquent language. What is lost is the understanding, the full meaning, of the butchered word and its application. Self-contained underwater breathing apparatus is descriptive. Scuba is not. Scuba is just - a word. Might as well call it "lormit". It describes nothing.

Now, the digression I just put you through is not a consequence of my knowledge of Mr Madoff's penchant for acronyms nor have I heard that he was into scuba. It is because con man is short for confidence man. The full term -- confidence man -- not only tells you to hide your watch when you shake his hand but, most importantly, informs you as to how his scam actually works. He purposely sets out to gain your confidence, then he steals you blind.

Ever heard of George Parker? If not, then perhaps you've heard the popular retort that is directed to the gullible: "I have a bridge to sell you". George Parker sold the Brooklyn Bridge many times, sometimes twice a week. Police often had to stop the victimized buyers from erecting tollbooths on the famous bridge. He also sold other New York City monuments such as the Statue of Liberty, Madison Square Garden, the Metropolitan Museum of Art. Mr Parker inspired sufficient confidence to convince the marks that he was authentic.

Victor Lustig sold the Eiffel Tower twice and he sold several money printing machines. He also managed to trick Al Capone. Joseph "Yellow Kid" Weil used phony oil deals, women, race tracks, false identities to swindle many. Soapy Smith, from the old wild west days, fooled townspeople into thinking that some of the special soap bars he sold had a $1 or a $100 dollar bill wrapped around it. Someone, part of his confidence game, would exclaim that he had won $100. Then others would buy a soap bar and end up with ... soap. There was Frank Abagnale on whose life of playing confidence games they made a major motion picture, Catch Me if you Can.

Italian immigrant Charles Ponzi (1882-1949) was in and out of trouble during his misspent youth. Petty crimes mostly. Then he turned to the possibility of legally arbitraging in Postal Reply Coupons. What was illegal was convincing others to invest in his scheme and promising to double their money in 90 days. As long as he had more incoming stooges than investment returns to pay, he was in good shape. Ponzi was arrested, deported to Italy and died penniless.

These confidence men were only successful because they were able to connect with a mark that was driven by a bit of avarice or perhaps desperation. The confidence game was on when the victims gave in to trust the confidence man as a result of a gesture designed to garner that very trust. The victims all believed in something (and someone) that was too good to be true. 

The term confidence man is due to a fellow called William Thompson. Mr Thompson was active in New York City in the 1840s. He dressed nicely, as many other confidence men also dress. The genial Mr Thompson would strike up a conversation with a mark for a period of time and then ask: "Do you have confidence in me to leave me your watch until tomorrow?" Many did. 

Confidence Under Attack: Part 3 of a Series

Part 2 of this series on Confidence pointed to the lightning fast and accelerating blurring of the lines that is taking place between our political and business spheres. Left unabated, this cross-dressing that we are witnessing can only weaken the nation. 

The political trespass into the free market, or business, orbit is quite worrisome. We hear that these are emergency measures only. Pardon the skepticism, but it is truly uncommon for a government, even a benevolent one such as ours, to relinquish power that has been seized. Too many self-interests are created once a politician claims new territory. That dog will not easily surrender his bone.

One emergency leads to another and then another. The emergencies will be given different names to mollify voices of opposition to the expanding governmental  tentacles. Emergencies will be a/k/a "Special Measures"; a/k/a "Temporary Realignment"; a/k/a "Period of Adjustment". 

If we have seen what we have seen under a Republican administration, one can only tremble at the government overreach that will descend upon us by a Democrat administration in partnership with an activist Democratic-led Congress.  Their self-propelled pressures to control our economy can only be achieved by weakening our free market system beyond recognition.

Our economic house is indeed on fire. Without doubt there will be plenty of damage from the blaze. Government has extensive, but certainly not total, blame for the conflagration. We now look to the co-culpable federal government to be the fire department. Let's hope, nay -- let's demand -- that once the fire is tamed they do not feel obliged to get too comfortable and begin living in our houses. Let's remember that government works for us, The People, and we need to make sure that they go right back to the fire station.

Little Drummer Boy

A young boy, too poor to buy a gift for baby Jesus, plays his drum to please the newborn. 

In 1977, Bing Crosby and David Bowie deliver perhaps the finest rendition of this song. Listen.

Confidence Under Attack: Part 2 of a Series

The longtime nexus between Wall Street and Washington, D.C. has been strengthened beyond belief. The last days of March of this year gave us the Bear Stearns government-backed bail out. We had a new ballgame. The mixture of politics and business should ideally be kept as distanced as possible. Referees should not tackle the runner and linebackers should not throw penalty flags.

Now we are witnessing the bizarre and horrific spectacle of politicians like Barney Frank who somehow feel qualified to know which loans should be approved by a bank and at what rate. He does the aforementioned credit work in the morning. In the afternoon, he designs fuel efficient, affordable, well-styled cars that will salvage the Big Three.

So, too, we cringe as we watch corporate CEOs make desperate pleas for taxpayer money to save their businesses. Last week, it was the car guys; this week, commercial real estate developers; next week, what, massage parlors? They beg Washington when they should be petitioning investors and creditors to say yea or nay to whatever it is that they peddle.   

It is all strange indeed. A strangeness that stiff-arms confidence because roles have been changed. What we had come to expect in terms of spheres of responsibility is violated. Boundaries are blurred, if not obliterated. And it is all happening at warp speed. To this, we react as is dictated by human nature. It is as if a large, grotesque, and unknown beast has appeared in our mountain village. We watch with keen eyes. What is this thing? We move and breathe deliberately and silently. We need to figure this out first before we have restored confidence to go about our daily tasks.

Was not Socrates' definition of justice akin to each person performing the work for which he is best suited and that everything has it's place? Certain work should only be performed by those skilled for the work in question. Trespass with caution.

It's (Almost) All About Confidence

The present economic recession commenced in December 2007, a year ago. We learned this officially two or so weeks ago. To be sure, the recession is riddled with a host of accompanying economic data that substantiates, or proves, that times are tough. The unemployment rate, GDP, retail sales, capital spending are just a sample of the data we see. 

The depth and length of a recession depends largely on the restoration of confidence. We, as consumers, investors, and businessmen, have little confidence these days. It is clear that we had misplaced confidence prior to December 2007 and even into the first quarter of 2008. The child that ably manages his balance on a bicycle for the first time only to fall when someone interrupts him with a reminder that "he really doesn't know how to ride a bike" comes to mind. Once fallen, and confidence shaken, the newbie bike rider may be stupefied to hear that his future survival depends on his ability to immediately continue riding a bike.  

The point here is the paradox between the sickness and the cure. We are in the problem we are in because we borrowed too much and spent what we borrowed on things whose prices were inflated by a bubble. The macroeconomic antidote to this problem? More debt and spending. It is not unlike a drunk curing a blistering hangover by chugging a fifth of whiskey in the morning. 

