Man Without Qualities


Saturday, March 15, 2003


Time For The Reinforcin' O' The Stereotypes

But wasn't it Senator John Kerry, illuminated from within by either a wee drop or one of his many ethnicities, who first said:

"There's no place like the blessed Emerald Isle. Down at Noonan's, the lads and I will be staying up until the wee hours toasting Merry Old Ireland. And vomiting."

Or maybe it was Maureen Dowd, to pass the time while opportunistically digging up some vestigal ethnic tubers to toss into her latest anti-Bush stew.

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Trending Away II

The current "crowds" of anti-war protestors seem surprisingly small - although some media coverage seems at pains to obscure that: An estimated 10,000 antiwar protesters, including many who remember World War II, paraded peacefully through central Tokyo. Only 10,000 in a capital city of more than 10,000,000? Is that a joke or a typo?

The reference to "many who remember World War II" is curious, especially with respect to former-Axis-power Japan. That was the war that was much worse than it needed to be because too many outside the Axis sought only "peace in our time" through excessive faith in diplomacy with a madman. It was the war that was so much worse than it needed to be because isolationism and misguided left-wing activism caused too many Americans to focus their attention only on what the Axis had already done to the United States.

The linked article continues: Sentiments were as varied as the locales, with many people saying Iraqi President Saddam Hussein is no threat to the United States ...

This same sentiment has been expressed in the round of American television advertisements - one featuring a Methodist bishop, others featuring B-list celebrities - opposing the war. Indeed, much of the anti-war effort in the United States and Europe seems intent to establish such a "principle," and the people carrying and expressing that intent should be vigorously questioned about it, much more vigorously than has been the case to date. The "principle" has taken root in a shockingly wide tract of the Democratic Party: Democratic presidential hopeful Sen. John Kerry said on Friday that Iraq does not pose an immediate danger, and said that instead of rushing into war, President Bush should take months to build an international coalition against Baghdad.

This same Senator Kerry, who describes his "recently discovered" Jewish heritage as a "light" within him, should be asked pointedly: To what extent would a complete and utter annihilation of the State of Israel, or any other purely domestic pogrom or genocidal act, pose an imminent threat to the United States - or any threat to the United States at all? In such a case, should the United States just dither around the green glass building in Turtle Bay until the French and some collection of undemocratic Security Council states decide it's time to move? Is that a "principle" the anti-war crowd's arguments support de facto or by intent? And if not, why not?

And Howard Dean should be up next. According to USA Today: He ceaselessly attacks fellow candidates who voted for last fall's resolution authorizing Bush to use force against Iraq, contending they support ''unilateral war.'' The four who voted yes say they were convinced Bush would try to work through the United Nations. If there is a war, it won't be unilateral because some U.S. allies already are on board.

Now that the loathesome and embattled U.S. Rep. James P. Moran Jr. (D) quit his House leadership post ... for making what he called "insensitive" remarks about Jews pushing the nation into war with Iraq, the time is ripe to really get into the consequences of the other positions the Democratic Party and its main exponents are developing.

UPDATE: Silence is not the answer.

FUTHER UPDATE: Anti-war "crowds" have been small - even in the "Arab street."

ANOTHER UPDATE: A follow up question: Do torture and gross human rights violations pose an imminent threat to the United States?

AND ANOTHER: Arnold Kling breaks out the history books.



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Friday, March 14, 2003


Grand Rentier

Writing for MSNBC, Dan Goure points out:

So it is fair to ask, even with some sense of exasperation, what does France want? The answer is straightforward. France wants influence and power. It wants influence over the international security order that is developing in the aftermath of the Cold War. France is no longer a great power; its influence will not come as a result of the size of its military or the robustness of its economy. It will come from imposing on the international system a system of procedures, rules and regulations that will constrain the ability of more powerful states, and particularly the United States, to act without France’s assent.

This is a rather grand way of saying that France wants the United States to pay for and maintain the world's only meaningful military - whose use will be subject to the will of France. The "superstate" of treaties and international institutions desired by Mr. Chirac is therefore a refinement of the observations of nineteenth-century French journalist Frederic Bastiat that "The State is that great fiction whereby everyone tries to live at the expense of everyone else." The effects of the superstate desired by Mr. Chirac would be simpler: France and Europe would simply live at the expense of the United States. An aging France and Europe will be rentiers - but without ever having made an investment.

