Update on the Mortgate Crisis

I have stated my tentative belief that the mortgage "crisis" isn't likely to have severe repercussions for the economy. The Independent Institute's Robert Higgs supports that argument with some real data (which my argument noticeably lacked), pointing out that there is plenty of credit still available in the U.S.

For example, commercial and industrial loans at all commercial banks were $1,503.6 billion as of June 1, 2008. This loan volume is almost 19 percent greater than it had been a year earlier, 34 percent greater than two years earlier, and 53 percent greater than three years earlier.

Or consider real estate loans at all commercial banks, which were $3,644.9 billion as of June 1, 2008. This loan volume is 5.5 percent greater than it had been a year earlier, 17 percent greater than two years ago, and 33 percent greater than three years ago.

Or consider total consumer credit outstanding, which was $2,586.3 billion as of June 30, 2008. This loan volume is 5.6 percent greater than it had been a year earlier, 10.9 percent greater than two years earlier, and 15.2 percent greater than three years earlier.

He also points out that interest rates are still low. Granted the Fed is trying to keep them that way, but I think if there had been a massive dryup of credit caused by failed banks, the Fed would have had to take much more drastic steps to keep loan rates low.

All in all, I'm not too worried about the future. Now if the housing market in my town would just warm up, so I could sell my other house...

Republicans Should Take Note

Not that I've been following the news closely, but I don't think this story from the Center for Responsive Politics is getting as much play as it should.

Democrat Barack Obama has received nearly six times as much money from troops deployed overseas at the time of their contributions than has Republican John McCain, and the fiercely anti-war Ron Paul, though he suspended his campaign for the Republican nomination months ago, has received more than four times McCain's haul.

Looks like it's not just liberals who support an early exit from Iraq.

The Democrats’ Worst Nightmare

A great irony may be unfolding before our eyes. In July, Democratic nominee Barack Obama raised $51 million dollars, while Republican nominee John McCain struggled to raise just over half that ($27 million). Obama’s total of $390 million is more than twice McCain’s $153 million. And yet Obama’s lead over McCain has narrowed.

Democrats have long complained about the power of money in campaigns, and bitterly resented that the Republicans could nearly always outspend them by tapping the wealthy business class. So now they face the stunning possibility that they could outspend the Republicans by a wide margin, yet still lose the election.

That would be ironic indeed, and just how devastating would it be to the Democratic Party?

Cafferty Pistol-whips McCain

For those who don't read CNN.com., I'll point out this vicious--but wholly fair-->critique of John McCain by Jack Cafferty. Here's a sample:

John McCain graduated 894th in a class of 899 at the Naval Academy at Annapolis. His father and grandfather were four star admirals in the Navy. Some have suggested that might have played a role in McCain being admitted. His academic record was awful. And it shows over and over again whenever McCain is called upon to think on his feet.

Ouch, that's gonna leave a mark.

Hiding Out

I'm at an undisclosed location for a few days, trying to prepare my classes for the fall term. God willing and the creeks don't rise, I'll return soon.

Pondering the Housing Market

Everyone's an Economist, Externalities Version

Standard economic theory predicts goods with positive externalities will be underproduced because the producer cannot capture the full value of what is produced (some people can enjoy it for free, without compensating the producer). From a biography of Al Wight, who, writing as James Herriot, became the world's most famous veterinarian and made the Yorkshire dales world famous, is this lovely example, which occured one day when Wight went shopping for fireworks.

[H]e made a visit to a shop [and] asked for rockets.

Another customer overheard his request and leaned towards him. "Don't buy rockets, Mr. Wight," he whispered, "they 'ave a good selection o' Roman candles an' some right good Catherine wheels, at good prices an' all!"

Alf was mystified. "My kids love to see rockets soaring to the sky. Anyway, what's wrong with rockets?

the man eased in closer. "Why, everyone else can see 'em!"

What if the Mortgage Companies Failed?

Would there really be a problem if these entities just failed? Are they like banks in that they would start contagion

This is the question asked by James K in a comment on a previous post.

