First, let me start off with an analogy. Here's the setup:
Once there was an old man who lived alone on his private property in a remote part of the town. Usually, he would just sit on his back porch, polishing his favorite shotgun.
Then one day, a little girl of about 5 years old happened upon the property. She was picking flowers had wondered in, oblivious to the property line.
The old man decided he wanted to enforce his property, so he took the appropriate actions to get the little girl to leave.
First, he put his shotgun away. Then he walked over to the little girl and politely but firmly asked her to leave.
The little girl ignored him.
What level of force is appropriate for the old man to force the little girl to get off his property?
Is there any point where it is appropriate for the old man to lay hands on the little girl?
I would say the old man is basically stuck. If the little girl continues to ignore him, there is nothing he can do. There is no level of force he himself can personally use on the little girl. He might be justified in yelling at her, but that's probably about it. Maybe he could get his big dog to bark at her, as long as he is able to keep the dog on a leash. But at no point is the old man justified in inflicting pain or bodily harm on the little girl.
Perhaps if the little girl was really a ninja disguised in a dress, maybe the old man would be justified, but that's not the analogy. The intent of the analogy is to illustrate that there is no path imaginable that could lead to a justification for inflicting pain or bodily harm on the little girl.
So here is a video that shows that we are living in a police state:
I bet that "dash-cam" will never surface. It doesn't have to. There is no path imaginable that could lead to a justification for inflicting pain or bodily harm on the granny. There is no mention of weapons, only profanity. Profanity alone qualifies as "being combative" "violence" to the police, which is asinine. But even if she threw her dentures at the officer, there is still no reason for the officer to use the taser.
So remember, these thugs will lash out at you with their pain sticks if you don't comply. If anyone is ever successful in non-compliance, this will undermine the entire system, so there are no exceptions. You are lucky they are only pain sticks, you worm!
It's funny because it's true, right? In addition, since we lack regulation, innocent institutions and individuals who invested in term asset backed securities and other loan facilities will suffer. Therefore, we must bail out AIG, as this news segment asserts:
I would like to suggest that the above assertion is incorrect and that the problem was not that AIG and companies like it took advantage of poor regulations. There were sufficient regulation already in place to prevent fraud. The problem was that there was an excess of credit created by the Federal Reserve System.
So to complete the tainted meat analogy in the comic, imagine the government was in charge of producing the live cattle. They could produce as much or as little cattle as legislators decided. And let us also imagine the government produced as much cattle as possible because they believed our economy depended on it. There was so much cattle, meat packers had to come up with more creative ways to process and sell meat to the US population. If they didn't do something with the government provided cattle, the cattle would die before being processed.
That's silly, right? If the government knew its actions were inefficient, they would scale back their efforts, right? No, instead they berated the market for not producing meat as fast as the government produced cattle.
But the correct thing for the government to do would be to produce less cattle, not berate the free market. Don't breed them as much, don't force them on the meat packers. But instead, the government decides to increase cattle production even more due to the upcoming crisis they caused. More crisis, more cattle.
So the free market, faced with overwhelming supply of their commodity, decide to launch cattle into space, develop enormous cattle boats, or some other "innovative" solution. Eventually, they even figure out how to get the average person to buy cattle so each home has two or three heads of cattle. The president's advise when more crisis hits, "Go on a cattle drive." Eventually. the free market does things with the cattle no one would have ever dreamed of. They deal with the problem with innovation, which is what humans tend to do with problems.
It's a good analogy because at some point, one innovative solution might fall under an "unregulated" area. Then, this unregulated area might result in risk like a tainted food supply like the comic suggests. But the free market would not have tried this unregulated solution if it weren't for the ridiculously overwhelming supply of cattle. The problem was the government. The cattle market was just trying to deal with it.
In the real world, we have an overwhelming supply of something, but it's not cattle. It's credit. I'm not talking about credit cards, although that's pretty bad. I'm talking about credit created by the Federal Reserve System that floods the market.