Paradoxical or not, that may indeed be the drunk's short-term cure.  The long term cure is just too painful and requires great discipline. A society that pays homage to instant gratification eschews a long term, albeit healthy, remedy. However, this peculiar short-term cure requires the confidence that the morning fifth of whiskey will not cause the already splitting headache to make you feel like you just got hammered by a Joe Frazier left hook. 

Without confidence, no one will want to spend if we think our employment situation is shaky. No one wants to lend if they don't have confidence in a timely repayment. No one will invest without confidence that the investment itself is recoverable. 

When our confidence is shot, human nature, the primitive brain, takes over. We ration. We become rational. Our survival instincts sharpen. We save. We wait. We see. We react. It is irrational to do otherwise in the short term. We are survivors. Our DNA says so. Otherwise, we would not exist. Extinction is the fate of those species that do not promptly adapt to danger signals.

A manufactured sense of economic safety is a creation of modern man and takes the form of the various monetary and fiscal interventions that governments enact. These are actually good, sound tools that can avoid a worse recession and perhaps even hasten a recovery. But to work, they are forced to appeal to the modern brain and this requires a key ingredient that has the effect of telling the primitive brain to take a break -- yes, Confidence. 

Who was A.P. Giannini?

Amadeo Pietro Giannini was born in San Mateo, California in 1870. The son of Italian immigrants, Giannini succeeded in the wholesale produce business. His attention shifted to banking upon observing that banking practices tended to ignore the needs of what he termed the "little fellows". So in October 1904 Giannini founded the Bank of Italy in a building that had been a saloon in San Francisco. He offered basic deposit account services and granted loans based on his assessment of the prospective borrower's character. 

Now the story gets interesting. Recall that on April 18, 1906, scarcely 18 months from the opening of the Bank of Italy, San Francisco was hit with a disastrous earthquake that leveled the city and killed many. That same day Giannini travelled 18 miles by wagon from his home in San Mateo to the Bank, located in the North Beach neighborhood. He quickly loaded $2 million onto a produce wagon and covered the money with fruits and vegetables and took it back to his home.

Rather than shut down, as most other area bankers did for several weeks, Giannini opened for business in North Beach. Over a plank that rested upon two barrels he accepted deposits and extended credit that was critical to San Franciscans' early efforts to rebuild their city and lives. Giannini took risks and inspired confidence during the dire aftermath of the earthquake. Giannini had constructed a bench of sorts with his plank and barrels. A bench is the latin banco, from where the term bank stems.

He fervently insisted that San Francisco would rise from the ashes. Running a bank totally based on trust, he made his reputation by helping the city rebuild. Later, he expanded the Bank of Italy across California, breaking with the tradition of independent local banks by providing banking services to the Yugolsavian, Russian, Mexican, Portuguese, Chinese, Greek, and other immigrant communities. 

Through the 1920s, the Bank of Italy continued to grow. Then in 1928, Mr Giannini approached a San Francisco banker about a possible merger between the two financial institutions. You may have heard of the bank they formed -- the Bank of America. 

Giannini remained as chairman of Bank of America until 1945. When A.P. Giannini died on June 3, 1949, at age 79, hundreds of "little fellows" attended his funeral.

The Pie and the Russian Brothers

The pie is a commonly used metaphor for describing the nation's economy. For example, we routinely hear or read about "getting a slice of the pie" to connote an individual's or a delineated group's share of the economic goods. 

By paying close attention to how the metaphor is applied one gains a sense for the underlying economic politics of the user of the metaphor. Notice, for instance, that modern liberals will almost exclusively refer to adjusting the size of the pie slices, as in "the working class slice has grown thinner while the wealthy have a larger slice". Perversely, they want you to believe that having a larger slice of a shrinking pie is a good thing.

In contrast, those that focus on the free market engines of economic expansion speak about the policies and approaches that will make the pie bigger. "We need more ideas and energy centered on the opportunity to grow, on abundance, on new markets, on a willingness to improve and compete, on more economic freedom in the hands of the creators of wealth rather than in the undeserving hands of the distributors and self-proclaimed adjudicators of wealth". 

This "unfair slice" argument is the modern liberal's springboard for their banal liturgy about protectionist measures, class-warfare and all the other divisive stuff that constitutes the politics of envy and resentment. We need less focus on mealy-mouthed and corner-of-the-eye glances on what your neighbor has that you don't. We need less of this because it is the path of ruin, the path of losers.

There is an old Russian fable about two brothers. Only one brother owned a sheep. The sheepless brother was hopelessly consumed with envy. Then one day, this brother that did not possess a sheep found a lamp, rubbed it and out came a genie willing to grant one wish. The wish? Well, the brother sneered and wished that the genie kill the sheep of his brother. 

A Different Way to Pay Taxes

Americans would have a different attitude toward taxes if they were not deducted from our paycheck. Then, we would have to write checks every month payable to the various departments of the US Government for our income, payroll, social security, and all other taxes. There is something about owning something and then being forced to give it up. 

Paycheck deductions for taxes are too smooth, too easy and too automatic. They create the numbing unconsciousness that can delude one into thinking that the entirety of a hard-earned paycheck was never truly ours to begin with. The fact that some, upon receiving their tax refund, exclaim that "they got something back", is alarming when one really thinks about the mindset. Rather, the exclamation should be: "why did they overreach into my earnings and where is the interest payment?"

What Comes First, Price or Cost?

In their purest form, capitalists and socialists have a fundamental difference on how a product ought to be priced in the marketplace. Let's begin with the socialists. Socialists predominantly base business enterprise decisions on cost. To arrive at an appropriate product price, they add up the labor costs, material costs, and other costs associated with taking the product to market. To this sum they add whatever profit margin they view as essential, and this brings them to a grand total: the product price.

If foreign competitors offer the product at a lower price, then socialists decry unfair trade agreements and scream for protectionist measures such as tariffs that are aimed at elevating the competition's cost, and by extension, the competitor's price. Lowering their own price is not the solution, especially when rigormortis sets in on their sacred "cost + margin = price" mentality. Who suffers from this wrongheadedness? The consumer for one and any notion of business sanity for another. The socialists have it backwards because their stale process leads to political barriers that reward inefficiencies.

By dramatic contrast, a capitalist focuses on price as the key determinant. What price will be the most attractive to capture consumers in a competitive marketplace? Once that price is established, the capitalist organizes himself to arrive at a cost structure that will permit the delivery of the product and leave a residual profit. This process forces the free marketer to develop all sorts of increased productivity measures,  sound organization, efficient use of labor, technological progress, optimal distribution channels etc... It is this very effort to construct a cost structure that can work within the constraints of the price limitation that has brought us marvelous new technology, workplace enhancements, and general business innovation. It leads to economic growth.