The answer is, I'm not sure. I'm not an expert in the mortgage industry by any means. But what happens is that the mortgages get packed and sold to investment firms. As the high-risk packages, made up of the sub-prime mortgages, are not being repaid, nobody wants to buy those right now, and so the investment banks that sell them are currently refusing to make funds available to the subprime mortgage firms. That is, the investment banks are the secondary lenders that make money available to the primary lenders (who make the money available to the home buyer), which, if I understand correctly, they do by purchasing the loans from those primary lenders (that purchase refills the coffers of the primary lender, so they can make more loans).

If I have that wrong, I hope someone corrects it.

So I suppose the danger is that large losses accrue to the investment banks themselves, reducing the supply of credit available in general, perhaps wiping out mom and pop's lifesavings, and in general creating the "contagion."

But I have doubts the contagion would create a long-term depression, as opposed to a short-term slump--a "correction: if you will. Keep in mind that it's primarily the sub-prime loans that aren't being repaid. Those are buyers who over-extended themselves. Most of them aren't impoverished, and haven't gone to living on the street, but have had an income decline they couldn't afford because they were living on the edge. Foreclosures are at about 1 in every 200 homes, and housing prices have declined--in some areas--by 10-20%. That sounds horrible, but it's only .5% of homes, and the values haven't been totally lost. That is, the lenders can regain some of the money that the defaulters can't repay by selling the house at a lower price.

So the lenders will lose money. Fannie Mae and Freddie Mac--government created, but publicly traded, lenders--have lost, respectively, $1.3 billion in the last quarter and $5 billion in the last year. That's big amounts for those firms, but they're also the biggest mortgage backers in the country, so they're taking the lion's share of the losses. Quadruple that amount and it's still not that big a chunk of the U.S.'s $13 trillion economy.

And of course saving the mortgage firms doesn't come free. There's not some great untapped reserve of money that can be used painlessly to save them; the money will be diverted from other uses. Or more likely, we'll try to borrow more by selling more federal securities, thus continuing upward pressure on interest rates, with the attendant economic effects. Notably, what I've noticed in the arguments for rescuing the mortgage industry is a focus only on the primary effects on the industry itself--I haven't seen much on the secondary effects of industry failure or secondary effects of industry rescue. I rather suspect Bastiat's ghost might be muttering something about the seen and the unseen. I think the real question is which course of action has the greatest benefit/cost ratio.

If there is some reason to mitigate the losses, I think it would be wise to do the minimum--do what it takes to keep the effects from snowballing and wreaking great harm to the economy (and let's face it, at 5.7% unemployment, our economy is a long way from being wrecked), but not enough to let the lenders off the hook for their bad decisions.

Sarkozy, New Leader of the Free World?

French President Nicolas Sarkozy has brokered a truce between Russia and Georgia. Granted, the timing was right for Russia to make an agreement, as they'd achieved their goals, and granted the truce is fragile and both sides are claiming the other is violating it.

None of that detracts from the fact that Sarkozy did what Bush should have done. Yes, the French have at least temporarily taken away the U.S.'s role as leader of he free world. And if you don't think that's a kick in crotch to U.S. conservatives, you've already forgotten about freedom fries.

In Which I Join Positive Liberty

Jason Kuznicki has invited me to join the Positive Liberty blog. As I have liked that blog since I began reading blogs (not more than two years ago--I'm always a bit slow on the tech stuff), I'm honored to join.

That doesn't mean I'm discontinuing this blog. I just have to figure out how to split myself between the two without enervating myself. Off the top of my head, I'm guessing it will make sense to direct my longer, more thoughtful and analytical posts, to Positive Liberty, and keep shorter, more visceral ones for this blog. But we'll see how it works out in practice.

So I'm feeling good about myself today, thanks to Jason, and I hope to see you at PL soon.

