Steny Hoyer was just interviewed on CNBC and I just love to hear the nonsense that spills out of Demunist leaderships mouths whenever they open.  Speaking about the state of employment and the Democratic shift to prioritizing jobs in an election year, he went on about how if we could just get the policy mix we had in the Clinton years back in place we could counter all the damage done in the Bush years.  Obviously he is referring to marginal tax rates and Demunist’s desire to fleece everyone who has anything to fleece of whatever is fleeceable.  It really makes one wonder whether there is a brain or a Democratically preprogrammed computer in his head.

To anyone who remembers the golden 90’s, one is struck by the differences with our currrent circumstances.  In the 90’s, we had the Peace Dividend with the fall of Communism and a general rightward tilt in terms of economic freedom worldwide, the elimination of the S&L Crisis, the development and dispersal of a wide variety revolutionary new technologies in the Internet, cell phones, computing and medicine, and conclusion of the Uruguay round of world trade talks which set the stage for globalization.  In other words, there were gale force tail winds which Clinton expertly sailed.  These tail winds allowed him to raise taxes without killing the golden goose.  In fact that was a prudent tightening of fiscal policy for the time as it helped reduce the level of growth that otherwise would have taken place and helped keep inflation from getting out of hand.

The economy, with such strong underpinnings, succeeded wildly DESPITE the tightening of policy that tax increases represented. Demunists like Hoyer for some reason believe that higher taxes CAUSED the prosperity of the 90’s.  A stunning misreading of history for one at the highest levels of policy making in our great country, and one that sadly pervades the Democratic worldview.

Now fast forward to today.  I will agree for the sake of argument with the left that the Iraq war, while it had the positive benfit of ridding the world of Saddam Hussein, was nevertheless ill-considered in that it enatngled us for years in the middle east with great cost and with an arguably deleterious effect on our standing with many friends and foes, with whom we now find ourselves at a loss of traction on subsequent issues ranging from sanctions on Iran to combatting terrorism and many others.  Economically the problem is that it just costs alot and thus increases pressure on the federal budget and hence on the need to raise taxes.  In so many other ways the current situation also differs from the 90’s.  Rather than Tail Winds we have gale force Head Winds.

First is obviously the epochal credit crisis and its aftermath.  Rather than being on the cusp of a great surge of global wealth creation, as we were in the 90’s, we have just witnessed spectacular wealth destruction.  Demographically we are on the cusp of a bubble of retirement and have promised the retirees massive state pension support in the form of social security and medicare.  Foolishly, as is usually the case with Washington, the age for retirement was not indexed to life expectancies, which have lengthened greatly since the programs were enacted.  So we now can expect to pay many more years of benefits to tretiress than was contemplated at program inception.  Other head winds include the fact that there are increasing numbers of religious fanatics who want to end the way of life of the West.  The general tilt of politics has been towrd less freedom rather than greater for the last 5 years globally.  It would take years to overcome these head winds under the best circumstances.

But of course America elected Barack Obama and a Democratic congress.  So we are not going to have the best circumstances for growth.  Instead we have people who believe that raising taxes will somehow spark risk taking.  It won’t.  We have people who believe that more regulation will spark risk-taking.  It won’t.  We have people who believe that it is a good idea to send 100s of Billions of Dollars to the third world to atone for climate changed caused by our past development and as if that wasnt bad enough, to double the cost of energy to our own economy and then try to tell us that there will be a net benefit in the form of “green jobs”.  There won’t.

Will raising taxes and returning to the glorious Clintonian past by tightening fiscal policy be the right prescription in the current circumstances where we have Head Winds rather than Tail Winds?  It won’t.

One of the reasons Demunists trot out to justify their insane proclivity to destroy our health care system is that in the current system too many people go bankrupt and lose their homes due to health expenses they cannot handle.  And to some extent this may be true, and perhaps we should do something about it.  Unfortunately, the solution they have proposed, while it might save some of the people who would otherwise have been impacted thus, will in fact create others who would not have been bankrupted by health expenses, but now will be by the mighty hand of government.

One of the main tenets of Commocratic health care is the mandate that ALL Americans purchase health insurance or face fines.  Whether you have purchased a qualifying plan or not and thus whether you must pay a fine or not will be tracked by the IRS.  Putting aside for a minute the outrageous invasion of privacy that will result from the IRS having godlike powers to inspect our personal lives,  this will mean for many people that they will be subject to tax penalties when they cannot afford the mandated insurance.  And of course, once they cannot pay these taxes, they will have usurious additional penalties piled on top of those.  The IRS makes credit card companies look like pussycats when it comes to tacking on fees and penalties for non-compliance.  And in the end, the IRS will put a lien on your house and you may lose your home.   Not a nice result.