Here's a riddle: What happens when you cross a free market-created price constraint with a labor union/protectionist business organization? You get huge losses with no flexibility to change because the cost structure is rigid. You get Detroit.

Deepak and Gotham

Deepak Chopra is a bit flustered these days because of  a commentary written by Dorothy Rabinowitz that appeared in the Wall Street Journal on December 1st. The piece, titled "Deepak Blames America", convincingly asserts that Mr Chopra, during a CNN interview, pointed the finger of blame toward the United States as it related to the Mumbai, India terrorist attack. 

To paraphrase the CNN interview, Deepak said that US foreign policy led to the murderous act because the policy is too nasty toward the otherwise easy-going terrorists. It would be far better for America to adopt a "root cause" approach to this pedestrian misunderstanding with those who want to annihilate us. By the way, the self-help guru put out the outlandish claim that those who drop bombs from 35,000 feet (US pilots) can also be considered terrorists. 

The inconvenience of the "roots cause" kumbaya is that we are being targeted because of who we are - western society. However, to correct the root problem, all we need to do is mass convert to Islam and abandon this silly democratic regime we have. Seems reasonable to me.

Deepak Chopra objects to the term "War on Terrorism", citing that it paradoxically translates into "War on War". I tend to agree with Deepak and would suggest a more illuminating term, such as "War on Islamofacsism" or "War on Radical Islam". The sagacious Mr Chopra prefers to dial down the rhetoric and call it "Serious but respectful objections with those who embrace a different but equal culture and possess a well-grounded dislike for Americans because we do not dedicate enough time to fully understand the root reason for why these peaceful human beings want to kill us". Okay, the conflict's name may be long but it may catch on in time.

Today is the 67th anniversary of the Japanese attack on Pearl Harbor. The next day when President Roosevelt declared war on Japan he used stark and clear words (dastardly, treachery, etc..) to convey his emotions and the reasons for war. Deepak would have advised the barbaric FDR to stand before congress daintily waving windchimes and call for a moment of aromatherapeutic, non-offensive dialog amid sushi and sake in order to engage in a guilt-ridden exploration of the "root cause" for the attack. We obviously did something to offend them. If you buy "The Seven Spiritual Laws of Success" you will not actually learn what we should have done in the aftermath of Pearl Harbor or 9/11 but Deepak would appreciate the patronage.

On December 5th, Deepak's retort to Ms Rabinowitz was printed in the Wall Street Journal. The letter was short and a bit whiney. He pouted because Ms Rabinowitz launched a personal attack on him. Somewhat disappointingly, Deepak exhibited a lack of creativity by using the same catty arguments, almost verbatim, that he used earlier in the week when he pawed at Fox News. Catty is never good, but being catty and lazy is inexcusable for someone who wrote a book conspicuously titled "Synchrodestiny". 

Enter Gotham Chopra, son of Deepak and rumored to have been conceived in the batmobile. Gotham follows Deepak's blurb of a letter with a rather long missive that is ominously prefaced with a threat to swing hard at Ms Rabinowitz because his daddy could not on account of Deepak's vow of non-violence in "all his words and action". (I may be allowed to dispute Deepak's allegiance with his own vow because his words do make my head hurt) The point is that Deepak cannot engage in bellicose words but he can recruit Gotham to the task - kinda like how the old mafia dons would take care of business. 

Gotham blusters that he will put this whole fracas with the terrorists in the "proper context". He does not. Gotham fails pathetically. Rather than elucidate, he punishes us with a rambling and incoherent series of non sequiturs. Further into his meandering letter I think I read the name Gandhi somewhere in there, something about his lending a bizarre idea to Deepak, and perhaps even a philosophical reminder that Cisco drank the whiskey and Pancho drank the wine.

Okay, I was going to write more about this but these guys just aren't worth it. So I'll stop right here. Deepak is a fraud and Gotham is a dullard.

As said by Churchill

The inherent vice of capitalism is the unequal sharing of the blessings. The inherent vice of socialism is the equal sharing of the misery.

An Awful Time for Trade Barriers

The Democrat-led House of Representatives, spearheaded by Speaker Nancy Pelosi, is blocking a vote on the US-Colombia Free Trade Agreement. Rather than protecting the labor unions (such as UAW) and manufacturers, whose job losses Democrats claim to lament, this trade agreement inaction will prove costly at a time when our economy is in a desperate need of a tourniquet. The delay is especially ill-timed because the Canada-Colombia FTA was signed on November 21st. 

The benefits gained by Canada and Colombia will result in a loss for the United States. The Canada-Colombia pact will eliminate existing tariffs between those two countries for a wide range of products. Hence, why would Canada and Colombia choose to purchase from the US (with tariffs) when it is cheaper to buy-sell among themselves? Who gets hurt here? - labor unions and manufacturers, of course.

It is in our country's best interest to demolish trade barriers, especially with a democracy in our hemisphere. We should want all South American countries to realize the benefits of being a free-trading, economically-free, democracy. Canada is ahead of us on this one.

Somali Pirates

Lo and behold, there may be one topic that most of the world can rally around - the scourge of Somali pirates. Piracy off the coast of this disastrous African nation has been all over the news as of late. There have been 90 reports of piracy in 2008 by the Somali.

Using vessels that range from large to dinghies, these criminals board a ship, make hostages of the crew, and then ask for ransom for the lives of the hostages. Refer to this map to see worldwide reported pirating incidents for 2008 alone. There are three hotspots. Off the coasts of Somalia, Nigeria, and Indonesia.

Unlike pirates of yesteryear, there has been minimal interest in the captured vessel's merchandise, although a captured Ukrainian freighter was carrying tanks, grenades and a host of other military equipment.  In 2008 alone, these pirates have seized vessels from India, Iran, Ukraine, Saudi Arabia, Thailand, Great Britain, France, and many others. The The Saudi vessel was a supertanker holding about $100 Million in oil.

A coalition of several countries has been formed to patrol the Gulf of Arden. To defend against the pirates, commercial vessels are now better equipped to repel an attack. This defensive measure is quite expensive, when one adds the new technology, additional militarily-trained crew that is required, increased insurance costs, and the cost and use of the patrol boats that act as guardians.

This coalition for "pirate-free waters" needs to go a step further by taking the offensive. They should consider patrolling the waters closer to Puntland, on the northern shores of Somalia. This break-away region that is run by warlords holds the highest concentration of these pirates. Once stationed, the coalition should sink any and all vessels that leaves its coast. If they shift to another region, then sink all of those vessels as well. 

We are dealing with a criminal element that becomes increasingly brazen. Think Mogadishu in 1993 with Black Hawk Down. There is nothing that is swashbuckling romantic about the murderous thugs that perpetrate these high-water crimes.