Color Coded Nannies

Here's a neat little rendering of the nanny-state propensities of major U.S. cities, along 8 issue areas (sex, alcohol, tobacco, guns, etc.). Mouse over the city and each issue is highlighted red, orange, yellow, or green. Most repressive city, Chicago. Least repressive, Las Vegas. Oddly, that reverses my order of preference for those cities. Thanks to theagitator.com for the link.

Date-Stamp Posting on College Hockey

This post is wholly to date-stamp a particular issue, without yet revealing it to the niche market that cares.

Adrian College's men's hockey team went 26-3 in its inaugural season last year, closing the year with 20 straight victories (and one of those losses came when the coach sat the starting goalie for skipping class--a big thumbs up to both the coach and the prof who reported the class skipping). Along the way they won games by scores such as 9-1, 14-2, 18-1, 16-2 and 20-2. In the process they quickly became the most hated team in NCAA Division III hockey, based not only on the traumatic losses bestowed upon their opponents, but also on the claimed ignorance and arrogance of their fans, who--it was alleged--thought they ought to be crowned NCAA D-III champs without further ado.

Ignorance did play some role, as the D-III playoff selection process is a bit odd (due to historical factors of where the most, and the best teams are located), and hard for first-timers to D-III to parse. The consequence was not so much arrogance, as frustration, as fans who believed their team could compete with the best realized that even if the team had gone undefeated, they would still have been denied a spot in the playoffs.

Without going into details, the fundamental problem was the dreaded SoS, Strength of Schedule. Because of its geographic location, the only league into which Adrian properly fit happened to be one that is--as attested to by the scores Adrian posted--quite weak. Strength of schedule is a useful measure; it ensures teams don't post good records just by playing patsies. The downside is a team, no matter how good, can be kept out of playoffs by the refusal of teams from good conferences to schedule them. And it's not all pure selfishness on the part of those teams--if they win, because their opponents' overal SoS is weak, it doesn't help the winning team's SoS, whereas if they lose their ranking will be killed by the other team's Sos.

So the Adrian College coach has reportedly sent out a message to all the good D-III conferences (nearly all on the East Coast, the one place outside Minnesota that is a real hotbed of college hockey), announcing that for the 2009-2010 season we will play anyone, anyplace, anytime (the '08'09 schedule is already set). And reportedly, so far there are no offers by any of those good programs. If they all refuse to play, they can continue to say Adrian really is weak, based on its SoS, despite its record and its scoring. But, although it grieves me as an Adrian fan to admit this, they have nothing to gain by scheduling Adrian, win or lose.

But the stakes are about to get higher. While running up those scores last year, Adrian's coach often sat his first line, or first two lines, for most of the third period. While I couldn't blame an outsider for disbelieving it, Adrian was consciously trying to not run up the score. In the final regular season home game, there was only one player on the team who had not scored, and the coach forbade everyone else from taking a shot on goal--if we were going to score any more against a badly beaten opponent, it was only going to be by that one guy (who did, finally, score his single goal for the season).

But reportedly another coach in our conference voted Adrian lower in the polls just out of spite, and Adrian's coach has, again reportedly, said that his team will try to run up the score against opponents this year. In part it's aimed at that particular other coach, whose unfortunate players are going to be the ones who suffer, and in part it's to make a statement that if a score of 20-2 isn't sufficient to be recognized as a playoff worthy program, perhaps a score of 30-2 will be.

If this comes true, Adrian will be hated more passionately than it was last season. And I can't say that I would blame anyone for that hatred. And I'm not going to whine that the current playoff selection system is unfair--the system was in place long before Adrian started a hockey team. But if the only way for Adrian to get consideration in the current system is to thrash its opponents far more than they deserve (they're just college kids not good enough for D-I or the minor leagues, after all), that's what's going to happen. And despite having a powerhouse of a team in his first season, the coach has recruited players expected to deprive current players of ice time.

So, come January, February, and March of 2009, if the Adrian Bulldogs win some games by more than 20 goals, remember that the reasons were posted here first, long before the games began. (And if they're not, if they're struggling to win, well, commenting is always open here, and you can mock me as viciously as you are able.)