The market had to take on the credit just like it had to take on the cattle. If they didn't take the credit, they risked being eliminated from the competition or prosecuted by the regulators. If you don't play the US currency game, you are dealt with.
So the credit market created all kinds of innovative solutions, including term asset backed securities and loan facilities to convert the credit into an investments.
It doesn't matter what it is. Cattle, credit, or jaguars, if you overproduce it, the market has to compensate with asset bubbles. The media is blaming the market for the bubbles when the government overproduced the commodity.
So what's the correct answer to the problem of AIG and such? Let them fail but blame the government's credit glut. But of course, the government won't allow it to fail because it means having to admit they caused the problem in the first place. They would rather take over AIG, making the US government the biggest issuer of insurance.
Welcome to the American Dream. We are all insurance brokers now.
In the latest episode of The Sitter Downers, I thought it was interesting that Tom had to come up with a legitimate reason to invade the US before he could postulate his actual question. I'm not entirely sure what Tom's question was, so I'll come up with my own after using the following scenario to help suspend Adam's disbelief.
I think Tom was going to try to ask about the principle of invading another sovereign country that didn't pose a threat. And what gives any country a right to impose its beliefs on any other country?
Adam's objection was that Tom didn't account for the fact that the American invasions are noble. So in order to address that, here's my analogy.
Suppose...
... a superpower invaded America and continued killing Americans who fought back and resisted the occupation to the tune of between 4,000 to 15,000 each day (depending on the day of the week).
... the invading superpower is a relatively small, relatively militant nation who recently became a superpower due to the discovery of a powerful new energy source called AQS (artificial quantum singularity) which now makes this superpower very rich and very dangerous.
... the superpower invaded America because it had a moral objection to the killing of 3,000 to 5,000 people every single day (depending on the day of the week).
... the 3,000 to 5,000 people America kills are unborn babies.
... this superpower isn't part of the UN, but if it were, it would just ignore the UN.
... this invading superpower also made an alliance with Mexico for logistic purposes.
... Mexico sides with the invaders and creates an alliance in exchange for support and protection.
We know that not all Americans personally kill unborn babies. But that distinction is relatively unimportant to the invaders. To them, all Americans have the potential of becoming abortionists either by performing abortions or by fighting the occupation. They make no distinction between the abortionists and those who harbor them.
Since the Americans voted for the "abortionism" regime for 35 years on end (republicans and democrats are both abortionism regimes), all Americans are to blame to some extent. The occupying nation also takes issue with Christianity, claiming it promotes abortionism. Although this is a false claim, the citizens of the invading superpower can't be bothered to check the facts.
So with the above analogy in mind, my main question is, do you think it's ok to call all the Americans who fight back abortionists?
Also, does it seem a little strange that the invaders are against abortionism but don't mind killing many times more Americans to stop them from being abortionists?
It is also very convenient that abortionists come to America from other countries to get killed. That way, the invading superpower is itself safe from abortionism since they are fighting them "over there."
What was the alternative? Assuming such a superpower came into existence, does it not have a moral obligation to stop the murder of these innocents by any means necessary? Should the superpower just stand by and allow the Americans to kill these people when it has the power to step in and stop it? Should the superpower really just rely upon "talks" to try to convince the Americans to stop their abortionist regime?
Or in fact, is there a principle at work for respecting the borders of other nations and avoiding entangling alliances instead of invading nations that do things we don't approve of?
Shouldn't the new superpower respect the borders of the abortionist nations and set an example by not itself engaging in abortion? Setting an example for other nations establishes a moral high-ground for them to follow.
If you're having trouble seeing the parallels in my analogy, I'll break it down for you:
America is analog to Iraq, therefore
Abortionism is analog to Terrorism, therefore:
Abortion = Terror
Abortionist = Terrorist
Abortionist/ism Regime = Terrorist/ism Regime
War on Abortionism = War on Terrorism
The invading superpower is analog to America, therefore
AQS is dual analog to America's rich resources and military industrial complex.
