I attended a lecture this past Friday night at the University of New Hampshire. The event was sponsored by the Young Americans for Liberty, a well-organized group of young people who care deeply about America and welcome all points of view. Their spokesman, John Jones, set a positive tone in his introductory remarks by pointing out that they are less interested in partisan bickering and more interested in exchanging ideas in a “non-hostile environment” (his description). I imagine they would welcome Ann Coulter just as much as they would welcome Michael Moore, without name-calling or discourteous heckling. They are also a group doing their best to practice what they preach by struggling to pay for their own events instead of dipping into the university’s student activities funds. “Why should other students have to pay for our events,” said John. In my book, that is commendable.

On to the main event…

The keynote speaker of the evening was Dr. Tom Woods (B.A., Harvard – Ph.D., Columbia), Senior Fellow at the Ludwig von Mises Institute and author of the NY Times bestseller and smash hit Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse. (Tom also penned The Politically Incorrect Guide to American History, a book I have used as an educator and highly recommend). The topic of the evening was similar to the tagline of Meltdown – that excessive government intervention in our markets caused our current economic woes and government “solutions” to the crisis will likely make things worse. But don’t let the topic fool you, this was not a political talk where all of the blame was placed on either the Democrats or Republicans. According to the Austrian School of Economics (where Tom’s economic philosophy comes from) – both parties consistently fail us.

How do they fail us economically? There are too many ways to count. However, one of the strongest examples given in the lecture was the manipulation of interest rates by the Federal Reserve. Basically, interest rates are supposed to fluctuate according to how much money Americans save. When we save a lot, interest rates are driven down because the banks have more money to lend. When we don’t save a lot, interest rates are higher because banks have less money to lend. Pretty simple, right? And yet we have a central banking system in which the Chairman of the Federal Reserve (Currently Ben Bernanke – seen here on the left giving us all the bird) dictates those rates to every bank in the America. Couple that with other government interference in the market, under seemingly innocuous names like “fair lending”, and you have the perfect storm – “cheap money” for people who normally wouldn’t qualify to open a tab at their local watering hole.

Austrian Economic theory is not difficult to understand. On the contrary, scholars like Tom take what are typically difficult subjects and break them down so they are easy to understand. This is in sharp contrast to Keynesian economists who typically take topics that could be easily understood, toss in a few mind-numbing algorithms, and muddy the waters with unnecessary, esoteric jargon in an attempt to convince the rest of us that they alone are intelligent enough to make policy. And here we are in the deepest recession in a century. Thanks guys!

Tom’s books are fun to read and easily digested. But his lectures (there are several on YouTube) are even more fun. He’s a gifted speaker who entertains while he educates. He even managed to squeeze in an obscure Jethro Tull reference that I’m sure flew over the heads of most of the undergrads in attendance. Afterward, he signed books and chatted graciously with those in attendance, including my wife and I.

Sidenote: I’d be remiss if I didn’t mention the first speaker of the evening, Scott Horton of Antiwar Radio. He spoke for about a half hour before introducing Tom and his words represented a bitter pill that took me the better part of the last decade to swallow (to put it lightly). However, once that pill slowly makes its way down your throat (scraping and cutting like a razor blade the whole way), foreign policy, national security and the “War on Terrorism” become more clear. Scott talks about things that are not easy to talk about and I admire his guts. Mindless flag waving and chest-beating are easy. Painful self-reflection of our collective history is not.

Comments and criticism are welcome.

The current economic crisis/recession/depression (whatever it is) has sparked endless debate in both the main stream media and the blogosphere. Whose fault is it? Who should have seen it coming? What should have been done to avoid it? And what should we be doing to fix it? There are lots of questions, very few answers, and a glut of “experts” who can’t seem to agree on anything. In the midst of all this confusion one thing is for certain – people are furious and nothing fans the flames of their anger better than a little cheap populism. In short, it’s not a very popular time to be wealthy in America.

Time magazine published a scathing piece on financial network CNBC this week. James Poniewozik writes:

To watch CNBC today is to enter an alternative universe, where élites are populists, Wall Street is Main Street and bank executives are the oppressed…

CNBC’s reaction is colored by its stressed-out day trader’s focus on the short term. When ordinary people think about the economy, they think about jobs, college, retirement. Sure, the stock market affects them in the long run — but so do job security and the threat of getting wiped out by health-care bills. When CNBC considers the economy, it means Wall Street’s numbers that day, that hour, that minute. CNBC may pay lip service to the long term, but it has the time horizon of a fruit fly.