True, many vessels that depart from the Somali coast are innocent fishermen. But that's the problem - these "innocent vessels" are indistinguishable from the pirates. Therefore, they should all be sunk until Somalia learns to conduct itself. Should it not learn, then they can just prey on one another and leave the rest of the world alone. 

Winston Spencer Churchill

Winston Churchill was born on this day in 1874. The twentieth century boasted more than a handful of truly outstanding statesmen and national leaders. Making the short list for the greatest statesmen of the last century are: (1) Theodore Roosevelt, who led America to become a true world power; (2) Franklin Roosevelt, who led a country out of isolationism to defeat Hitler's Germany; (3) Ronald Reagan, who never doubted that American virtue would triumph over the Evil Empire and thus led the way for what was the disintegration of the Soviet Union.

The greatest statesman, however, was Winston Churchill. His stalwart leadership as Prime Minister during the early years of World War II kept Hitler at bay while Churchill was recruiting America to join the war against the Nazis. England was completely overpowered during the fall of 1940 when Germany was torridly air bombing London for weeks on end. Churchill kept his country, and the free world, in the game by imploring his military to fight with tenacity and by maintaining an erect, no-surrender attitude through his speeches and actions. The "Blood, Toil, Tears, and Sweat" speech, the "The Finest Hour" speech, the "The Few" speech, and the "We Shall Fight on the Beaches" speech will echo throughout time as clarion calls reminding us that evil cannot defeat an indomitable spirit. Through his words, Churchill turned the English language into a weapon of mass destruction.

The Churchill biography is gigantic even when measured only by his public service and military accomplishments. However, the prodigious Churchill created a vast body of work as an author. He wrote a total of 43 books in 72 volumes. To name a few of the best known books: The World Crisis (about WWI - 5 volumes); A History of the English Speaking People (4 volumes); The Second World War (6 volumes). His mode of relaxation was painting and Churchill even became an accomplished painter.

Winston Churchill was a truly remarkable man who possessed a fiery passion for charging forward into adversity for the sake of a Good. What made him exceedingly impressive was his ability to accomplish what he did despite some serious human obstacles. Churchill had a speech impediment that would have caused most people to withdraw from ever engaging in public speaking. Also, throughout his life, Churchill suffered bouts of major depression, calling his depressive states the "Black Dog". Undeterred, he rose above these drawbacks with a will and a drive and a talent that the human race rarely sees. 

When Churchill resigned as Prime Minister in 1955, he bade farewell to his Ministers leaving them with a message and a piece of advice. The message was: "Man is spirit". The advice was: "Never be separated from the Americans". The inimitable Winston Churchill was a savage gift to a world that was in peril.

Quick Notes:

Churchill's favorite cigar? Romeo y Julieta. He began cigar smoking while in Cuba in 1895.

Churchill's favorite drink? Whisky and Soda

Best Winston Churchill biography? Churchill, a Life by Martin Gilbert.

Churchill's Public Service Timeline:

1893: Enrolls in Royal Military Academy

1895: Visits Cuba while on leave during the Cuban War of Independence and comes under fire for the first time

1896: Cavalry officer Churchill is posted to India

1897: Volunteered to fight local tribesmen in Malakand (now part of Pakistan)

1898: Participates in a cavalry charge in Sudan

1899: Loses first attempt to be elected to parliament. Travels as journalist to the Boer War in South Africa. Is captured and escapes.

1900: Elected to parliament as a conservative

1904: Leaves the Conservatives to join the Liberals

1911: Is appointed First Lord of the Admiralty

1915: Blamed for Dardanelles disaster in WWI. Resigns. Rejoins the army and fights in France

1919: Secretary of State for War and Air

1924: Leaves Liberals and rejoins Conservatives. Is made Chancellor of the Exchequer

1930s: "The Wilderness Years". Churchill out of office but is a lone voice warning of the menace from Germany

1939: Britain declares war on Germany. Churchill is back as First Lord of the Admiralty

1940: Is made Prime Minister

1945: Loses PM re-election

1946: In a speech in Kansas, coins the term "Iron Curtain"

1951: Becomes Prime Minister again

1955: Resigns as PM

1964: Leaves the House of Commons

1965: Dies in London at age 90

“Never give in, never give in, never, never, never, never – in nothing, great or small, large or petty – never give in except to convictions of honor and good sense.” – Sir Winston Churchill

A Worthwhile Read

Walter Williams, a self-described conservative economist/commentator, wrote an interesting piece that aims to shed light on how money, as a medium of exchange, can camouflage coercive activities that we would otherwise view as intolerable. This obfuscation is exacerbated when it is combined with big, fungible pot of money whose sizable ante is the result of the millions of dollars gathered from government reaches into our pocketbooks to fund "social goods". 

Thankful For

A country whose promise of freedom makes it the best place to live in and whose democratic ideals makes it the most noble to die for.

Friends and loved ones who stick with you through thick and thin. No one can be forced to be a friend. It is this very freedom of choice that sublimates this relationship.

Parents who not only dedicated a lifetime of sacrifice to their children but who, in one shining and heroic moment, showed the wisdom to act with courage, conviction, and optimism to make a decision that forever bettered their children's lives.

Siblings whose company allows you to feel more comfortable than with anyone else. You can talk to them about anything and laugh about almost everything. New stories constantly enter our private history and old stories never grow stale.

Children who need not do anything else but look into your eyes for you to tremble at the magnificent splendor and power of unconditional love. Children exist as the means for God to share with us a glimpse of the extent of His love for us, His children.

Happy Thanksgiving!

Cut, Baby, Cut

President-elect Obama has signaled that he will not pursue the repeal of the Bush tax cuts, citing the dire financial markets and the worsening economic conditions. Barack Obama is to be applauded for heeding the advice of his economic advisors. His implied intention now is simply to allow the tax cuts to go away once they expire in 2011. At that time the previous higher tax rates would come back into effect. If keeping taxes low is the right medicine now, then what kind of economic quack would construct an argument that higher taxes would be good for the economy later? We will leave that for another day.

There is plenty of talk and maneuvering for a sizable financial stimulus package to coincide with Obama's inauguration. If you really want to see surge in consumer confidence, a curtailment of job loss, and an upward jolt in investment in both real estate and financial markets, all that Obama needs to do is to announce that he will immediately call for a tax cut. Lower personal income taxes for all income brackets, lower capital gains tax to spur investment activities, and lower corporate taxes to save jobs. This would, of course, require some gritty spending cuts at all levels of government as a show of fiscal discipline.

I don't think that the democrats will actually cut taxes across the board, or at all for that matter. However, such a move would be the ideal antidote for the economic ills that are dogging us. Cut, baby, cut.