Britain and the other European counties supporting the United States seem to understand what the French do not: the French scheme cannot possibly work because the United States is not willing to work for France, even if the whole scheme is made very complicated. If the French and like-minded nations want to play in the big military leagues, there is no substitute for actually maintaining a substantial military - and that costs money, which requires increasing economic efficiency and overall wealth. The French and their followers don't want to pay the bills or make the economic adjustments needed to generate the wealth that would allow them to pay the bills.

Various questions arose with the demise of the Soviet Union that have never been answered. Why are there United States troops in Germany, for example? There are many others. Resolution of these questions has been sluggish, perhaps because once one really attempts to answer them one begins to realize they lead to very much more profound considerations. Why does NATO exist? Why does the United Nations exist? What the Iraq crisis is demonstrating is that to some Europeans - and especially the French - the answers to both of these questions is the same: to subject the United States military apparatus to European control. There will be no real multilateral reciprocity.

But if the world is reconstituted along the French lines, the United States gets little out of it. If the United Nations, for example, did not exist the United States would not have to be concerned with the argument that it cannot "legitimately" use its military without UN approval. Indeed, the existence of the UN appears to be stunting the development of international law - and is certainly restraining its recognition of the centrality of genuine electoral democracy as a necessary underpinning for the legitimacy of any state. Without the UN, the votes and positions of, say, Syria or Pakistan (current highly undemocratic members of the Security Council) would not be relevant - and that would probably be a good thing. Further, if the American military were subjected to the kind of foreign control that the French seem to envision, there would be a greatly reduced incentive for the United States to maintain its substantial military. That certainly would be to the liking of some American politicians. Perhaps that is why Mr. Clinton is arguing: "We need to be creating a world that we would like to live in when we're not the biggest power on the block." But in such a world as Mr. Clinton advocates, just who will be the biggest power on the block? Somebody should pointedly ask him - and his wife.

But to borrow a bit from Mr. Clinton's first Presidential campaign: the above considerations seem to be an argument for ending NATO and the United Nations as we know them. Or maybe its all a reason to seriously think about other uses for the land in Turtle Bay.

Or just maybe something will happen pretty soon that will make the preposterousness of the French scheme apparent to everyone, and we'll all wake up from it as from a fever dream. Then the games on the East River can continue as irrelevantly as before, with the biggest questions concerning the UN centering on what to do with all those constantly illegally parked diplomatic limousines.
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We're All Reaganites Now

The Associated Press reports:

Coniferous forests around the world may be emitting more smog-causing nitrogen oxides than traffic and industry combined, suggests a report in the prestigious journal Nature.

The report, released Wednesday, flies in the face of the accepted view that forests reduce pollution by absorbing it — a theory Canada relied on in demanding credit for forests as pollution "sinks" under the Kyoto climate change accord.


I understand the first sentence. It's nice that yet another quote from Mr. Reagan which has been brandished by his critics as "proof" of his stupidity has turned out to be likely correct.

But the second AP sentence makes almost no sense to me. The main thrust of the Kyoto Treaty is carbon dioxide - not nitrogen oxides. It is true that greenhouse gases include water vapor, methane, carbon dioxide, nitrous oxide, ozone, chlorofluorocarbons, hydrofluorocarbons and perfluorocarbons. But most of the developed world's production of greenhouse gases is in the form of carbon dioxide (CO2), this means that Kyoto is mostly about reducing CO2 - and those were exactly the terms in which the debate has been conducted.

One would have to spend a lot of time examining the credentials and recent medical history of any scientist whose study "proves" that trees don't remove carbon dioxide from the air - but this isn't such a study. The AP says only that this study deals with nitrogen oxides (I haven't seen the original Nature article). As the AP article irtself points out, the big problem with nitrogen oxides is that: Nitrogen oxides are smog precursors: They combine with other pollutants to form ground-level ozone, a major component of smog. Nitrogen oxides are also down 38 percent since 1975 in the United States, for example - a trends mirrored in all developed countries.
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So how can it be that this study flies in the face of the accepted view that forests reduce pollution by absorbing it — a theory Canada relied on in demanding credit for forests as pollution "sinks" under the Kyoto climate change accord?