An Immodest Proposal

Following a link from Marginal Revolution, I stumbled across a reference to an appallingly stupid proposal floated in the pages of the Wall Street Journal: the federal government should resolve the housing mortgage crisis by buying, and blowing up, forclosed houses.

The essential argument here is that these things don't have enough value as it is, so let's completly destroy their value. Of course the purpose is to increase the value of the remaining homes in a straightforward application of supply and demand; if demand remains constant, while supply diminishes, prices will increase.

There are numerous problems with this proposal, all of them ignored in the article. First, low prices are not inherently bad. In fact low prices are very very good for people with low incomes. That's why Wal-Mart is good, not bad. The current mortgage crisis is only a crisis for those who loaned the money. It's not even a crisis for people who can't pay their mortgage--loss of income is their crisis, and they are the cause of the lenders' problems. A lender's pinch is not the debtor's problem. Of course if all credit disappeared, it would be the (prospective) debtor's problem, but that's not the case here; mortgages are still available. Which is why this is also not a crisis for potential home-buyers--in fact the decline in housing prices is the greatest thing possible for them. The solution, apparently, is to f*** over the less well-to-do in order to protect a particular set of businesses. I'm not sure how many of the classical economists would have approved, but I think the one finger I would raise for this proposal would be generous.

And then there's the bigger question of the collective value of housing. Granted that the price of many houses has already fallen by a third or more, would the elmination of the remainder of their value enhance the value of the remaining stock enough to offset that loss? That is, would the wealth of America actually be enhanced by this proposal, or would it be diminished? Although tighter supply would definitely increase the value of the remaining houses, the destruction of nearby properties would have a negative effect that would offset at least some of the increase. Neighborhoods where homes have been destroyed by fire and not rebuilt, for example, rarely exhibit substantial increases in home price. Now if the government wants to undertake the expense of removing all rubble, filling in the basement if there is one, sodding the area, and then giving it to the next door neighbor to double his/her lot size, we might be on to something.

But even in the best case scenario, this proposal ignores the root of the problem. Mortgage firms gave increasingly risky loans, that now they can't recover. The reduction in home prices doesn't mean they can't resell the homes--it means they can't resell them at a high enough price to recoup their losses. (And of course those higher prices were in part a product of their incautious lending.) That's what makes markets preferable to governments, people who make bad financial decisions reap the consequences. The pain of the resultant loss is the only thing that constrains people from repeatedly engaging in foolhardy business transactions. Any government bailout, regardless of how it's structured, lessens that pain, and reduces the incentive to not be foolish in the future, thus increasing the chance of "needing" to bail them out again. It's an exceptionally simple case of moral hazard, and the long range outlook is that the future foolishness, and its attendant bailouts will cost us more than will letting the current losses stand.

Perhaps it's revealing that the author, Holman W. Jenkins, Jr., writes a weekly column titled "Business World," rather than "Economics World." It could almost have been Jenkins himself to whom Smith was referring when he wrote:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

Russia Invades Georgia

Russian troops have now moved through South Ossetia into Georgia proper. That is, they can no longer claim to just be defending a region that has declared independence and that has many Russian citizens; they have moved into territory that is indisputably Georgian, and that has no interest in either independence from Georgia or being a part of Russia. And Russia continues to reject Georgian requests for a ceasefire. Apparently Bush's "firm" talking to Putin didn't take. (Does Bush recognize that Putin was in the KGB, and as such surely considers himself a real badass compared to Vietnam-avoider Bush?)

And while a U.S. ally is invaded and Russia takes the opportunity to reassert its military strength in the world, Bush is sending obvious signals that he doesn't care to much, by continuing to place watching the Olympics above getting personally involved in resolving this crisis. His public statements that "we strongly condemn bombing outside of South Ossetia" implicitly approves bombing inside South Ossetia, and in any case is a very weak response. "Strongly condemn" is strong diplomatic language when applied to weak vassal states, but means "we're going to stand aside and wag our fingers disapprovingly" when applied to more powerful countries.