Odd Committee Chairmanships

Henry Waxman (D), California recently ousted fellow Democrat John Dingell from Michigan to gain the chairmanship of the House Energy and Commerce Committee. The problem is that Mr Waxman despises oil companies. The appropriateness of this assignment for Waxman could only be rivaled by naming an incurable couch potato to head the President's Council on Physical Fitness. This is the same Mr Waxman that opposed random drug testing of federal employees but was all over Barry Bonds' steroid use and endorsed establishing drug testing for major league sports. I'm no fan of Bonds, but how exactly does Mr Waxman conclude that Mr Bonds' drug habits pose a greater risk to our health than do possible acts by federal employees, such as airport security workers? 

Then there is Barney Frank (D), Massachusetts. Mr Frank chairs the House Financial Services Committee. The problem is that Mr Frank hates capitalism and desperately wants to spread the wealth around by sticking it to the "rich". A Financial Services Committee chair that is partial to socialism? Quite bizarre indeed. What next? A museum curator that is hostile to the arts?

Lastly, we come to Charles Rangel (D), New York. Mr Rangel is the House Ways and Means chair. A very big assignment for sure. Contrary to the others mentioned here, this chairmanship makes sense because Mr Rangel is enamored with taxes. Now, he doesn't like to pay his taxes but he wants to make sure that we are not deprived of our Biden-described patriotic duty to pay more taxes.

Brokaw's Spite

Yesterday Joe Lieberman appeared on Meet the Press, hosted by Tom Brokaw. Throughout the presidential campaign, Mr Brokaw would invariably ask tough questions and follow-ups to Republican advocates. However, he obsequiously performed verbal curtsies when interviewing Obama supporters. Like others at NBC/MSNBC, his unflagging devotion to an Obama victory was emetically evident throughout the campaign season and after. Mr Brokaw's cheerleading, mind you, did not reach the soaring heights of Chris Matthews' and Keith Olbermann's. Mr Olbermann must still be emotionally distraught with envy because he was not selected as the YouTube Obama Girl.

The Lieberman interview was more akin to an interrogation and amply displayed Mr Brokaw's irritation with Mr Lieberman's support for John McCain. Brokaw badgered Lieberman with a clip from the senator's Republican National Convention speech where Lieberman did praise Obama but remarked that McCain was more qualified. Lieberman's defense of his evaluation of the presidential candidates caused Brokaw to fulminate and ask Lieberman if he shouldn't apologize for bad-mouthing Obama.

Brokaw also showed a clip from the same speech where Lieberman affirmed his support for Sarah Palin as Vice President. Brokaw's eyes squinted, his bottom lip stiffened, and then he hectored Lieberman for believing that Palin was more prepared for VP than he, Lieberman, and Biden. 

Lieberman deflected Brokaw's insidious attacks and expressed an interest in focusing on today's issues. Then, Brokaw the Grand Inquisitor shifted into the fastidious Father Brokaw, asking Lieberman if he would like to apologize for all his wrong-doings during the campaign, remarking that Lieberman had used the word "regret" but not "apology" during the interview. Good grief.

Joe Lieberman carried himself with dignity throughout this ambush. Tom Brokaw was petty, partisan, and vindictive. 

The Politics of Selfishness

Suppose you had gone to a restaurant with five friends and you were under the impression that it was going to be more or less "dutch". You were hungry and consumed 22% of the food that was brought to the table. When the bill came you were asked to pay 40% of the tab. Seems unfair, correct? Now suppose that your same group intends to return to the restaurant and they will expect you to now pay even more, say 43%, of the tab even though you will consume the same proportion as last time. If you balk at this apportionment, you will be called selfish. "An outrage", you proclaim.

According to the IRS, in 2006, the top 1% of wage-earners paid 40% of income taxes while earning 22% of all income. The top 10% paid 71% of all income taxes and the top 50% paid 97%. The bottom 50% paid 3%. 

Being in the top 1% in 2006 meant that your adjusted gross income was $388 thousand or greater. To qualify for the top 50%, you needed $32 thousand in income.

Pre-Bush, in 2000, the top 1% paid 37%. The top 10% paid 66% and the top 50% paid 96%. The bottom 50% paid 4%.

Hence, despite the "tax cut for the rich" there was increased disproportionality in the tax burden distribution. That Bush guy, he really favored the rich. But how could this happen? Easy, the number of millionaire income taxpayers nearly doubled between 2003 and 2006 and these new "rich" entrants paid more in taxes because, while cut, the tax rate schedule remained progressive.

The next time you go to that restaurant with your friends, you should consume 20% but go ahead and pay 50%. The next three friends can pay another 60%. The remaining two pals will then receive a refund for the 10% that was overpaid even though there bellies will be plenty full. Then no one will call you selfish, at least not until your next restaurant rendezvous.

JFK and the Comparison Problem

Today marks forty-five years since the fateful day in Dallas. John Kennedy had been elected president at the age of 43, more than three years younger than our current President-elect. I mention their ages because of the simply inane likening of Obama with Lincoln, FDR, and Kennedy. In particular, the Kennedy comparisons center on youthfulness, style, and swank. Here the media is behaving with the unhinged and irrational adoration that one would only expect from a teeny-bopper fan club. The fact is that JFK as a presidential nominee, whether you like him or not, presented credentials that far exceeded Mr Obama's abbreviated history of deeds.

In 1940 at age 23, Kennedy was slated for induction in the US Army. His poor health record was a problem, however, so he had his family pull strings to allow his induction into the Navy. Initially stationed in the United States, he asked and received sea duty. In 1943, as a commander of PT 109 in the South Pacific, Kennedy's boat was split in two by a Japanese destroyer. In what became a six-day ordeal, he displayed great courage in finding rescue for his crewmen, including a four hour swim to safety while hoisting a wounded crewman. At twenty-three, Obama was a community organizer in Chicago. Little to compare at this stage in their life.

After his military service, Kennedy went on to serve six years in the U.S. House followed by eight years as a U.S. Senator. This is national congressional experience that far outweighs Obama's four years in the Senate, two of which were dedicated to his presidential run. Not much of a comparison here.

As president, Kennedy bucked his own Democratic party when he pushed hard for a tax cut as part of the 1963 budget. He declared that to promote economic growth "one step, above all, is essential - the enactment this year of a substantial reduction and revision in Federal income taxes ... it is increasingly clear ... that our obsolete tax system exerts too heavy a drag on private purchasing power, profits, and employment". Apparently Kennedy was a bit partial to private purchasing power, he did not regard "profit" as a cardinal sin, and knew that lowering corporate taxes increases employment levels.

To combat temporary deficits from a tax cut, Kennedy proposed tightly controlling government expenditures. Close your eyes. Can you really imagine those words coming from a President Obama, the new Kennedy? No comparison to speak of. There is a night and day difference when it comes to going against one's own party and the merits of a tax cut.