This means that CNBC looks at everything, particularly politics, in terms of how it will affect “the Market.” The commentators on CNBC murmur about the Market as if it were the Island on Lost: a mystic force that must be placated, lest it become angry and punish us. “The Market doesn’t like …” “What the Market wants to see is …”

Remember when it was cool to work in the financial sector?

Enter Bernie Madoff

There is perhaps no better icon of the financial meltdown that Bernie Madoff who pleaded guilty yesterday to 11 charges ranging from financial fraud to perjury. He faces 150 years in prison for his crimes. The Economist reports:

The fraud he masterminded was remarkable for its scale, longevity and the sophistication of its victims: hedge-fund founders, Swiss banks and movie moguls, as well as charities and small investors, some of whom put in their life savings. The charge sheet confirms that he ran a Ponzi scheme of unprecedented boldness, dating at least as far back as the 1980s. Mr Madoff claimed to achieve healthy, stable returns through a whizzy stock- and options-trading strategy. In reality, there was no trading for well over a decade. Money from new investors was used to cover redemptions for old ones.

Mr Madoff’s guilty plea is especially anticlimactic because he has apparently refused to co-operate with investigators, leaving many a loose thread.

So, Madoff decides to plead guilty and will likely spend the rest of his life in prison. More than likely he will live out his final days in a minimum security facility although officials insist his plea was not part of any deal. Really? And what about his accomplices? Either Madoff had the dumbest people in the world working for him or they were in on it. Unfortunately, since he pleaded guilty we may never know. This brings me to my question for the week.

Is life in prison enough? Madoff knowingly ruined countless lives and plunged entire organizations (including charities) into bankruptcy. Shouldn’t he be forced to suffer more than merely living out his few final years (he is 70 years old) watching TV, reading books, and receiving the occasional visitor? In fact, isn’t that what old people do anyway!!!???

Question: Madoff will be sentenced in the beginning of June. If you were the judge, how would you sentence him? Be creative and try to keep it clean.

To book me for a lecture or debate go here.

I haven’t answered emails (at least not publicly) in a long time. Here are two that I recently received but hadn’t replied to yet. Comments and criticism are always welcome.

“You haven’t said ‘boo’ about the bailouts of the financial and auto sectors.”

Actually, I have. But let me reiterate my position in case I haven’t been clear. I am absolutely 100% against any bailouts of any kind. This is not the way capitalism and free markets are supposed to work. We don’t privatize profits only to socialize the losses when they become too big. On a side note – the $700 billion given to the financial sector turned my stomach, but the completely different treatment of the automotive industry (for a fraction of the money) makes me want to vomit. Bruce Raynor summed it up nicely in the LA Times:

When one compares how the auto industry and the financial sector are being treated by Congress, the double standard is staggering. In the financial sector, employee compensation makes up a huge percentage of costs. According to the New York state comptroller, it accounted for more than 60% of 2007 revenues for the seven largest financial firms in New York.

At Goldman Sachs, for example, employee compensation made up 71% of total operating expenses in 2007. In the auto industry, by contrast, autoworker compensation makes up less than 10% of the cost of manufacturing a car. Hundreds of billions were given to the financial-services industry with barely a question about compensation; the auto bailout, however, was sunk on this issue alone.

Would doing nothing cause mass unemployment and financial hardship for countless numbers of people? Yes, but I’d be willing to bet it wouldn’t be as bad as the pundits say. If Americans are the finest, most skilled, educated workers in the world they’ll find a way through it. Ironically, we all know what that letting businesses fail is the right thing to do for the markets in the long run (“for the children” to steal a phrase from Bill Clinton). We just don’t want to take the pain.

Try looking at it this way – we’ve never been asked to sacrifice. “The Greatest Generation” marched off to the battlefields of World War II in Europe knowing that many of them would not come back. But they did it anyway. They did it for their children and future grandchildren. They did it because they knew that freedom and democracy were in jeopardy and need to be saved through personal sacrifice. The entire country (even those who didn’t physically ship-out) made sacrifices and joined the effort for the greater good. What do we do? We put our children and grandchildren into deep, insurmountable debt while demanding that the government “make it all better” for us. We’re soft. We’re too accustomed to our bonuses, inflated stock options, and golden parachutes. It’s time to let the market correct itself and make some very painful personal sacrifices – not on the battlefields of Europe – right here in our own streets.

“When you move back to the states will you stop bashing the DR?”