Bush's performance so far is a disgrace, and it appears he doesn't understand the dangers of a militaristically resurgant Russia. He continues to say that he and Putin "have got a good relationship." Bush is playing the fool while the fires of Cold War II are being lit.

John McCain on the Russia-Georgia Conflict

I used to lean toward voting for McCain because I thought he'd be a better foreign policy president than Obama. I've begun to doubt that, and now there's this:

Russia should immediately and unconditionally cease its military operations, withdraw all forces from the sovereign territory of Georgia," McCain told reporters in Iowa.

Well, yes, we all wish that would happen. But does McCain not realize that Georgia chose to escalate the fighting in South Ossetia? And more importantly, does he not realize that it was Russian citizens in South Ossetia who were being attacked by Georgian forces? Would McCain, as president, unconditionally withdraw if American citizens were being targeted?

Here's Barack Obama's comment on the issue:

Georgia's territorial integrity must be respected. All sides should enter into direct talks on behalf of stability in Georgia, and the United States, the United Nations Security Council, and the international community should fully support a peaceful resolution to this crisis.

I think he misses the point that Georgia's territorial integrity is quite a debatable issue, and like McCain, that it was Georgia that ratcheted up the level of conflict.

The quotes are from Foreign Policy Passport, which argues that the war is Russia's way of keeping Georgia to unstable to join NATO. Given how little enthusiasm Russia has for NATO expanding not just to its doorstep but into former USSR territory-- of which Putin, et. al, probably hope to eventually regain control--I'm inclined to agree. That's why it was particularly stupid move for Georgian president Saakashvili, who seems to have belatedly figured that out.

Bush, fortunately, said he was "firm" with Putin, when they spoke at the Olympics. The crisis hasn't taken up too much of his time, however, and I imagine he was firm in this Olympic encounter as well.Does anyone else get the impression that he's not taking this conflict seriously? Does he not realize the significance, or has he already checked out of the job of America's foreign policy leader?

God Vandalizes National Park

Wall Arch, in Arches National Park (Utah), has collapsed, in an apparent act of God. Below are before and after pictures.(Source: http://sillyviolet.blogspot.com/2008/03/arches-national-park.html)
(Source: http://www.cnn.com/2008/US/08/10/arch.collapse.ap/index.html0

T-Shirt of the Week

Seen at Splash Universe waterpark, in Dundee, Michigan.

Bush's Soulmate Attacks U.S. Ally

Vladimir Putin says, "War has started," as he sends troops into a separationist province of U.S. ally Georgia. If Bush really saw into Putin's soul, he should have seen this coming. Granted it doesn't sound like Georgia's just an innocent victim. The fighting is in the province of South Ossetia (which 95% of American adults can find on a map, given Google Maps and about a month) which has been essentially autonomous since the late '90s and wants to unify with North Ossetia, which is part of Russia. but which the new Georgian president, Mikhail Saakashvili (a household name in the U.S. because the U.S. media does such a bangup job of covering world affairs) apparently insists on forcibly reunifying.

I don't know about you, but I find a slight irony in the idea of a breakaway republic objecting to a breakaway province. Apparently Saakashvili (like Abe Lincoln) is irony challenged.

But apparently most South Ossetians have Russian citizenship, so Saakashvili should have known Russia would come to their defense.

So we have one leader who Bush thinks--or did think--was a good buddy, and another leader who's a close ally of the U.S. It seems as though Bush migh have put some effort into averting conflict here, but apparently he was distracted by trying to figure out how he could justify invading Iran (hell, Afghanistan's a mess, Iraq wasn't going so well, third time's the charm, right?).

OK, all a bit snide, but seriously, this is a fairly major foreign policy fuckup by the Bush administration. A resurgent and militarily successful Russia is not in U.S. interests, but by standing by with his dick in his hands, Bush appears to have been caught wholly offguard.