Link via Best of the Web

UPDATE: The Nature article discussed above seems to be about trees. But a perceptive reader reminds me that a forest is more than a set of trees. Whether forests (including the dead, decomposing ex-trees they contain) actually absorb CO2 on a meaningful net basis is controversial. Many pro-environmentalists extend the argument that forests are the "lungs of the earth" - but others, including Lomborg's Skeptical Environmentalist, disagree and cite research papers that suggest forests have no such effect. Ironically, Canada relied on the "lungs of the earth" argument to obtain its partial exemption under the Kyoto Accord.

FURTHER UPDATE: Steve Verdon has a big "global warming" update.

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Who Knew II

An astute reader writes to point out that most of the known controversial transactions between German firms and Iraq broke German law, have not demonstrated German government complicity and happened under the prior strongly pro-American government of Helmut Kohl. Some such transactions have resulted in criminal convictions in Germany and the German media seem not to have been shy about reporting the shenanigans. Chicago Boyz has more.

But the thoughtful and intelligent Steven Den Beste certainly has nothing to be ashamed of in having brought up these ideas (or, as he terms his efforts, getting the idea into circulation and causing some others to start looking for evidence of it) - regardless of whether there are mistakes or bad guesses here (which has certainly not yet been demonstrated). Mr. Den Beste points out:

I was not (as [Robert Musil has] suggested) saying that I had concluded that the French were indeed treacherously involved in illegal dealings with Iraq. (Nor is it the case that I check under my bed for Frenchmen every night before going to sleep.) What I said was that it was a disturbing possibility that we needed to start considering, since I didn't think that more mundane explanations sufficed. So at best it was speculation or conjecture; it was far from being what I'd refer to as a "theory" (which is to say, something so well established as to be nearly indistinguishable from fact e.g. "The Theory of Relativity").

But the Man Without Qualities did not mean to suggest that Mr. Den Beste had concluded that the French were indeed treacherously involved in illegal dealings with Iraq. But he certainly has been a main player in advancing that theory as a likely explanation. Mr. Den Beste does not care for the term "theory" here, but I think that is solely an epistemological issue. I believe intellectual constructs get labeled as "theories" exactly to distinguish them from "facts" ("Theory of Everything," "Theory of Dark Matter") although the name often sticks after the theory is accepted as fact ("Theory of Relativity," "Theory of Universal Gravitation") - although sometimes the "theories" become "principles" at that point, and the two appellations continue in parallel. Maybe "hypothesis" would be better: Is "Efficient Markets Hypothesis" or "Efficient Markets Theory" better? And I also think he has gone a little beyond presenting the ideas as mere "speculation or conjecture," but I don't consider that a sin. A responsible thesis advisor often suggests that a promising student test a theory. Nothing wrong with that.

In any event, I think theories (or hypotheses or whatever) are often best considered as points in a process of successive approximation: each point in the process should explain more facts in a more elegant and logically simpler fashion than its predecessor. In my opinion, Mr. Den Beste's theories (or whatever) are like that - they explain some facts, but not others - but they might be a good starting point for a successor theory that transcends the limitations of his work.

But I also think that these theories are gaining more currency than justified by the facts they explain or the elegance of the reasoning. Worse, that may be happening because of emotional anti-German and anti-French sentiment - although I consider neither of Messrs. Den Beste or Taranto as advancing such error or of irrational anti-German and anti-French sentiment. Anti-German and anti-French sentiment is growing in intensity, and some (in my opinion) is justified. But such sentiments cannot justify losing one's clarity of thought where that is avoidable, especially in a democratic political context.

But then there is the observable fact that Mr. Den Beste won't refer to me by pseudonym - requiring me to take recourse to bracketed insertions to identify my own reference! How nice is that?

UPDATE: Some things are already getting more overt.
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Flaming Atrioid Strikes Capital Of Krugmania!

A toofer for Maguire.

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Thursday, March 13, 2003


Trending Away

This just in (thanks to Croooow Blog):

Jewish groups have gotten a pretty clear view of the courage their longtime Democratic friends have exhibited over Rep. Jim Moran's anti-Semitic comments. According to a staffer for the American Israel Public Affairs Committee, it and several other groups, including the American Jewish Congress and the American Jewish Committee, had pressed hard for such senators as John Edwards, John Kerry, Tom Daschle, Edward Kennedy and Barbara Boxer to come out hard and loud against Moran.

"They wanted Moran to hear it from everywhere on the Hill," says the AIPAC staffer. "But we're shocked by the silence over the past few days."