As a full time market participant, I have been accustomed to keeping CNBC on next to me all day long.  I don’t any more.  Read this article which suggests that General Electric CEO Jeff Immelt has put pressure on the network to be less critical of President Obama,  I believe he has.  There is much more pro-Obama speech there now.  Anchors now defend the insane health care legislation.  That was what clinched it for me.  Mark Haines started snorting derisively about those who speak of ‘death panels’.  Mark, I bet you have not read the work of Ezekiel Emmanuel (Obama’s health care advisor and member of the Comparative Effectiveness Research board authorized and funded in the 2009 ‘Stimulus’ package) , have you.  Read it and then tell me that Death Panels is too strong a word for what Demunists are trying to do.

To be honest, I do still watch it until 9AM Central.  The Fox Business News host in the morning is just awful.  I miss Rick Santelli and Larry Kudlow and Art Cashin, but you cannot have everything I suppose.

Why would Jeff Immelt put the screws to his business media outlet?  Well, it could have something to do with all the green energy work that GE is going to get from the government.  That will mean GE sells a lot of wind turbines.  In exchange for becoming an Obama supporter, Immelt got a seat on the Economic Recovery Advisory Board and the promise of fat government contracts for the “Smart Grid’ and green energy projects.  And GE needs it to stay afloat.  I puke when the GE commercials touting the smart grid come on, you know, the ones with the scarecrow suggesting the Wizard of Oz?  And what about the commercials where the ‘GE Employees’ sing awful 80’s movie soundtrack tunes.  My God those are painful.  Those commercials are ‘paid for’ by US tax dollars.  GE Capital was a major recipient of federal bailout funds under the ‘Stimulus Plan’ and TARP (actually the Temporary Liquidity Guarantee Program).  While that probably made some sense, because the commercial paper markets were dead, it still reeks because in advertising for all this feel-good green energy work they are doing they are recycling dollars they will earn from supporting the outrageous cap-and-trade legislation which will bring our country to its knees and result in massive government intervention into the everyday lives of Americans.

Switch to Fox Business Channel and do not buy GE appliances or anything else made by GE or its subsidiaries.

It is rather rich to hear Pelosi and Hoyer call those who are shouting down their congressional representatives and others at Town Hall meetings Un-American.  Those with by far the worse reputation for shouting down those with whom they disagree tend to be liberals, especially campus liberals.  They do what they can to stop those with whom they disagree from appearing in the first place, and failing that, even at really fine institutions like Columbia University, they just shout them out.

The paranoid left believes the recent protests are orchestrated, when they clearly are mostly not orchestrated.  They profess to wonder why we cannot have a rational debate.  The president bemoans the fact that there is so much misleading information and gosh-darned erroneous rhetoric out there;  please just report it to us when you see it.

What you do not see in the press is any acknowledgment of WHY reasoned debate is pretty much impossible, on either side.  Talking to a member of Congress or the Administration is like talking to a brick wall.  They show up with canned and irrelevant politic-speak.  They are not really going to listen to you or take account of your views or even think, much less actually READ the history changing legislation on which they are casting votes.  They, almost without exception, speak from a talking point sheet composed by their leadership.  In other words, it is all bullshit.  And then Claire McCaskill (D-MO) asks, apparently in all seriousness, “Don’t you trust me?”  Bwah ha ha ha ha ha ha (tears rolling down cheek and falling heavily to the floor).  You have got to be kidding.

It is no wonder then that the only reasonable approach to changing the outcome is just to shout the loudest.  Just say No, No, No or some other slogan that can be chanted over, and over, and over….  Pelosi and her ilk have only themselves to blame.

As reported here, Barack Obama, the man currently pretending to be the President of the United States of America, said when discussing his insane nationalization of the health care system that will bankrupt the country while simultaneously reducing the quality of care and taking a giant leap toward a country like the one presented in the movie Logan’s Run : “The American people have to realize that there’s no such thing as a free lunch.”