Interestingly, in the tax cut debate, JFK's main opposition in the Senate came from Al Gore - senior that is. Seems that this Mr Gore feared that a Kennedy tax cut would only favor the rich, would not be good for social justice, and so on .. boring ... yawn. (Note: Gore Sr was so concerned about social justice that he voted against the Civil Rights Act of 1964). Who knows, perhaps Al, Sr. may have won the day had he convinced the nation that the planet would soon enter another ice age. Unfortunately for Senior, the precocious young Al was still a few years away from inventing the internet and developing a nifty powerpoint presentation to help drive home dad's argument.

JFK demonstrated at least one true act of courage and heroism. He did not necessarily heed the party line and he was certainly not labor's pushover. To be fair, Mr Obama will surely have his own opportunities to show his mettle. Although there is little in his past that points to deeds of valor or shows of individualism, he will have his chance.

Triumph

 Phoenix, the 770-pound spacecraft, landed on Mars in May. It studied things on Mar's north pole for a few months, and then called it a day on November 2nd. Among it's findings, Phoenix positively confirmed that water ice exists on the red planet. 

Where there is water, there is at least an infinitesimal possibility of life. Aside from water, they also found other stuff there that has scientists giddy and drinking Red Bull by the gallon. Last message sent by Phoenix's blackberry? "TRIUMPH". 

Bellweather and Anti-Bellweather

Missouri broke a streak of 12 consecutive presidential elections where the state voted with the winner. Missouri's polling result became official yesterday with McCain scoring a razor-thin victory. Not since favoring Adlai Stevenson over Dwight Eisenhower in 1956 has Missouri "gotten it wrong", thus gaining the well-deserved bellweather state reputation. Thirteen was just not a lucky number for Mr McCain.

So, I thought it would be interesting to poke around and see which state has sided with the loser the most over the same 1960-2008 period. The anti-bellweather states are: Washington, Mississippi and Alabama. Each of the three states has voted with the eventual loser in 6 of the last 13 opportunities. The two southern states supported a third party in both the 1960 and 1968 elections. 

Ohio is the new bellweather state, having voted with the winner since 1964.

Thinking of Thatcher

Yesterday's Wall Street Journal carried a book review titled "Never Wobbly". The book itself is "There is No Alternative". It is about Margaret Thatcher and was written by Claire Berlinski. Apparently, Ms Thatcher's resuscitation of free markets in Britain is highlighted in the book. 

The book review shares two anecdotes that serve as time-traveling charmers from the Thatcher years. One involves Prime Minister Thatcher being asked by David Frost (in 'tutorial style" we are told) about inconsistencies in the official version of the sinking of an Argentinean ship during the Falkland Wars. Mrs Thatcher satirical response was a gem: "Do you think, Mr Frost, that I spend my days prowling round the pigeonholes of the Ministry of Defense to look at the chart of each and every ship? If you do you must be bonkers." Perhaps he wasn't bonkers, but one can safely assume that the chastened Mr Frost must have shrunk a couple of inches when met by Mrs Thatcher's glaring eyes.

The second anecdote is classic Thatcher. To a visiting Congolese Marxist she tersely proclaimed: "I hate communists". That's it. That's Margaret Thatcher.

Good for the Goose; Horrible for the Gander

The United States labor movement is poised to push the Democrat-led congress to swiftly pass the Employee Free Choice Act (EFCA). A key feature of the EFCA is a "card check" system that allows a prospective union organizer to enter a shop, hand a worker a union sign-up card and then watch him or her vote "yes" or "no" for union formation. Without a secret ballot, the worker/voter is totally open to intimidation and threats.

Meanwhile, we shift to our nation's capital. Today, Democrats in the senate will cast a vote to determine if Sen. Joe Lieberman will be unceremoniously thumped from his chairmanship of the Senate Homeland Security Committee. Seems that the Dems are a bit miffed that the senator from Connecticut supported the presidential run of his friend John McCain. To cast their votes, these senators will bravely use the secret ballot. Need to preserve dignity, you understand.

What makes this situation possibly delightful is that Lieberman may well indeed retain the chairmanship. This would be a direct rebuke to Harry Reid's thirst to punish the traitor. Even so, word is that Ried will get his pound of flesh one way or the other. Should Lieberman stay as chair of the Homeland Security Committee, the Democrats may opt to strip him from the all-powerful subcommittee chairmanship on the Environment and Public Works Committee. That'll show him.

Not a bad way to start a book

10. If I am out of my mind, it's all right with me, thought Herzog. -- Saul Bellow, Herzog

9. He was an old man who fished alone in a skiff in the Gulf Stream and he had gone eighty- four days now without taking a fish. -- Ernest Hemingway, The Old Man and The Sea.

8. Man is born free; and everywhere he is in chains. -- Jean-Jacques Rousseau, The Social Contract.

7. " Who is John Galt?" -- Ayn Rand, Atlas Shrugged

6. Happy families are all alike; every unhappy family is unhappy in its own way. -- Leo Tolstoy, Anna Karenina

5. Everything is good as it leaves the hands of the Author of things; everything degenerates in the hands of man. -- Jean-Jacques Rousseau, Emile

4. It was a bright cold day in April, and the clocks were striking thirteen. -- George Orwell, 1984

3. Call me Ishmael -- Herman Melville, Moby Dick

2. It was the best of times, it was the worst of times, it was the age of wisdom, it was  the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair. -- Charles Dickens, A Tale of Two Cities.

1. I have long believed that any man interested in either the mystic or the romantic aspects of life must sooner or later define his attitude concerning Spain. -- James A. Michener, Iberia

On Risk and Reward

Risk-taking is a fundamental imperative to the forward movement of civilization. Explorers and scientists that have engaged and continue to engage in risk-taking have brought us untold progress. To them we owe an endless list of new frontiers, comfort, medicine, transportation, and communication breakthroughs. The benefits from risk-taking activities in the world of commercial enterprise is equally abundant, bringing us expanded trade throughout the centuries, economic growth, jobs, etc... At the core is the uncontestable postulate that there is little that we can point to as progress that did not emanate from risk-taking. No risk-taking equals no progress.

The risk I am discussing is risk taken on a voluntary basis. Coercive risk-taking is not within the sphere of the "risk/reward=progress" equation. For example, being told to rob a bank when a gun is put to your head is certainly not voluntary nor intended to result in any benefit other than not losing your life. Likewise, running through a blazing fire to save a loved one falls in the coercive risk category as it is an action taken apart from a voluntary design.

There are two essentials needed to make risk-taking possible:

1. The ability to quantify, or assess, the level of risk being contemplated. Absent this calculation, one is unable to weigh the possible cost of failure. This uncertainty evaporates the desire to take risk.
2. Reaping a reward that is commensurate with the measured risk. The larger the risk, the more reward will be demanded.