There are definitely other parallels, I just didn't fully document them all.
No analogy is perfect. For example, Iraq didn't have any known Al-Qaeda terrorists until we invaded, but my analog America has abortionists, just like in real life. But I hope someone will answer a few of my questions. Please stick to the overarching theme and try not to knit-pick my analogy too much. Some knit-picking is in order, but there's no reason to allow it to short-circuit the original point.
Hair samples from Ben Bernake, Chairman of the Board of Governors of the Federal Reserve, were much more difficult to obtain for obvious reasons. However, the efforts paid off. In 10,102 samples studied by scientists globally, Bernanke's DNA sports the only known instance of multiple, repetitive, alternating K-Marker M-Marker pairs.
Hilarious. There must be a virus associated with economist humor. I caught it. Oh well. But as always, Mish really does convey the point extremely well. Too bad it's largely just lost on most people.
The definition of insanity is doing the same thing over and over again and expecting different results.
First, I'd like to introduce the underpants gnomes:
As these banks and institutions are reinforced and supported with taxpayer funds, they must meet their responsibility to lend, and support the American people and the U.S. economy. It is in a strengthened institution's best financial interest to increase lending once it has received government funding.
Government "supports" banks by taking $2,000 from every man, woman, and child in America.
Government urges banks to increase lending to "support" every man, woman, and child in America by lending the money they just taxed back to them.
Profit!!
Here's an analogy from the underpants gnomes when they only planned corporations and before they figured out what step 2 was:
By the time they figured out step 2, the underpants gnomes had moved on to planning governments instead of just planning corporations. Somehow, we can tax and lend ourselves to prosperity. Does anyone else still think this is a good idea? I'd really like to know!
Unless you are fluent in the "High Finance" language, you may not be aware of some of what's going on under the hood. Keep in mind, I've only picked up a little here and there in the past year, so it's not like I know either.
But sometimes it helps to use analogies, so I think I'll use Star Trek. If you don't like Star Trek, then I guess you're out of luck.
Here are a few examples of very scary headlines for context:
The keyword I'd like to explore is LIBOR, which stands for London Interbank Offered Rate. The analogy I'll use is a warp engine. Imagine the starship captain wanted to jump to warp 2. He instructs the helmsman to engage at warp 2. The helmsman enters the coordinates and warp factor, then they zoom off. They stay at warp for 3 hours, then they reach their destination.
The Federal Reserve System has instructed the banks to lend at interest rate 2% (warp factor 2 in my analogy). But they aren't following that instruction because they don't trust each other. Fed has set the target of 2, but instead it's up to 3.77, as of today.
It's like a typical Star Trek episode where they can't shut down and they're careening out of control. Only, 3.77 isn't a warp factor, it's an interest rate expressed in percent. And instead of making the economy go fast, it's slowing it down.
In my analogy, the chief engineer has a theory. He thinks the warp coils are out of alignment. This causes the warp nacelles to create a unsympathetic harmonic that results in an improper warp factor and other effects. The warp engine is getting into an anti-matter feedback loop and the whole system is running inefficiently. The power required to maintain warp 3.77 when the factor is set for warp 2 is causing damage to the engine.
In the case of how this relates to LIBOR, the economy is the warp engine while the individual banks are the individual warp coils. They are out of alignment because they don't trust each other, so they won't lend each other money at the recommended rate.
So it's not a very elegant analogy, but it illustrates how the Federal Reserve System isn't able to control things the way they'd like. How do you get the warp coils into alignment? Actually, that's as far as I can take the analogy. The assumption that our economy needs a Federal Reserve System dictating an interbank interest rate is actually the root cause of the problem. The Fed isn't smart enough to know what the optimal interest rate is for each situation. They're only guessing. The free market should be allowed to set their own interest rate.
Doing that now would cause some pain now, but it would fix the problem for the future. It's not a silver bullet. The general philosophy of the free market will have to be taken seriously before these problems will ever start to go away.
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