Edwards, among others, has put out press releases expressing dismay and displeasure over Moran's comments. But with the exception of Daschle, who was asked about Moran at a press conference set up for to discuss another issue, few Democrats have been out front on the Moran comments the way they were after Trent Lott's comments last December.

"It's a disappointment," says the AIPAC staffer. "We expected better of the Democrats, many of whom we've strongly supported in the past. They should know that we do remember these kinds of things."


The Democrats really seem to think that the American Jewish community is not going to understand what has been happening in the loathesome Moran matter.

How stupid is that?

UPDATE: Better late than never, the mainstream press reacts and Moran, more-or-less, leaves.

But it all seems like pulling teeth from a cat.

Again, links from Crooow Blog.
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Two Atrioids Came Screaming Across The Sky ...

... and crashed in a sulfurous mess.

Or, rather, they were brought down by Steve Verdon, who shows that the busy, busy, busy Mr. Atrios is apparently saving time by no longer reading the articles to which Atrios links.

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Wednesday, March 12, 2003


Mr. Market: Moats And Castles

Writing to the Berkshire-Hathaway shareholders, Warren Buffet asserts:

Both Coke and Gillette have actually increased their worldwide shares of market in recent years. The might of their brand names, the attributes of their products, and the strength of their distribution systems give them an enormous competitive advantage, setting up a protective moat around their economic castles. The average company, in contrast, does battle daily without any such means of protection. As Peter Lynch says, stocks of companies selling commodity-like products should come with a warning label: "Competition may prove hazardous to human wealth."

Actually, competition is essential to the maintenance of human wealth - but it does erode the profit margins of individual, un-moated economic competitors.

That's quite an emphasis on moats or what an anti-trust economist, lawyer or regulator would call barriers to entry. As noted previously, Berkshire-Hathaway is generally said to deploy its resources into insurance and "brands." Having raised the issue of the need to avoid the principle that "competition may prove hazardous to human wealth," surely Mr. Buffett is at least as concerned to maintain "moats" to protect both of Berkshire-Hathaway's insurance and non-insurance castles.

So what's the "moat" that protects Berkshire-Hathaway's insurance business from competition eroding its profit margins? One searches the cumulative Buffett/shareholder correspondence in vain for the moats. One finds many paeans to Berkshire-Hathaway's great "float," its sound financial condition, its marvelous management, its cagey evaluations of risks. But no moats.

Is there a clue to Berkshire-Hathaway's insurance business moats in this year's letter from Mr. Buffett to the Berkshire-Hathaway shareholders? In that letter we find that Berkshire-Hathaway's largest non-insurance source of revenue is a commodity company. A natural gas pipeline company, to be exact - and one which for which Berkshire-Hathaway has little voting control:

Berkshire also made some important acquisitions last year through MidAmerican Energy Holdings (MEHC), a company in which our equity interest is 80.2%. Because the Public Utility Holding Company Act (PUHCA) limits us to 9.9% voting control, however, we are unable to fully consolidate MEHC’s financial statements. Despite the voting-control limitation – and the somewhat strange capital structure at MEHC it has engendered – the company is a key part of Berkshire. Already it has $18 billion of assets and delivers our largest stream of non-insurance earnings. It could well grow to be huge. Last year MEHC acquired two important gas pipelines. The first, Kern River, extends from Southwest Wyoming to Southern California. This line moves about 900 million cubic feet of gas a day and is undergoing a $1.2 billion expansion that will double throughput by this fall. At that point, the line will carry enough gas to generate electricity for ten million homes. The second acquisition, Northern Natural Gas, is a 16,600 mile line extending from the Southwest to a wide range of Midwestern locations. This purchase completes a corporate odyssey of particular interest to Omahans. From its beginnings in the 1930s, Northern Natural was one of Omaha’s premier businesses, run by CEOs who regularly distinguished themselves as community leaders. Then, in July, 1985, the company – which in 1980 had been renamed InterNorth – merged with Houston Natural Gas, a business less than half its size. The companies announced that the enlarged operation would be headquartered in Omaha, with InterNorth’s CEO continuing in that job. Within a year, those promises were broken. By then, the former CEO of Houston Natural had taken over the top job at InterNorth, the company had been renamed, and the headquarters had been moved to Houston. These switches were orchestrated by the new CEO – Ken Lay – and the name he chose was Enron. Fast forward 15 years to late 2001. Enron ran into the troubles we’ve heard so much about and borrowed money from Dynegy, putting up the Northern Natural pipeline operation as collateral. The two companies quickly had a falling out, and the pipeline’s ownership moved to Dynegy. That company, in turn, soon encountered severe financial problems of its own. MEHC received a call on Friday, July 26, from Dynegy, which was looking for a quick and certain cash sale of the pipeline. Dynegy phoned the right party: On July 29, we signed a contract, and shortly thereafter Northern Natural returned home.