In the realm of risk quantification, we can thank the advancements in mathematics ranging from Cardano the Renaissance Gambler (eminent 16th century physician and unmitigated gambler) to Harry Markowitz (portfolio selection theorist) and everything in-between and beyond. Without reliable risk measurements we would not have insurance companies, finance companies, medicinal innovations and a host of other disciplines that are forced to project possible outcomes in order to arrive at present-day decisions. The future needs to be somehow measurable, with known prognostication limitations taken into account.

To voluntarily agree to take a risk, you will expect a reward. Even Evel Knievel knew that. Do you think this daredevil took numerous death defying risks just for kicks? If there is no reward, then why take the risk? Most rewards are measured in monetary terms and the timing of the recompense can be expected now or in the future. However, monetary is not the only acceptable reward measure as patriotic, religious, social and family benefits are certainly legitimate reasons to accept risk.

A rational person will weigh risk and reward and determine whether the risk "is worth it". True, the spectrum of personality types can range from extremely risk-averse people to bonafide risk-lovers whose adrenaline-stimulant is risk. Everyone must decide, within their own personality make-up, whether or not a proposed action or venture is worth the risk. 

Let's look at investment risk. Should you buy a particular asset or not? There is risk that the investment's value may drop and you suffer a loss and there is the possibility that the value will rise and you will profit. When a government changes tax policy it serves to disrupt the risk-reward balance that we calculate. Let's assume an increase in capital gains taxes. If you invested wisely your reward is now less by the degree of the tax increase. However, the risk is unchanged. Clearly, this would cause many along the risk spectrum to decide that, at a lesser reward, the risk is not worth it. Progress is the victim. The more government intervenes in the risk-reward equation, the less pure the proposition becomes.

There is another way that government can be an undesired risk-reward party crasher. It can leave reward relatively untouched but, instead, lessen risk. This is also known as a bail-out. In the long run shielding risk is extremely dangerous because the risk has not disappeared. It has merely been "spread around" to the taxpayers who did not volunteer to take it in the first place and now, in an act or coercion, assume risk without hope for reward. To use a technical term -- it's a bummer. Furthermore, the reward side of this same equation will eventually get hammered down because a risk safety net is an unsustainable position to take in a free society. 

The freedom to decide to accept risk and enjoy the concomitant reward or punishment with minimal outside intervention is key to economic growth. Otherwise, we have a mess.

Our First Bail-Out

Our country's first bail-out has enchanting similarities to the present state of affairs. The year was 1790. The republic was young, merely one year separated from George Washington becoming our first president, having sworn the oath of office on the steps of Federal Hall in New York, overlooking Wall Street. 

The starring role then was also played by the Secretary of the Treasury, a fellow named Alexander Hamilton. The beneficiaries of the bail-out were the 13 original states themselves. The amount was $25 Million of debt incurred by the states as an outcome of fighting the revolutionary war. The titanic clash that ensued was a fight over whether the federal government should assume the states' debt. It was called the "assumption debate". As a side note, doesn't assumption sound so much less desperate than "bail-out"?

Hamilton saw assumption as an opportunity to forge a union of the states, a true United States. To Hamilton, it was akin to an act of patriotism. The chief assumption dissenter was James Madison, seconded by a fellow Virginian and Secretary of State, Thomas Jefferson. They argued that Virginia and other southern states had almost retired the debt and vehemently opposed the idea of now paying the other states' share. Plus, they didn't trust Hamilton and disliked his combative, take-no-prisoners style. 

As the rancorous debate raged in the summer of 1790, it became evident that Mr. Madison's side had the votes to reject assumption and that's exactly what they did. Alexander Hamilton did not relent. Knowing that the sites for both the temporary capital and the permanent capital were still undecided, the brilliant Mr. Hamilton saw an opportunity. 

Other than New Yorkers, and perhaps other northeasterners, there was not a wave of support for either a temporary or a permanent capital in New York City. The reasons for the "just say no to New York" were many: it was distant from the geographic center of the states; many desired an agrarian, rather than an urban, personality to the capital; New York City would be too close to commercial and financial interests. Nevertheless, New York was a distinct possibility for a temporary capital and there was fear that the temporary would become permanent.

Hamilton needed Pennsylvania congressmen to side with him and he needed Virginia to rescind its opposition. It went down like this: in exchange for assumption backing, Hamilton told the Pennsylvanians that he would support Philadelphia as the location for the temporary capital. To please the Virginians, he would lobby for a permanent capital on the Potomac. (the establishment of a ten square mile federal district for the capital had been agreed upon at the constitutional convention). The Pennsylvanians assented and Madison voted against assumption but encouraged four Virginians to vote for the measure.

There are two enduring consequences of our first bail-out: (1) Jefferson later intimated that this bitter division gave rise to two distinct factions, our first political parties that remain with us today if one accepts the "Republican Democrats" becoming just "Democrats" in the 1820s and the Whigs morphing into Republicans in the 1850s; and, (2) the federal government gained the power to tax. The second consequence was Hamilton's aim in his mission to create a strong federal government. Once gained, the power to tax would not be ceded.

Where was President Washington in all of this? He supported assumption but wanted to not appear partisan so he stayed out of the fray. 

A Billion Here, A Trillion There

These days you cannot get through the day without hearing or reading about multi-billion dollar bail-outs and trillion dollar debt. It can be numbing, and after awhile, desensitizing to the point that some may yawn when they hear a politician call for "only one billion dollars" to bail out the Bounty Hunters of America or some other budding interest group promising to deliver votes in a future election.

So, how much is a billion or a trillion dollars? Well, U.S. paper currency is six and one-eighth inches long. Let's round the length to six inches to make the math simple. Want to be a millionaire? Lining up one million dollar bills equates to almost 95 miles, or roughly the distance from New York City to Philadelphia. How about a billion end-to-end dollar bills? That would be 95,000 miles or just about enough to trace the circumference of Earth four times. Let's keep going and see how far a line of a trillion dollar bills takes us. From the Earth to the Sun with about three million miles to spare!

Not shocked yet? Okay then, let's bring back the one-eighth of an inch that we trimmed off of the length of the bill and apply that to the billion  dollar bill line. You get an extra 1,972 miles or nearly the distance between Boston and San Antonio. Small numbers add up big and big numbers add up huge.

For the Youth: Have a Plentiful Toolbox

There is an adage that says that "if your only tool is a hammer, every problem looks like a nail". Considering the myriad of problems we encounter in our lives, it is best to acquire and become proficient in many, many tools. The more tools we possess, the better we can deal with all kinds of circumstances, whether good or bad.

The acquisition and command of tools is the best answer to the often-asked question posed by young people: "Why do I need to learn about (pick a subject, any subject) if I do not plan to ever do that in my life". The answer should be: "because you will acquire a tool that you may need at some point in your life". 