No. Why would I? I have many permanent connections to the Dominican Republic which give me a vested interest in its future. If anything, you can expect more unfiltered criticism. Yes, I’ve been censoring myself a bit because this ain’t Kansas when it comes to free speech and criticizing the church or government. In addition, as a high school teacher there are some subjects that I didn’t feel comfortable blogging about. That will no longer be the case.

Living here for six years has been an absolutely fantastic experience. I learned some Spanish, experienced life as a foreigner/immigrant (an interesting perspective), learned about different perspectives on the world and my own country (sometimes painful perspectives), met and worked with some great people, and got married. However, at the end of the day, living in the developing world has given me a greater appreciation for the greatness of the United States. With all of its faults it’s still the greatest country on earth. Why else would so many risk their lives to get there? The video below is a graphic representation of American immigration between 1820 and 2007. Each dot represents 100 people. I’ll be one of them very soon.

See you next week.

Immigration to the US, 1820-2007 v2 from Ian Stevenson on Vimeo

Where the candidates’ positions are more clearly articulated, Mr Obama scores better on nearly every issue: promoting fiscal discipline, energy policy, reducing the number of people without health insurance, controlling health-care costs, reforming financial regulation and boosting long-run economic growth. Twice as many economists think Mr McCain’s plan would be bad or very bad for long-run growth as Mr Obama’s. Given how much focus Mr McCain has put on his plan’s benefits for growth, this last is quite a repudiation.

Interestingly, the Economists overwhelming (81%) said they had more confidence in Obama’s willingness to tap experts and choose qualified advisors than McCain’s. Remember, McCain is the commander-in-chief-wannabee who isn’t sure if he’d sit down with the Prime Minister of Spain.

Is the fat lady warming up?

RHM

Thomas Sowell, one of my favorite economists, recently declared that “markets readjust themselves for a reason. That reason is that people pay a price for their misjudgments and mistakes”. I think that argument goes a long way when trying to describe what’s going on in American politics in 2008. Strange things are happening. The Democratic presidential candidate will be either a woman or a black man. White people from both parties are voting for the black man in droves. Rudy Giuliani’s September 11th chest pounding earned him an early exit from the race. John McCain, a very liberal republican any way you cut it, has still managed to become his party’s main candidate. Could that signal a major change in republican values? Strange things are indeed happening.

Major political market corrections only happen every few decades. The 60’s brought JFK, Reagan brought us the 80’s, and Obama is the leading indicator to watch in this 2008 correction. Never have the president and congress had such pathetic approval numbers, 30% and 22% respectively. This is akin to buying stocks at $100 and watching them fall to $30 and $22. It’s time to cut losses and invest elsewhere with our votes.

There is absolutely no doubt that imperialism has played a role in the DR’s history and accounts for at least some of the causes of its current state of development. Spanish and French colonizers exterminated the native Taino Indians and exploited much of the natural resources. The country was twice invaded by the United States. The most recent interference of 1965 ousted the progressive intellectual and grandfather of modern Dominican politics Juan Bosch (he founded the two major parties, the PLD and the PRD) only to replace him with Joaquin Balaguer (the iron-fisted former right hand of the brutal dictator Generalisimo Rafael Trujillo.) Balaguer’s subsequent administrations were marked by oppression of any political opposition and a general repression of civil liberties. It makes one wonder what the country would be like if Juan Bosch would have been in Balaguer’s shoes for all of those years.

Having said all of that, it is still only part of the story. And it’s the part that nobody can do anything about because it is all water under the bridge. Furthermore, it doesn’t fully answer the question as to why the country is still in a perpetual state of development in 2008. Can we really say that the reason only one in ten Dominicans graduates from high school is because of Christopher Columbus? Or that the reason the government is rife with clientelism and corruption is because the U.S. occupied the country several times in the 1900’s? Is it the United Nations’ and the World Trade Organization’s fault that the country’s infrastructure has been on the verge of collapse? Can we go on blaming “afuera” or “los Gringos” for all of our woes and expect things to get better?

Those are the questions I’ll do my best to answer tomorrow. The lack of basic education, culture of corruption, and absence of political will to prioritize how to spend its limited resources are what’s killing the country. And it can’t go on like this forever.

Sidenote: Lest I be accused once again of bashing the DR unfairly, I’ll be the first to say that American public education is nothing to brag about, we have tons of corruption in our government and we spend our resources like a drunken sailor on payday. And all three of those things are entirely our own fault. See? No double standard.