Coming from the leader of the Frree Lunch party that is pretty rich.  Under Obama’s leadership, the number of taxpayers that pay no income tax will breach 50% for the first time.  Yet many of those 50% that pay no taxes whatsoever will benefit from the programs, like nationalized health care, that Obama proposes.  Is that not the quintessential definition of a free lunch?  Obama’s slickness is starting to make slick Willie look positively tacky.

Antichrist’s Adjutant: Henry Waxman	Dumb as a Rock, but just as dangerous when thrown at your head – 3rd in line for the Presidency, House Speaker Nancy Pelosi

These are two of the most powerful Demunists and Commocrats in Washington, Waxman, Chair of the House Energy Committe, and Nancy Pelosi, Speaker of the House of Representatives.  Waxman is from Beverly Hills, 90210 country, California.  Pelosi is from San Francisco.  Obviously their state is governed so well, that we should use it as a pattern for the country.  Oh, wait, their state issues IOUs to pay people that banks will not even accept.  Their state is bankrupt as a result of Demunistic and Commocratic, stars in your eyes,, blinders-on, incapable of thinking of the consequences  mismanagement.

Here is the language of Obama’s chief political advisor, David Axelrod:  “Ultimately, this is not about a process.  It’s about results.”  In other words, in words reminiscent of Stalin-era communism, “The ends justify the means.”

Or take the language of Nancy Pelosi speaking about the need to reduce carbon output on her spring 2009 trip to China.  “Every aspect of our lives must be subject to inventory.”  How do you do that?  You send jackbooted ACORN “community organizers” around to gather the GPS coordinates for your home in the process of gathering census data, so they know where you live.

Or take the Cap and Trade bill sponsored by Henry Waxman.  Before you can sell your home, you will have to prove to government auditors that you have made it energy-efficient.  What will they do if you haven’t?  Maybe fine you?  Maybe take a lien on your home?  I do not know.

I have argued that when fascism comes to America, it will come from the Left, not the Right (see Liberal Fascism).  So it is.

With the news today that the Tribune Company has reopened negotiations to sell the team with a second bidder, I thought it time to opine on the Cubs chances this year.

A couple of years ago I had a letter hand delivered to Andy MacPhail by a friend of the family who was in town to watch a Cardinals game in MacPhail’s box at Wrigley.  In the letter I offered to be the team’s Moneyball guy, as I have some ideas on what it takes to make a winning baseball team.  I did not know that MacPhail would soon be gone.  My letter made its way to Jim Hendry and I have his reply letter in which he kindly declined my offer of assistance.

Things would be better for Cubs fans had he not declined my offer.  Recall that last year the Cubs had arguably the best team in baseball.  They ended the season with a whimper in the first round of the playoffs against the Los Angeles Dodgers due, I submit, to the fact that Lou errantly failed to start the electric Reed Johnson in Center Field in favor of the aging Jim Edmonds, and started Fukudome in right.  Fukudome did nothing, Edmonds failed to spark the team, Johnson did not even have a single defensive inning or at-bat and the Cubs predictably but unnecessarily disappointed fans who had really believed that 2008, the 100th year of Cubs futility, would be the year they redeemed all those millions of fan-years of expectations.

So in the off-season, you might expect Hendry to keep the team together for a repeat.  Though I had resolved not to give a damn about the Cubs going forward, I did tune in in mid-April.  I was surprised when I saw the damage done to the team.   Not only did they not keep the team together, they traded away its heart by dealing away Kerry Wood and Mark DeRosa.  The clubhouse chemistry between DeRosa and Theriot was the core of what made the Cubs a contender last year.  Gone.  The feel-good story which had Kerry Wood in a comeback role as closer was finished.  Gone.  Wood was not the best closer in the game, but certainly he did a serviceable job, and he has a winning disposition.  Also a good part of the team chemistry.

Why did Hendry deal these two players?  According to news reports quoting Hendry, it was to make room for… Milton Bradley?!?!#?*!?  Aaron Miles at second for DeRosa and Kevin Gregg for the Closer?!?!#@?!?  Where to start.  Gregg has proven to be several notches below Wood in the closing role.  Aaron Miles is a serviceable player, but he does not have the spark with the rest of the team that causes guys to play above their baseline capabilities.  And to top it off, they acquire the games biggest head case and worst clubhouse guy (possibly excepting Manny Ramirez) who comes in to hit … .110.  You could not have made worse moves.  It just isn’t possible.