When 2001 began, Charlie and I had no idea that Berkshire would be moving into the pipeline business. But upon completion of the Kern River expansion, MEHC will transport about 8% of all gas used in the U.S.


Again missing from this benevolent discussion of MEHC's prospects is any discussion of how a company largely in the business of transporting a commodity plans to maintain the kind of profit margin that Mr. Buffet and his shareholders expects (MEHC also owns a significant residential real estate business, whose description I have not included). But there is one thing insurance and natural gas pipeline companies have in common: they are subject to many layers of regulation and service markets in which competition is low because of political considerations. And there is little dispute among economists that a major source of barriers to entry is regulation.

Could it be that Mr. Buffet's insurance and gas pipeline revenues depend on Berkshire Hathaway being able to continue to overcharge customers relative to an efficient, competitive market, and therefore on Mr. Buffett's and Berkshire Hathaway’s political influence? Of course, insurance and gas pipeline markets can be made efficient, or close to it. But would one expect Mr. Buffett and Berkshire-Hathaway will favor or disfavor regulatory reforms that would tend to make markets efficient? How about in California, for example, a major area served by Mr. Buffett's new pipeline?

What would a dependency on supra-competitive profits do to one's understanding of what one commentator has called "Warren Buffett's growing network, a formidable collection of corporate heads, financiers, money managers and celebrities, ... profitable connections that have been one key to Mr. Buffett's success." The comments continue:

The innermost circle ... now numbers almost 60, [and] gets together once every two years for a retreat led by Mr. Buffett. .... The conclaves ... fall somewhere between group therapy and a huge board meeting of "Buffett Inc." .... With corporate competitors and independent investors getting together, the sessions could raise antitrust or other tricky issues. But "no one wants to talk about things that could be a possible problem," says Mr. Tisch. "They won't do that. These people are too smart."

Still, Mr. [Bill] Gates, a first-time retreat guest this year, tells of a cruise around Victoria's inner harbor where he says Mr. Tisch, Mr. Buffett and Mr. Murphy talked at length about "issues of price and valuation in media." Among other things, Mr. Gates says, "they were talking about where ad rates are going, and where they should be."

Legal experts consider such conversations "a gray area of antitrust," says Garth Saloner, an antitrust specialist at Stanford University's Graduate School of Business. "To prosecute that kind of thing, you need to show they agreed, whether explicitly or implicitly, to some course of action. That's hard to prove."
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Krugmania Explained!

Prompted by Mickey Kaus' puzzlement at the most recent Krugmania efflorescence, Brad DeLong accomplishes the seemingly impossible task of scribing a post simultaneously stilted, acrobatic, and hilarious. All that in the service of "explaining" Paul Krugman's bizarre concern that the Administration is plunging the nation into both deflation and inflation. Ah, yes.

The Good Professor intones:

Mickey Kaus is puzzled because he doesn't get the fact that that the two different problems that worry Krugman (and me!) operate at different time scales. One--possible deflation--is a problem for the next three years. The second--possible inflation--is a problem that may begin to threaten the country starting at the soonest a decade hence, but not until then.

Poor Mickey - he just "doesn't get" it. Now, one should also keep in mind that the Good Professor is writing to explain a column by Herr Doktorprofessor revolving around his just having refinanced his mortgage to lock in a new low fixed interest rate (but a rate higher than his old variable rate mortgage). That is, the Good Professor is "explaining" that Herr Doktorprofessor rushed right down to his mortgage broker to lock in a rate rather than risk exposure to a long-term interest rate surge triggered by expectations of an inflation that may (or may not) happen, in the Good Professor DeLong's words, "starting at the soonest a decade hence, but not until then." Yes, indeed, Paul Krugman is just terrified that the financial markets might "wake up" to his neurotic fear (shared by Professor DeLong!) that federal governments ten years out will start to act like the guys who run Argentina! Not just an academic concern, mind you, but a terrifying fear that prompts a mortgage refinancing. One needs a lot of academics in one's head to come up with those particular fears and explanations.