Agricultural Land Use Tour

My county's Michigan State University Extension office and our local Rural Land Use Committee sponsored an Agriculture and Land Use tour. Cost me all of $15, and was a good show.

First stop was a biodiesel plant. I left as dubious about turning food into fuel as I was when I arrived. There are some subsidies involved, and it was unclear whether it would make a go without government support, and I wonder about the net energy balance in biodiesel (I'll have to look it up). But they run a slick operation, and it was fascinating to learn that when the price of soybean oil skyrocketed they switched to "choice white grease" (pork fat) as their feedstock for making diesel. Now they use corn, which is okay as long as it doesn't affect the price of bourbon.

Next stop was a new subdivision development that is designed as an environmentally friendly one. The city of Tecumseh (population about 10,000) had bought a farm with a sizeable woodlot on the outskirts of town, and then sold it to a developer who would follow their vision for it. The city created a new zoning classification--an environmental residential community--and cut the developer's original plan from 400 homes to just under 200. Instead of bulldozing the land flat they built on the natural contours and left the woods and a wetland pond in their natural condition, creating a conservation easement to be held by a local organization (Raisin Valley Land Trust).

Following lunch, with presentations from the Extension service, we visited a 3rd generation family-owned apple orchard, and finished with a stop at a family owned cabbage and tomato farm. The apple growers were among the few people I knew who were kind of pleased with high gas prices, as that has a much greater negative effect on their competitors in Washington State--the U.S.'s most fruitful apple growing region, but a long way from the big eastern markets. Interestingly, their main concern is labor costs. They rely on migrant workers during the picking season, and the family member who gave us the tour shook his head in wonder when he talked about the claim--often made--that if they would just pay more they could find Americans to do the work. The cabbage growers' big cost challenge was in the response to the recent e-coli outbreaks. The wholesaler to whom they sell demands a rigorous inspection system that is costly and time consuming. Given that e-coli, while deadly, kills very few people in the U.S. each year--the response has probably been something of an overreaction. Obviously we want to prevent deaths, but the growers' profits have been pushed so low they can't absorb much more. If they quit growing cabbage, one of two things will happen: large agribusinesses, which everyone hates but me, will take over; or we'll ship it in from Central and South America, where the inspection schemes aren't quite the quality of ours.

All in all, a very informative day about local agriculture and rural land use. I was one of the few city dwellers on the tour, though, so most of it was probably preaching to the converted about the importance of agriculure in our community.

McCain to Add 20,000 Troops to the U.S. Economy

McCain says the U.S. needs "an economic surge." So what's worse, his egregious pandering or his total ignorance of economics?

I Hate the President

The next one, that is.

This is the really bad effect of the long campaign season--candidates have to talk too damn much and they keep having to answer questions. Before a candidate becomes president, the media demand that they have a proposal for dealing with every imaginable political issue. Once the person becomes president, however, they deal with a set of issues that is a combination of those personally selected and those that are simply unavoidable, but they don't have to talk about all the others.

And it's inevitable that all that talking is going to cause them to say things that diminish our confidence in them. Nobody is going to agree with them on all issues, nor does any one person have the best answers to all issues. (As a consequence, I am consciously relying on heuristics to determine my vote this time around, as the more I think about the candidates' positions the more confused I get about my preference.)

And of course it's a real pisser for whomever gets elected, because he'll have no honeymoon in office--none at all. We already know him too well to give him the benefit of the doubt for a while.

If we could compress our campaign season, this problem would largely solved. Unfortunately, the front-loading of the primary system is a classic case of individual rationality resulting in collective irrationality. There's a good solution being floated--rotating regional primaries--but no good mechanism for moving the states toward it.

Rationally Irrational Voters

It turns out that more knowledgeable voters benefit from the use of heuristics more than less knowledgeable voters do.

Science News has a report on recent studies by Richard Lau and David Redlawsk on the use of heuristics by voters. It affirms what political scientists have been saying for a couple of decades, which is that voters are more likely to rely on heuristics when voting than to actually pay close enough attention to the candidates to make a fully informed decision.