So it is too bad that I am not working for the team.  And it is too bad that Cubs fans will have to wait more decades for a shot to see the Cubs win the fall classic.  I will be surprised if the Cubbies finish above .500 on the season.  And then their other core players like Derrek Lee and Aramis Ramirez will be past their winning years.  Once upon a time I was a Cubs fan.  Now I am an angry ex Cubs fan.

In December the Fed announced that it would target Fed Funds at 0 to 1/4% and it also announced that it would be in the market for agency debt and treasuries, effectively monetizing the debt of the United States.  The dollar, which had been strengthening in the flight to quality as risk positions were eliminated in the aftermath of the financial market meltdown, dropped sharply.   Yields spiked down on the theory that the Fed would be buying treasuries in competition with those fleeing risk.  Importantly, this also put an end to the commodities drop from July of 2008 to December 2008.   Over the next few months, markets fluctuated in a range near their December levels and the dollar strengthened as people were worried whether the world was ending.

As is became clear in the spring of 2009 that things had stabilized somewhat, the implications of extraordinary money creation by the Fed, along with a ridiculously wasteful US stimulus spending bill and a less wasteful Chinese stimulus plan started to become clear and markets reacted.  Ten year treasury yields have just about doubled in 6 months.  Crude oil prices have more than doubled.   Even Corn prices have risen 55%  despite the decimation of the chimerical ethanol industry.  Such price moves have happened in most commodities as it has become clear that there is a rising long term risk of inflation.

The Fed’s position has been made more difficult by an $800 Billion “stimulus plan” that will be mostly wasted and pending Demunist legislation that promises wartime deficits as far as the eye can see.  But an independent Fed has to be the entity that backstops the system by defending the dollar.  And the only way it can do this is by convincing markets that it will not let the situation get out of hand.  Unfortunately, a guy with the nickname “Helicopter Ben” is most unlikely to be counted on to do so.  As a result we will likely face a dollar crisis, with the result that debt yields will rise massively, as will the cost of all commodities.  As a matter of policy, should the cost be bourne by those who use commodities, notably oil and gas?  This would probably suit the Demunists and Commocrats as it helps their drive to go green.  It is a steep price to pay though and could lead to world unrest.  It also shifts massive amounts of wealth to really bad people all over the world; the Saudis, Putin’s Russia, Chavez in Venezuela, Iran and so forth.  It would be better if the Fed showed some mettle and kept a lid on commodity prices by raising rates, even if only a little.  They may even find that it helps keep long rates in line to help the housing market, even if it costs banks a little as it flattens the Yield Curve a bit.  The bottom line is that authorities cannot create a painless economy, no matter what democratic keynesians say.  The sooner the pain is felt, the better off the world will be in the long run.

If the Fed would only get some balls, we could silence the noise coming from the worlds leading autocracies about dropping the dollar as the world’s reserve currency.  Sadly I would bet that this will not happen.  The world will lose the dollar on Obama’s and the Demunist’s watch.

The ongoing bailout of Chrysler and General Motors cannot be looked at as anything other than a bailout of the UAW.  By some estimates, the American taxpayer will be shelling out $215,000 for every job saved.  The massive waste of time and money surrounding these shenanigans boggles the mind.  Does anyone doubt that these companies will need more and more taxpayer money to operate in the future?  GM will have to reach a market cap it has never achieved in the past to allow it to pay back the money it has received.

If I could do animation I would animate a race of geese around a track where the goose picks up coins and stuffs them in a sack.  It makes it around the first turn all the while stuffing its sack.  As it picks up steam and its sack starts getting full, bystanders – who are all politicians and union members – start pouncing on the back of the Goose demanding that they be given coins.  Eventually the Goose is so overwhelmed that it misses a turn and crashes into the wall just shy of when it was going to hand the baton off to ??? some other industry that requires labor.

In exchange for the massive and unfair taxpayer transfer of wealth to these politically favored workers (why are workers in other parts of the country not receiving similar help?  Why am I or my friends not receiving such help for that matter?), we should ask that union members who benefit forego their voting rights for at least one 4 year election cycle.  After all, this whole exercise is nothing but a huge buyout of their votes.  And they thought Blagovich was shameless.

It is enough to make one wretch and wretch and wretch.

Secretary of Energy Steven Chu, whose pronouncements on energy tend toward the wacky, today said something that actually makes sense.  He called for roofs around the world to be painted white.  This is something that will make a huge difference in ameliorating the heat island effect, and in cooling the planet.  And it is not some mightily expensive scheme that will only line the pockets of the well connected a la Cap and Trade.  It could actually be done in the normal course of things at reasonable cost and will make a difference.