But, contrary to Good Professor DeLong's "explanation," Herr Doktorprofessor Krugman makes it pretty clear that he expects the surge in long-term interest rates triggered by expectations of future inflation to commence within a matter of months, maybe even TOMORROW: It means higher monthly payments, but I'm terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits. .... With the economy stalling and the stock market plunging, short-term rates are probably headed down, not up, in the next few months, and mortgage rates may not have hit bottom yet. But unless we slide into Japanese-style deflation [Note to Prof. DeLong: Is this "less-than-3-year deflation" or full "Japanese style 10-year-plus deflation" that Prof. Krugman thinks we may "slide into?" Is the point that the demand for long term credit may drop so low that even fears of long term inflation won't drive up the price (interest rate) of such credit?], there are much higher interest rates in our future. ... I've done the math, and reached my own conclusions — and I've locked in my rate. And let's not forget that this is the same Herr Doktorprofessor Krugman who uses the term "no relief is in sight" to describe relief that will likely occur within a year or so. [And even with that grudging acknowledgement that mortgage rates may not have hit bottom, this has got to hurt.]

Also, Herr Doktorprofessor Krugman's old, variable interest-rate mortage would have been keyed to short term rates - which do not reflect market concerns about inflation beginning far in the future, although short-term rates do increase when inflation actually increases or the market fears an uptick in inflation in the near term. But the Good Professor explains that none of those things that affect short term rates will happen for at least ten years, So if that old Herr Doktorprofessor mortage hadn't been paid off, it's interest rate would have stayed low for at least 10 years. If Herr Doktorprofessor is right and the "market wakes up" to the risk of future inflation, then long term rates will rise. But - assuming Herr Doktorprofessor is right and the market keeps proving that he is right for the next ten years - is it not likely that in the face of ten years of destructively high long term interest rates the federal government would itself wake up and do something about them, such as cutting federal spending or reducing regulatory drag? But Herr Doktorprofessor Krugman would rather contract to pay a higher interest rate for 10 years than bet that the United States would fix a severe long-term interest rate problem in that period. All because he's done the math. I wonder if he'll share what math it is that one "does" to determine by algebra that the federal government will likely become disfunctional for more than 10 years.

With friends like the Good Professor to "explain" his writing, why would Herr Doktorprofessor Krugman need critics like the Krugman Truth Squad and various Krugman Watchers to humiliate him? On the other hand, the rest of us can be thankful that Don Luskin does such a good and gleeful job of it. And Paul Jaminet of Brothers Judd points out that the Krugman/Delong approach gives a new meaning to the term "excluded middle."

UPDATE: Tom Maguire reminds me by e-mail that Herr Doktorprofessor Krugman has also recently been terrified about the bursting of a possible real estate bubble! I just want to go on record that it is my firm conviction that unless we slide into Japanese-style real estate deflation, there are much higher real estate prices in our future! There. Surely that cleared things up.

In the mean time, should a man (excuse me, not just a man, a full Princeton economics professor and John Bates Clark medal winner) who just gave up ten years of cheap variable-rate mortgage payments to guard against possible inflationary federal acts at the end of that period seriously think about what he needs to do to avoid the fallout from the bursting of that real estate bubble? Say, by moving onto a boat right away?

Do the math, Herr Doktorprofessor - and lock in your slip fees!

MORE:The ceaseless extrusion of economic/political agitprop has begun to bore the great mind of Herr Doktorprofessor and he has recently begun to spice things up by flinging racial slurs, as Jim Miller points out. Yes, yes, this particular piece of Krugmania is beneath contempt, but reading the column and Jim's take down is a guilty pleasure. If it's not quite up there with back-to-back Buffy reruns, it's certainly on par with filling the celery groove with peanut butter and chowing down!

STILL MORE: From Hoy.
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Preliminary Findings Are That Plymouth Rock Lands On SEC

The Man Without Qualities has been skeptical of the new Securities and Exchange Comission (SEC) requirment that the Chief Executive Officer and Chief Financial Office of large public companies personally certify the company's securities filings under oath penalty of perjury. The media balleyhooed the significance of this new rule. It has been and continues to be my belief that if the new rule has effects at all they will mostly be perverse. Now arrives a note from Max Power drawing my attention to an interesting article which suggests that the new rule has had no effect. That is, indications so far are that the market is "perfect" enough to drop a rock on the regulators:

On June 27, 2002, the Securities and Exchange Commission of the United States ordered the CEOs and CFOs of 688 large firms to certify the earnings numbers of their companies by 5:30 PM EST, August 14, 2002. Our paper finds that certification was not only a non-event for the certifiers around their certification date, but it was also a non-event for the non-certifiers around August 15, 2002. There could be a number of reasons why this occurred. Cross-sectional and time-series evidence, however, supports just one hypothesis: the market had separated firms with good earnings transparency from firms with bad earnings transparency before the SEC order of June 27, 2002. The SEC order did not help, but neither did it hinder, the market's ability to differentiate further between these two types of firms.
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Who Knew?