But, following along the lines of research by Gerd Gigerenzer (and in contrast to the arguments of Daniel Kahneman and Amos Tversky), Lau and Redlawsk find that heuristics, based on emotional reactions to candidates, can lead to better voting (defined as choosing the candidate closest to one's views) than fully informed voting does. The reason essentially is that too much information inevitably leads to points of disagreement between the candidate and the voter, confusing the voter (something I'm certainly experienceing this year). This is nice to see, since I've long thought Gigerenzer got the better of K&T.

But, interestingly, the positive effect is mostly confined to better informed voters. The less informed voters had, predictably, a harder time choosing the best candidate, but less predictably their performance declined when using heuristics.

The moral, I guess, is that if you really care about whom you vote for, you should stay politically informed, then follow your gut.

Those Wacky Economists

Alex Tabarrok at Marginal Revolution has a great post on "How an Economist Thinks."

Over the weekend a crew came round my neighborhood offering to paint house numbers on the curb. Large bold curb numbers, they pointed out, make it easier for emergency service workers to find houses in the dark. Good argument. The price was good too. Then I noticed my neighbors were having their numbers painted. So of course, I declined.

As Homer Simpson would say, "It's funny because it's true."

Zimbabwe Suffering Yet Again

Zimbabwe, where president Robert Mugabe recently resorted (yet again) to violence to thwart a chance at democracy, is now suffering from hyperinflation. The official figure is 2.2 million percent, but others say it is closer to 12.5 million percent.

Here's my favorite line, from a Newsday article.

"The central bank, overwhelmed by stratospheric inflation..."

Hmm, the central bank is "overwhelmed" by inflation. Let's try a simple syllogism.

1. Inflation is caused by too much money chasing too few goods--i.e., a surplus of money in the economy.

2. Central banks determine how much money is in the economy. Therefore,

3. Central banks control inflation (as Paul Volcker demonstrated so painfully, but so necessarily, in the U.S. in the early 1980s).

But the Zimbabwe bank's response? Print more money, in larger denominations. Here's more evidence they didn't take the right economics courses:

The bank attributed black market inflation to shortages of hard currency that pushed the black market exchange rate to at least 90 billion Zimbabwe dollars for a single U.S. dollar, compared to the official bank exchange of 20 billion to dollar.

Since value is based on relative supply and demand, there's no way in hell that a shortage of hard currency could reduce its value so dramatically. USD1=ZD 90,000,000,000?! The quickest way to reverse that imbalance is not to cut zeros off the currency--the classic but useless response of hyperinflating governments--but to dramatically reduce the number of Zimbabwean dollars in circulation.

The real reason goods are flowing to the black market is not because of a shortage of hard currency, but a sufeit of it. By flowing to the black market, sellers can demand payment in U.S. dollars, a far more stable currency more likely to hold its value. It's not rocket science--if you're a seller of goods, would you rather receive payment in a currency that's likely to still be worth as much tomorrow, or in a currency that's likely to be worth half as much--or less--tomorrow?

And of course the people who suffer from their government's ungodly combination of evil and stupidity are the average citizens, who've done nothing to deserve any of this.

But it could be worse, I suppose. Zimbabwean citizens could be at the mercy of a capitalist system in which Wal Mart comes into their communities and relentlessly drives prices down.

Lying for Jesus Pisses Me Off

The Confraternity of Catholic Clergy is angry at PZ Myers for desecrating a communion wafer. I don't blame them. Not only would you expect them to be angry, they have a right to be angry. And on a personal level I'm not all that impressed with PZ's action.

But having grown up so deeply enmeshed in Christianity that the ideas and beliefs are a permanent part of my identity despite my lack of belief now, I get righteously indignant at people who lie for Jesus. And the Confraternity of Catholic Clergy have done that, saying:

The freedom of religion means that no one has the right to attack, malign or grossly offend a faith tradition they personally do not have membership or ascribe allegiance.