We need more such out of the box thinking to solve our problems.  There are certainly things that individuals can do to reduce the amount of energy that we use.  The government can provide a useful service by collecting such information and publicising it.  It can then also undertake reasonable legislation where necessary, like requiring new roofs be painted white.  Sadly the primary mode of operation for politicians and bureaucrats is to promote insane and risky schemes that will endanger our future prosperity in an unholy alliance between special interests and politicians, with the politicians crafting legislation to benefit the special interests while the special interests help the politicians with campaign cash.  Think Jeff Immelt, one of Obama’s smiling new supporters, and CEO of GE – who now supports the insane energy schemes of the left while expecting lots of business in return for GE.  It is enough to make one sick.

In testimony before congress today, Treasury Secretary Geithner let slip what typifies the mindset of ideologues like those in the Obama Administration.  When questioned by some congressperson or other about Chinese currency liberalisation, Geithner proferred that their currency liberalisation had been “substantial”.  The congressperson, unsatisfied with the generalization “substantial” pressed for Geithner to cough up a number, “10%, 20%?” he was asked.  “Congressman, those are just facts” he replied.  Yes, those are just facts.  Something that those with a progressive agenda just seek to ignore if they do not comport with whatever ends Progressives are trying to achieve.  Read the book Liberal Fascism.  Severe intrusions into personal freedoms are most likely to come from the Left, not the Right, with the notable exceptions of abortion and a couple other sexual freedoms where the Right would in fact do well to back off.

Has anyone noticed that no one in commercials can say “dot com” normally?  I suppose I am crazy.  I watch CNBC all day long every day because I am trading from 7:30 to 4.  Well I do not really watch it but I have it on so I hear it.  If you hear alot of these commercials what you will notice is that in commercials for forex.com, grandparents.com, cisco and some others, they say “dot com” like “dot caum” or they use a british accent to cover it up, and of course in the annoying Cisco commercials they have this human kitten talking about the human network effect or giggling contentedly.  I always thought there was something strange about John Chambers.  Is he related to Marilyn?

This of course brings to mind Obama during the campaign.  I know I am not the only one to have noticed that Obama affected the speech mannerisms of Martin Luther King.  A stylized form of speech combining aspects of southern drawl with staged preachiness.  Notice also that now that The Annointed One has actually ascended to the throne (while fighting tooth and nail not to produce a birth certificate proving that he was actually born in the United States – why not just produce it?), his speech has more or less returned to normal.  Obama is very clever.  He has mastered the Clintonian tactic of stealing an issue from your adversary and making it yours while acting the part like Reagan did.  Just as Clinton stole welfare reform and the balanced budget issue and pretended that they were his issues, when history shows he had them forced upon him, so Obama stole the religious issue stating over and over again that he is a man of faith, a religious person.  Very smart, since a real or affected religiosity is unfortunately and absurdly an absolute prerequisite to political success in America.  And a real bummer since absence of religious fanaticism is one of the only good things that can usually be said when a Democrat takes office.

Demunists and Commocrats are trotting out their talking heads today in response to the Feldstein WSJ editorial that higher taxes will hobble the economy.  I am sick to death of hearing their slobbering response, which assumes that everyone is a craven knothead willing to accept whatever tripe they proffer in their tired missives.

First is the absurd claim that “President Obama has reduced taxes for 95% of Americans, helping working people”.  If you believe that, I have a piece of property I am dying to show you located in Florida.  First of all, the bar is getting lower as it turns out that couples making $230,000 rather than $250,000 will be hit with income tax increases.  And of course, the administation is going to hit everyone who has a pulse, and even those who don’t with scads of other new taxes and fees in addition to the income tax.   In some cases they will disguise them, insisting that they aren’t ‘taxes’ and hope you believe it.  In other cases, like the carbon tax, they will insist that because they intend to return some of the money raised back to taxpayers, there is little net new tax.  Please!  That will not happen when Waxman and Pelosi can get their dirty mudhooks on it to buy other votes in other ways.  And guess what, those who make more than $250,000 are also working Americans, in most cases harder working than those the Demunists favor in their redistributive zeal.