InstaPundit links to this interesting Amiland post as more support for the Den Beste theory that Germany and France are trying to block war in order to cover up the extent of their support.

I fully agree that the Die Welt story that Amiland cites about Germany's recent and extensive business connections with terrorist supporting states is damning, and probably includes information new to the news media.

But that is far from constituting support for the Den Beste theory, which is almost certainly entirely wrong and - to the extent it gains currency - will probably prove to be a significant embarrassment to the pro-liberationist movement. The German/Iraq business connections described in the article are textbook examples of the kind of transactions American and British intelligence analysts track before breakfast every day. That these deals weren't recorded by Germany's Federal Statistical Office - as Amiland notes - would not keep them from the notice of the CIA.

Because US intelligence almost certainly knew about these deals from their inceptions, both Iraq and the US are in a position to blackmail the Germans with these deals. It would be far easier for the French and Germans to reach agreement with the United States to keep these and similar deals secret in exchange for tacit consent to an invasion - or at least for American cooperation is denying the significance of the German/French/Iraqi transactions - than for the Europeans to block the invasion and/or risk the United States revealing the whole mess.

Some of Den Beste's thoughts on Russian motivation are also probably seriously off track:

The Russian position has always been frankly self-interested. They don't pretend to be an ally of ours, but they will cooperate with us when it seems to be in their own interest to do so. I don't mind that, which is why I'm not particularly scandalized or upset that Russia is opposing the war. Russia still hopes to collect on debts from the Soviet period for weapons shipped on credit, and also hopes to take advantage of certain deals made with Saddam for future trade, and they make no bones about it.

Neither the Man Without Qualities nor the world as a whole has any particular problem with nations taking positions that are "frankly self-interested." But, again, it would be a lot easier for the Russians to reach an understanding with the Americans to preserve existing Russian/Iraq deals - including Iraqi obligations to repay their debt to Russia - than to assume the risks inherent in their current position of supporing France and obstructing the US.

If the Russians have economic concerns about a US invasion of Iraq, they would more likely center around what happens to the value of Russian oil reserves if the Iraqi oil fields are brought into full production and the sanctions limiting the sale of Iraqi oil are lifted following the installation of a new Iraqi government. The loss to Russia from those developments would probably dwarf the Iraq/Russian debt.

The French and Germans and even the Russians are creating problems. The first step in solving a problem is frankly understanding what it really is. In my opinion, the Den Beste theories are not that.

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Welcome InstaPundit readers. Link apparently due to intercession of Mike Daley.

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Tuesday, March 11, 2003


The Senator's Excess

Senator John Kerry famously informed us: "The greatest position of strength is by exercising the best judgement in the pursuit of diplomacy, not in some trumped-up, so-called coalition of the bribed, the coerced, the bought and the extorted, but in a genuine coalition."

That approach apparently did not go over as well as the Senator hoped, since we now learn:

Senator John F. Kerry of Massachusetts, who voted to authorize military action but has accused President Bush of rushing into war, said he will cease his complaints once the shooting starts. ''It's what you owe the troops,'' said a statement from Kerry, a Navy veteran of the Vietnam War. ''I remember being one of those guys and reading news reports from home. If America is at war, I won't speak a word without measuring how it'll sound to the guys doing the fighting when they're listening to their radios in the desert.''

But I wonder if someone drew his attention to this Heritage Foundation summary of economic links between Iraq and France, Germany, Russia, and China, as an astute reader did for the Man Without Qualities. Perusing the Heritage Foundation report certainly does help clarify where the financial incentives lie for the "follow the money" enthusiasts. Following the advice of an earlier, sharper resident of his state, Senator Kerry might want to count the spoons even faster now that Mr. Chirac has been driven to loudly describing his obstructionism as a matter of "fundamentals" approximating honor.












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