The tool itself may fit to clarify and inform on the manner in which a problem is sized-up and analyzed. Consider how a mathematician, a historian, and a biologist may each apply their learned discipline to to attack a problem. They would each come at it from a different angle. The more angles you can command, the likelier you are to penetrate to the core of the matter.

Tools are necessary beyond the act of analyzing a given situation and determining a course of action. The tools we gather over our lives can be used to persuade and communicate. Think of English majors, poetry students, language grads within the context of tools that aid in effective communication. 

In the not too distant past, the act of learning was not as remote from the critical reason for why learning was crucial. Learning used to be an essential for survival. The farmer needed to learn about crop harvesting and soil conditions to survive. Similarly, the mariner's need to master the ins and outs of weather and astronomy was a matter of life and death. Today, the need to learn may not be as dramatic as it was for the farmer and mariner, but tool-gathering continues to be the best way to prepare oneself for the marvelous twists and turns that life offers.

Growth in Ignorance as a Sign of Progress

We are becoming more ignorant. Pardon me, you ask. Me, more ignorant? No, not just you - we are all becoming more ignorant. Sure, we know a lot more things now thanks to the internet and the plethora of cable channels and radio outlets that inform us on thousands of varied topics. We can also add our own private learnings to our knowledge base. Still, and at the risk of taking another swipe at our self-perception, we know a lot less about how things work in the world. Here's the good news - this growth in ignorance, oxymoron aside, means that, as a whole (here you can define whole as a city or the planet) we are in a progressing civilization.  

Consider the typical hunter-gatherer society of eight thousand years ago. There was little that was not known. The members of the tribe knew who did what, when and how. They had no monetary system to fret over, no tough cell phone vendor choices to make, and little outside dependence on other tribes. The tribe was flat. There was minimal ignorance.

Shifting to today, who can fully explain the billions of actions that need to occur to bring to market all of the the products and services we consume? No one knows this. It involves an ever-increasing degree of human coordination where the actors themselves do not comprehend how their labor specialization contributes to the whole. Through generations upon generations of innovation, testing, executing, failing, re-inventing, re-testing, succeeding again and failing again, we have arrived at where we are. 

It is an accumulation of generational knowledge that we act upon without fully comprehending the total picture. And we are not even aware that this is what we are doing. The more complex, more specialized, and larger the "tribe", the less we know. (Want proof? Try to explain the global financial system as it exists today.) This is what freedom and a free marketplace engender. The freedom to try different methods of production and venture into the unknown with the chance for reward and failure alike. 

Adam Smith alluded to an invisible hand to describe how an individual's pursuit of self-interest produces a common good. Those that believe in a free market tend to hold a profound respect for this somewhat mysterious manner that we have progressed. We may not understand it, but we know there is a system of human coordination out there. And because we don't fully understand it, we should beware of abrupt changes to the system for fear that the consequences are equally unknown. The invisible hand system self-adjusts. The fact that we don't see the subtle self-adjustments should not overly concern us.

There are those that strongly believe in a government that should decide how things are for a wide-range of economic matters. Communism and other forms of totalitarian states are the more extreme forms of this hyper-control. Well-meaning socialists are also in this camp in a more benign way. Many who have socialist leanings are quite intelligent. It is this very premium that they place on the value of intelligence that makes them feel like they "know how things work and they know how to change them so that they can work better". They consider the human coordination that has evolved from the generational accumulated knowledge as hogwash because it cannot be explained to their satisfaction. It certainly cannot be explained in an appealing sound bite for sure. 

To socialists, the invisible hand is a silly superstition that should be thwarted and replaced with "rationalized" human design. They esteem their knowledge to be superior to that of the product of the many preceding generations. The free marketer would rather trust the masses of people that are free to make their own self-interested decisions than to trust a handful to devise a grand plan. The handful simply doesn't know what they think they know.

Socrates said that the recognition of our ignorance is the beginning of wisdom.

  

Respect and Gratitude

It was called Armistice Day for thirty-five years. Then in 1954 President Eisenhower signed legislation to rename the legal holiday. Now it is Veterans Day. November 11, 1918 marked the end of World War I hostilities, making today the 90th anniversary of the conclusion of this massive world conflict. The conflict ended on the eleventh hour of the eleventh day of the eleventh month.

Today we honor the approximately 24 million living men and women that have donned the country's uniform. These are the citizens who answered a call of duty and by doing so gave more than just a passive meaning to the democratic principles upon which this great nation was founded. In a feat of role reversal, our veterans elevated our dignity by telling us through their sacrifice that our rights were worth defending. While in truth they are the ones most worthy of dignity.

Most of the living veterans served us in the Vietnam, Gulf, and Iraq Wars. Only about 4 million served in the Korean War and slightly less than 3 million served in World War II (many served in both wars). Our WWII veterans are in their eighth decade or beyond and are dying at a rapid rate.

There is an American named Frank Woodruff Buckles. He lives in Charles Town, West Virginia. Mr. Buckles is up in his years. He is 107 years old. He enlisted to serve in WWI in 1917 at age 16. Later in life, as a civilian working in the Philippines in 1942, he was captured by the Japanese and was held three years in a prison camp. Frank Buckles is the last known living WWI veteran. Raise a glass to Mr Buckles and be ever-thankful for the very best that our country has to offer - our veterans.

What is a Liberal?

A government big enough to give you everything you want, is strong enough to take everything you have.

Thomas Jefferson

The current political discourse is one where Republicans will frequently try to pin the "L" word on their Democrat opponents and the latter will vehemently deny the charge. Only occasionally will you hear someone proudly proclaim their liberal credentials. More often than not, these very credentials are quite unliberal. 

Books, documents, and other recorded events allows us the exquisite luxury of going back in time to see how things were before the modern mangling of terms of political philosophy. During the years of the birth of our nation, Liberalism was understood, and defined by its' Latin etymology, as being in opposition to a condition of slavery. It's definitional connection to freedom is undeniable.

The liberal thought that consumed and guided our Founding Fathers was passed down by the likes of John Locke, David Hume, and Adam Smith. The connection between economic freedom and political freedom was clear in their writings, especially in the case of Adam Smith. To John Locke, the right to own private property was the key liberal idea supporting his belief that free people are capable of building a stable society - to him it was a natural right. 

A citizen's economic liberty is compromised and limited to the extent that the government competes for the same dollars. The more the government takes, the less economic freedom (and political freedom) the citizen can exert. Consequently, by definition, the less distanced the citizen will be from a condition of slavery. You may have the right to own private property but if you cannot keep enough of your earned money to more readily purchase the property it becomes a diminished right.  

Modern Liberalism is understood as supportive of government intervention into private economic affairs to fund the general welfare. The modern liberal is a proponent of a wide range of government spending discretion. Unbridled spending in areas beyond the proper role of government enters the realm of coercion. To the true, or classic, liberal this is anathema with liberty and freedom. It is anti-liberal.