The other piece of tiresome BS is the claim that the marginal rates will not be any higher than they were during the Clinton years, one of the most economically vibrant times in our history.  But the condidtions now are completely different than they were then.  We do not have a peace dividend from the fall of Communism.  The current credit crisis is magnitudes more serious than the S&L crisis.  The internet and personal computing juggernauts have matured somewhat so there are no windfall gains in productivity to be had.  Clinton was the heir of 12 years of the Reagan revolution and a liberalisation throughout the world, not to mention trade liberalisation through the Uruguay round of GATT (now WTO).  Obama is the heir to 8 years of Bush and the retraction of liberalisation around the world, not to mention the failure of the Doha round of trade talks in the WTO.

America prospered despite the higher taxes in the 90’s – when they tilted, in what turned out to be serendipitously correct fiscal policy, against a stunning tide of prosperity – not because of them.  Will she so prosper now?  Higher taxes and a restrictive fiscal policy in the current environment will be far more damaging in the 010’s than they were in the 90’s.  So Demunists and Commocrats are being predictably intellectually dishonest or just plain obtuse in their assertions.  What a surprise.

I did not know Bill Seidman, but my impression is that he was one of the good guys and that the world will be a worse place for his absence.  I am saddened that someone of such obviously genuine good will, tolerance and humor has left the scene.  His impish smile was infectious.  He was someone who was not afraid to inject respectful levity into otherwise overly serious discussions.  After watching him speak, I always came away feeling calmer and better about things.  He seemed a gentleman whose manner of conduct one can only hope to emulate.

I am not sure that stock prices ever bear much relation to the worldline that will ultimately play out over time, but the recent rally, now aged 55 days and counting, really highlights the fantasy world that typifies equity values (as so much else, but more on that later).  Recall that market indices made their lows on March 6th and the world looked bleak.

At that time, one started to hear that FASB was going to reconsider the application of the Mark-To-Market accounting rules for banks which would relax the requirements to mark their balance sheet assets to a market which did not exist.  The whole Mark-To-Market issue does present a dilemma.  On the one horn, as we have seen, the idea presupposes a market where price discovery is actually happening.  If this price discovery function is impaired, how is one to mark to market?  On the other horn of the dilemma, if you allow the quants to mark the assets to their models, the pressure to tweak the model is too strong to resist so you wind up marking the assets to fantasy levels.

Recall that the stringent Mark-To-Market accounting rules only became active in November 2007.  This marked the top in equities.  Conincidence?  I think not.  Also, according to the timeline published here,  on Monday, March 9th, markets started moving higher.  On Tuesday, March 10th Fed Chairman Bernanke weighed in on the issue of Mark-To-Market Accounting by suggesting that the rules be loosened.  This must have made Steve Forbes happy, as he had been harping on this issue.  According to the Wikipedia article linked above, the FASB made their announcement that the rules would be relaxed on March 16th.  The markets have been rallying since it first caught wind of the change.

Think about this for a minute.  In response to the hiding of problems banks have; by making their financial situation more opaque, markets have rallied 25%?  Moral of story is that people like to live in a fantasy world and damn you if you intrude on their reverie with sordid tales of reality.  Lesson for traders?  Do not be too worried about what reality would dictate, the markets and indeed the world turns on perceptions of reality washed through human minds which crave fantastical stories.

I grew up in Minnesota. We did not even have a yard. Our house was on 5 acres of woods that was itself surrounded by 100 or more acres of woods. Yes, my childhood was very much like Christopher Robin growing up in the Hundred Acre Wood. I even had a little golden bear that was my favorite childhood toy. I spent almost no time watching TV. I did not have the time. Why? Because I spent nearly all of my time in the woods. Running, sledding, building forts, riding bikes, climbing trees, collecting raspberries and puffball mushrooms. Exploring the woods.

Since my childhood, I have spent most of my time in cities, New York, Minneapolis and Chicago. I had settled on Chicago because it represented a happy medium between Minneapolis and New York in terms of liveability and opportunity. Liveability means it was easier to get around and generally safer in the areas where I went than New York. It also means it was generally more affordable.

There are two reasons it may be time to leave Chicago. First, I have children and I would like them to experience some of the carefree joy of living outdoors. This is not really a possibility anywhere near Chicago. The second reason is that it is becoming less liveable in many ways.

First it has become really difficult to get around in a reasonable amount of time.  But more importantly, it has become much less affordable.  Housing costs, while they did not climb as much as they did in the “hot” areas on the coasts, still rose to an outrageous extreme.

