Mark Steyn On Katrina

Over the past few days, I have read a lot of the great coverage of what's happening down in New Orleans. I have found that there has been so much written, that I really didn't have much to bring to the table. However, what I did find interesting, is how Mark Steyn once again looks at the situation and really distills a whole brew of issue into its basic absurdity:

After Sept. 11, many people who should have known better argued that it was somehow a vindication of government.

"One of the things that's changed so much since Sept. 11," agreed Vice President Dick Cheney, "is the extent to which people do trust the government -- big shift -- and value it, and have high expectations for what we can do."

Hard to see why he'd say that. Sept. 11 was an appalling comprehensive failure of just about every relevant federal agency. The only government that worked that day was local and state: The great defining image, redeeming American honor at a moment of national humiliation, is those brave New York firemen pounding up the stairs of the World Trade Center. What consolations can be drawn from the lopsided tango between slapdash bureaucrats and subhuman predators in New Orleans?

To be fair, next door, Gov. Haley Barbour of Mississippi has been the Giuliani of the hour, and there are many tales of great courage, like the teams from the Children's Hospital of Alabama who've been helicoptering in to New Orleans to rescue newborn babies.

The comparison with Sept. 11 isn't exact, but it's fair to this extent: Katrina was the biggest disaster on American soil since that day provoked the total overhaul of the system and the devotion of billions of dollars and the finest minds in the nation to the prioritizing of homeland security. It was, thus, the first major test of the post-9/11 structures. Happy with the results?

Well, that is the crux of things now when we look at the response overall? The closer the government is to the people, the more responsive it is. Perhaps the answer is shrinking the federal government even more rather than throwing money at it?

T-Shirt of the day

It says "Alcohol Tobacco and Firearms: should be a convenience store, not a government agency"

Available at Those Shirts I have the "celebrate diversity" one from them.

Quote Tag

I've been tagged by CharLeBois over at the Highway 401 Blog to pick my favourite quotes, so here we go:

"If it flys, floats, or f**ks, rent it" - P.J. O'Rourke

"Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place" - Frederic Bastiat


Now I'm going to tag Eli, Lebowski, Russ, and Jessica Lovejoy.

PS (8/25/05) - I can't believe I forgot these classics:

"F**k that s**t man, Pabst Blue Ribbon!" - Frank (Dennis Hopper), from Blue Velvet

"F**king Chrysler plant, here I come!" - Slapshot

The prudent bear

For those who want more information on the credit markets, The Prudent Bear has some good information

James Grant - More on bonds an current accounts.

I've linked up an article on the U.S. bond market by James Grant of Grant's Interest Rate Observer - an invaluable resource. It ties in with the article below.

Another great one is an explanation of the current accounts system titled "The current account for stock jockeys"

Both are great resoucres, and will offer a lot of insight into the world of interest rates, money and international banking.

Looming banking crisis in China

Tip of the hat to the esteemed Kate at small dead animals.

This is part of my larger point about the American economy being susecptible to recession. James Grant, of Grant's Interest Rate Observer pointed out on several occasions what is happening with China and U.S. current accounts deficit. Grant has noted that the U.S. buys billions in Chinese made goods, tangible property, in return for U.S. paper in the form of dollars and Treasuries. This only works for as long as the Chinese accept U.S. paper. Prior to 1971, the Chinese could theoretically ask for payment in gold to the tune of $35/oz. Now it's a fiat currency, and the U.S. economy will only continue to chug along as long as the Asian central banks accept U.S. dollars in trade.

What would happend if this was not the case would be a monumental spike in interest rates and a sudden spike in inflation, as well as disruption to the money supply. What this indicates is that the Federal Resevse only has de jure control over U.S. monetary policy. It is there colleagues in China, Taiwan, Korea, and Japan that have de facto control.

At least with a gold standard, I think it wouldn't have gotten to this.

Bush's immigration nonsense

Generally I'm a supporter of President Bush, but when he talks about creating a 'guest worker' program and an amesty for illegals - I start fuming. Such a program is patently unfair, threatens national security, and encourages more illegal immigration.

I'm an immigrant to this great country, albeit not a permanent resident. I had to go through all the hoops and red tape, and what not just to get here. If I wanted to get permanent residency, I'd have even more hassles, which would take years going through the byzantine maze of INS regulations.