That is a lie. I don't say it's an error, because I find it impossible to believe that they didn't at least have enough doubt about the claim that they should have checked it out.

Here's what freedom of religion means in the U.S.

• Congress shall make no law...prohibiting the free exercise [of religion]. Amendment 1.
• You can engage in animal sacrifice. Church of the Lukumi Babalue Aye, Inc. v. City of Hialeah.
• You can refuse to salute the flag in school if it violates your religious beliefs. West Virginia State Board of Education v. Barnette.
• You can refuse to work on your holy day, and receive unemployment benefits if such refusal results in getting fired. Sherbert v. Verner.
• You can refuse to educate your child past age 14. Wisconsin v. Yoder.

There are a few more, but surprisingly few free exercise cases in U.S. Constitutional history (they pale in comparison to the output of establishement cases--apparently state and local governments in the U.S. are far more interested in supporting their favored religion than restricting their less favored ones). But there's nothing in there about restricting the free speech rights of citizens who want to malign or grossly offend you. In short, freedom of religion means the freedom to practice your religion: it doesn't mean, and never has meant, freedom from mockery.

So remember, one of the 10 commandments is:

You shall not bear false witness against your neighbour.

However despicable the Confraternity of Catholic Clergy think PZ Myers is, they are clearly violating the commandments they have presumably committed to upholding. They can't take responsiblity for PZ's soul, but they can for their own.

Democratic Gay Marriage in Massachusetts

An itty bitty little news story is going mostly unnoticed, but it is a devestating blow to the arguments of the anti-gay marriage yahoos. The Massachusetts legislature has repealed a state law that prohibited out-of-state couples from getting married in Massachusetts if their marriage would be illegal in their home state. And here's the significance--for the first time a legislature, rather than a court has taken a positive action to allow same-sex marriage, and opponents can no longer truthfully say that it's only elitist unelected courts that are forcing gay marriage upon us. Oh, they'll still say it, but now we defenders of equality can point out that they're lying.

It shouldn't really matter. The criticism of unelected judges overturning the democratic will of the people is bullshit anyway. The primary purpose of supreme courts in constitutional governments is to ensure that the demos lives up to the ideals of its constitution, because unfortunately James Madison was right when he wrote in Federalist 51:

democracies have ever been spectacles of turbulence and contention; have ever been found incompatible with personal security or the rights of property:

When a court reprimands the public for being too miserly with equality, it's the public that's wrong, not the courts.

But what opponents of equality haven't noticed, or haven't wanted to notice, is that the Massachusetts state legislature has studiously refused to act ever since the 2003 state supreme court ruling. Because the court was interpreting the state constitution, the only remedy would be a constitutional amendment. Amending the constitution in Massachusetts requires that the same amendment be passed by two consecutive legislatures, with an intervening election. This sensible provision allows the public to throw the bums out if they don't like the proposed amendment, thus squelching it.

But not one session of the Massachusetts legislature has passed a repealing amendment--it was smashed by a vote of 151-45 in January of '07--despite the fact that they could have done so before the '04 elections, before the '06 elections, or since the '06 elections. While same-sex marriage may not have been legalized on a democratic vote, it proved to be impossible to get even one democratic vote to repeal it, and yet the citizens have never bothered to throw the bums out.

And note that the state legislature has now overwhelmingly voted to extend same sex marriage, a mere 3 months before the next election, which clearly signals their belief that the public is firmly on their side.

Opponents of same-sex marriage have been desperately clinging to the "elitist undemocratic judges" storyline as their last desperate hope for persuading the public. But they have missed the clear evidence that an initially skeptical public is irreverisbly trending toward support for same-sex marriage. The opponents have lost the battle to prevent it from being defined as a civil rights issue (and in this county civil rights issues always win eventually), and they are losing the demographic battle, as younger voters (roughly 40 and under) just don't see same-sex marriage as a threat to civilization.

It's all over but the shoutin', folks.