Second, the governance is dismal.  Sales taxes are now more than 10% for everything.  That is approaching VAT levels in Europe.  Now the replacement governor is talking about raising the income tax.  The very low rate of income tax was one of the main reasons for living in Illinois.  Last week, the parking system became untenable.  Whereas I was paying 25 cents to park for an hour in Bucktown, the rate just went up to a dollar for an hour.  That is a 400% increase.  On Wells street the rate went to 2 dollars an hours.  That is 8 quarters.  I am not in the habit of carrying around sacks of quarters.

Finally there is the privacy issue.  Daley has said that there will be cameras everywhere in the city.  That will keep people safer but it will also be more intrusive.  More perniciously they are using the traffic cameras at many intersections to give out automated tickets.  And I have read talk about using some kind of automated system on the freeways to issue speeding tickets.  With all this it really is becoming time to go somewhere else.

It is alarming to hear gleeful democrats say that the mistaken policies of the last 30 years are now to be jettisoned.  What policies exactly?  In a nutshell it is the reduction of state participation in the economy.  As the chart below demonstrates, it is hard to view the policies that started with Reagan as a mistake.  More people have been lifted out of poverty worldwide both in gross numbers and as a share of the global population than at any time since the Romans forcibly civilized much of Europe, the Middle East and the Mediterranean.

This week, the lying president’s lying press secretary, Robert Gibbs, attacked CNBC’s Cramer (a democrat no less) for pointing out what should be obvious to anyone.  Democrats are destroyers.  This is what I have been telling my democratic friends all along.  We are all going to watch it happen to our country.  Why is it that at precisely the moment in history when she needs a true libertarian leaning government (not Bush mind you) that will let loose the energies of her people to rebuild after the huge mistakes made by regulators and bankers that led to this enormous credit crisis, instead she should shoot herself in the foot by electing statists to run Congress and then also the Executive?  It may be a function of the same mania that led to these problems in the first place.  Or maybe it is just dumb bad luck.

Note the first two great inflection points in the chart below.  The first occurs when Paul Volcker, the same Volcker who is advising Obama now, is hired by Reagan to break the back of the inflation.  It is hard to see because the levels at that time are dwarfed by the levels (of wealth) that occurred in the last 20 years, but in a suitable scale, it is clear.  The second great inflection occurs when Newt Gingrich leads the Republican takeover of the House in 1994.  The change in slope is just amazing.

Now, we come to 2007 when the Democrats have taken the House back.  They are seated in January.  The market continues to rise for most of the year.  But late in 2007, it was starting to become obvious that there was a real likelihood that the Democrats were going to take the executive and bolster their grip on Congress.  The result?  The S&P 500 has dropped back to 1996 levels.  Just a bit more and ALL of the gain from 1994 on will be gone.

Coincidence?  Not likely.  But this is somewhat misleading.  The 90’s of course saw the rise of the internet and technological and automation enhancements that dramatically improved output per hour worked, or productivity.  The gains of the 00’s were clearly and improperly augmented by lending gone mad.  Bankers Gone Wild!  Who will make the videotapes?

But just as I believe that the dawning of realization that Clinton was no longer going to be President broke the cult-of-personality spell that had levitated stocks (a Republican Congress to divide government also helped) and caused a decline prior to Bush actually entering office, merely on the anticipation of it, I also believe that the current massive destruction of wealth started happening as soon as people started to realize that the destroyers would take control.

I also believe that we would have had a fairly massive downturn anyway, but I also believe that we will have come out of the tailspin alot sooner if we did not have Demunists and Commocrats in charge of the whole shebang.

I had intended to write an email to McCain’s campaign to proffer the following analogy for use in the campaign.  In the end I did not because I realized the cause was lost.  But it went like this.  McCain should have communicated to the people the question:  If you are driving a car and you are distracted by something and you start driving toward the ditch and a large tree on the other side what do you do?  The prudent thing to do is to gently steer the car back onto the road and continue on your way.  What you do not want to do is to throw the wheel hard over to the left.  What will happen if you do?  The car will either catch pavement and flip over, or if the angle is a bit more shallow, it will cross over the median and into oncoming traffic.  In either case, if you throw the wheel over hard left, you will be hurt or killed, both your body and your car destroyed to one degree or another.

America must be a bad driver because she just threw the wheel over hard left.  We may just find the S&P 500 back down at 450, where it was the last time the Destroyers controlled both branches of government.

Click me (S&P 500 Weekly)!