So, know what Bush is telling us is that if you're here illegally, you jump to the front of the line and get a green card, no questions asked. Gee, that makes me feel good. I should change my name to Miguel Sanchez, stay after my visa expires to become an illegal, and get in under the amnesty.

The worst part about this is that I think that this will have a negligible impact on the GOP's Hispanic vote. I would bet that a large number of Hispanic voters who came here though the proper channels would be ticked to find out that they're letting in the people who cheated first.

Finally, the GOP will suffer immeasurably as a result of this. Many conservatives and mainstream Americans have immigration and the need to control the borders near the top of their concerns, and the party ignores them at their peril.

What needs to be done before any of this guest worker nonsense is fourfold:

1. Beef up border security to prevent illegals from entering the country.
2. Bring in laws that severely punish companies for using illegal aliens as labour.
3. Have local law enforcement check the immigration status of all suspects arrested, if they are here illegally - the INS must deport them within 72 hours
4. Refom the process of immigration into the country. Clarify the criteria of who qualifies, and have an answer for them promptly - like 90 days. There is no reason for the confusion that is presently the INS where it can take years to determine whether one can immigrate into the U.S. or not.

The sad part is that neither political party has any stomach for this. As Pat Buchanan once said, "The Democats see illegals as potential Democratic voters. The Republicans see illegals as a source of cheap labor."

Mortgage interest deductibility

Garth Turner has made a case for Canada introducing a mortgage interest deduction into the Canadian Income Tax Act. I have voiced my skepticism on this matter based on my experiences doing individual tax returns here in the U.S., where one can deduct mortgage interest and property taxes, and based on the history of unintended consequences of targeted tax programs on the economy.

Here are my obsverations:

• The vast majority of income tax filers in the U.S. do not have sufficient mortgage interest to itemize their deductions rather than use the standard deduction. The majority of 1040 filers can not take advantage of this.
• The deductibility of mortgage interest lowers the cost of capital, and inflates housing prices by increasing the amount of financing buyers can obtain given a certain costs.
• Tax measures like this have unintended consequences. When president Reagan brought in tax reform in 1982, one of the stimulus packages was to lower the depreciable lives of property from 40 to 19 years. This created a boom in commercial and residential rental construction - and is one of the prime causes of the 1990's real estate bubble.
• Finally, once you bring in targeted tax cuts, you open up the Pandora's box and every little thing the electorate wants becomes a deduction or what not. This is why the 1040's in the U.S have become increasingly complex.

My solution for Canada - slash personal rates across the board (heck - if it starves the government, so much the better!) and have large personal exemptions. If I was doing it here, I would get rid of almost all the itemized deductions and up the standard deduction for a married couple from $9,750 to $30,000 (that would take off a large portion of taxpayers of the tax rolls, and the rich folks would be paying at a higher effective rate because they lose all sorts of deductions and not get dinged with AMT). Something like that would do more to help ease the cost of home ownership and spur the economy than a targeted deduction.

Detroit - Taxed and regulated to ruin. A cautionary tale.

The fine people of the Mackinac Center for Public Policy referred me to these two articles on how taxes and onerous regulation has helped turn Detroit into the utopia that it is today.

The first one is a study on the regulatory regime of Detroit and how it affects small and home based businesses, by Dana Berliner of the Institute of Justice.

The second one is a Mackinac research paper on the affects of taxes on economic prosperity of Michigan local governments.

If one wants to see how to drive a city into the dump - raise taxes and put up tons of red tape! That's a good start - you'll see David Miller in Toronto getting the idea!

The silver lining in high gas prices

Considering how the price of gas is close to $2.50/gallon here in Michigan, and I have a good commute every day, I feel the 'ouch' from this as much as everyone. I'm almost at the point that I wish this war was about oil, and that the U.S. would just get done with it and invade Iran and Saudi Arabia, hand it over to ExxonMobil, and open the spigots for $1/gallon gas.

But here is the silver lining, albeit long-term, in the short run spike in gasoline prices:

1. This is dampening consumer spending. Not enough to cause a recession, mind you, but enough to temper inflationary pressures.
2. The spike in prices, coupled with interest rates, is cooling off the housing market. This lessens the possibility of a major correction in the housing market, and it is slowly forcing all those folks who took second, third, and forth mortgages on the house for consumer spending to start seriously thinking about deleveraging. The deleveraging the reduction of speculation in the housing market will lower consumption, reduce inflationary pressures, and strengthen the U.S. dollar.

Well, at least I deluded myself into that.