I remember during the campaign watching this youtube movie where the woman gets all excited that Obama is going to pay for her gas and mortgage.  At the time it was a joke and everyone had a good laugh.  Well, it turns out Obama IS going to pay for her mortgage in the event.  And he is going to reduce the interest rate and principal on mortgages for perhaps millions of exactly the wrong people, despite lying during his Budget Speech that he would do no such thing.

So basically if your mortgage is a Fan/Fred piece of paper or if you bought way over your head and now cannot afford to keep paying, Daddy Obama is going to make it OK for you.  Of course he isn’t going to do anything to help those who exercised a modicum of good sense in not so overextending themselves.  The net result is that those who were irresponsible will wind up in a much better position than those in a similar situation who were responsible.

But that is the way of Democrats.  It is the Tae Democratica.  Never mind what makes sense, do not even bother to think what the consequences of our policy will be, we see something ugly and we just want to fix it by throwing someone else’s money at the problem.  And if it is politically unpopular, then just lie about it.

Apparently it wasn’t enough for Obama Press Secretary Robert Gibbs to lie about the fact that the Homeowner Satbility Initiative the president is proposing does by its terms extend taxpayer help “our neighbors” who bent the system so they could buy a much better house than they could afford, while not helping those of us who exercised responsibility by not buying above our pay grade.  President Obama came out in his nationally televised prime time budget unveiling speech and said the same thing.  I was reserving judgment on this administration and trying to give them the benefit of the doubt, but how stupid do they think we are?  Pretty stupid apparently.  The president has now actually just flat out lied to the nation.  The Associated Press called him on it in a follow up to his speech titled “Fact Check: Obama’s Words on Home Aid Ring Hollow” on February 24th.  The Wall Street Journal editorial page also referenced this today.

And as if this weren’t enough, Robert Gibbs seems now to be parroting the Democratic Congressional Committe misdirection on Rush Limbaugh.  He was at the presidential podium today jabbering about how Limbaugh hopes the president fails.  He then transmuted this into some tripe about how Limbaugh hopes the nation fails, as if Obama were the nation.  Now I do not follow or particularly like Rush Limbaugh, and perhaps he has chosen poor words to express his sentiments by talking about his hopes rather than simply pointing to the facts, but in any event that is NOT what Rush Limbaugh said!!!  So here is Robert Gibbs using the bully pulpit to lie once again.

Democrats have this propensity to intellectual dishonesty but this brazen disregard for the truth is really quite something.

UPDATE 05 March 2009: I would add that in light of what seems an unbelievable overextension of their balance sheet by writing hundreds of billions of dollars or more in Credit Default Swap (CDS) contracts they could not even remotely begin to conceive of being able to honor in the event, it would probably be wise to add a single rule limiting the amount of such contracts a company like AIG can write to some reasonable multiple of their capital. I also would suggest that it is most unpalatable to have the taxpayer now underwriting the counterparty risk of the buyers of these CDS contracts by making them whole with some $180B in capital injections. That is close to the entire tab for the S&L Crisis of 1991 right there. Those buyers should be out of luck and it seems rather dark that the Fed and the Treasury will not disclose those counterparties now that the taxpayer in fact owns the company.

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While people like Paul Krugman will say that the causes of the credit crisis involve many actors, and liberals point the finger at Wall Street and greedy bankers, it is instructive to remember exactly what the problem is.

The genesis of the problem is simply that millions of really LARGE loans were made to people who cannot or will not repay them.  This is not like people not paying their unsecured credit cards.   The dollar amounts involved there are small.  This is about default rates on mortgage loans going from the 1-3% range to the 15-30% range on loans whose average size is in the hundreds of thousands of dollars each.  Because the dollar amounts are so absolutely huge, they represent multiples of the capital reserves of the banking system, hence posing systemic risk.

This problem has been and will continue to be used as justification by those with other regulatory agendas to impose all kinds of burdensome and unnecessary regulations on activities from banking to trading.  Note however that the entire mess could have been avoided with but 2 simple rules relating to mortgage underwriting.

First, the lender should be reasonably sure that the normal anticipated monthly mortgage payment represents some reasonable fraction of income.  This is the Debt Service Ratio test.   Second, the amount loaned must represent no more than some maximum percentage of the appraised value of the property.  This could be as high as 90%, but probably not much higher.

Had these two simple rules been required by regulators of mortgage originators, we would not have the credit crisis we have today, even with securitisation and all the rest of it.  So be wary when you hear government say we need to regulate this, that and the other thing.  We only need 2 simple rules.