Coyote Blog

I have been predicting for years that the only solution for the Greece problem is for it to exit the Euro, go through a horrible economic crisis and deal with substantial devaluation, and then hopefully move on with a cheaper currency that makes its tourist industry look better and plugs the hole between taxing and spending with inflation.  It appears we are closer than ever to this actually happening.  The Greeks would likely be moving forward now, like Iceland, if they had taken their medicine years ago rather than try to kick the can.  Now it is just going to be worse.

I have been enamored off and on with the idea of a gold standard but Megan McArdle made some powerful points today about how the Greek situation teaches us that a gold standard doesn't necessarily impose discipline on governments.

It's easy to moralize Greece's feckless borrowing, weak tax collection and long history of default, and hey, go ahead; I won't stop you. But whatever the nation's moral failures, what we're witnessing now shows the dangers of trying to cure the problems of weak fiscal discipline with some sort of externally imposed currency regime. Greek creditors and Brussels were not the only people to joyously embrace the belief that the euro would finally force Greece to keep its financial house in order; you hear the same arguments right here at home from American gold bugs. During the ardent height of Ron Paul's popularity, I tried to explain why this doesn't work: "You don't get anything out of a gold standard that you didn't bring with you. If your government is a credible steward of the money supply, you don't need it; and if it isn't, it won't be able to stay on it long anyway."

This goes double for fiscal discipline. Moving to a fixed exchange rate protects bond-holders from one specific sort of risk: the possibility that inflation will erode the real value of your bonds. But that doesn't remove the risk. It just transforms it. Now that the government can't inflate away its debt, you instead face the risk that they are going to run out of money to pay their bills and suddenly default. That's exactly what happened to Argentina, and many other nations on various other currency regimes, from the gold standard to a currency peg. The ability to inflate the currency had gone away, but the currency regime didn't fix any of the underlying institutional problems that previous governments had solved with inflation. So bondholders protected themselves from inflation, and instead took a catastrophic haircut.

Postscript #1:  I had one issue with McArdle's piece when she writes

The only people this will be good for is people who long to vacation on the Greek Islands. If Grexit actually happens, book those plane tickets now, but hold off on the hotel. It will be cheaper in six months. Then try to enjoy it as you remember that those fabulous savings are someone else's whole life evaporating.

Hey, if Grexit occurs, you have no reason to feel guilty about taking advantage of the weak currency and low prices for a Greek vacation.  There is nothing the Greeks need more than for you to do exactly that.   It is the single best thing you could do for the Greek people.

Postscript#2:  Here is why exiting the Euro, devalutation, and inflation are the only way out for Greece at this point. Creditors allow countries to run long-term deficits and keep lending despite rising debt (see: Japan) because of a combination of a) the country can always just print the money they need; b) the country can raise taxes and take the money it needs or c) the country can keep spending flat and grow their way out from the debt.

None of these are available to Greece. They can't print money, at least without running up new debts (excess printing of Euros is automatically added to Greece's debt to the ECB).  They can't raise taxes because their citizens don't pay the taxes that already exist.  And they can't grow their way out because there is zero support for austerity or market-based reforms that would be necessary, and besides a huge portion of Greek deficit spending is for inherently unproductive activities.  At this point Greece's only option is charity, that the other countries of the EU will forgive debt or write them new debt, either to be nice or to avoid bad precedents with other PIGS countries.  But  the EU seems at the end of its charity rope, and besides given zero prospects of any sort of Greek recovery, even after a major write-off of debt the EU would be in the position of still having to send Greece new money for its new debts.

One of my favorites writers Megan McArdle comments on my post about the regulatory excess in California.  The same post was linked by Reason as well.  The Reason post got the attention of Ron Paul, who will be interviewing me for his radio show next week.

I posted a few updates on the article today:

Wow, reading this again, I left out so much!  An employee once sued us at this location for harassment and intimidation by her manager -- when the manager was her sister!  It cost me over $20,000 in legal expenses to get the case dismissed.  I had an older couple file a state complaint for age discrimination when they were terminated -- despite the fact that our entire business model is to hire retired people and the vast majority of our employees are 70 and older.  And how could I have forgotten the process of getting a liquor license?  I suppose I left it out because while tedious (my wife and I had to fly to California to get fingerprinted, for example), it is not really worse than in other places -- liquor license processes are universally bad, a feature and not a bug for the established businesses one is trying to compete with.   We gave the license up pretty quickly, when we saw how crazy and irresponsible much of the customer base was.  Trying to make the place safer and more family friendly, we banned alcohol from the lake area, and faced a series of lawsuit threats over that.

Republicans before the election worked to convince Libertarians that a vote for Gary Johnson (or any other third party) was a wasted vote -- that Libertarians needed to be voting against Obama and therefore for Republicans.  Some libertarians have argued that the only way to change the Republican Party is from within.  Libertarians need to join the party and then work to make the party less statist.

I thought this was a crock at the time and think so even more now.  Here is the key thought:  Republicans are not going to change their platform and their candidates and their positions to woo voters they are already getting.  After the election, no one in the Republican leadership was talking about what a mistake it was to run a big government Republican like Romney -- the ex-governor of Massachusetts for God sakes -- who authored the predecessor to Obamacare.  No one was wondering about Gary Johnson as a 2016 candidate.

What the GOP did do is panic at the shellacking they got among Hispanic voters.  The ink was not even dry on the ballots before Republican leadership was considering abandoning their anti-immigrant stance in order to win more Hispanic voters.  I am not sure that will get them Hispanic voters, but whether they are right or not, that is the conversation they were having.  They were asking, "How do we attract voters WE DID NOT GET" -- not, "how do we attract voters we are already getting".

The turn of the century Progressive Party (William Jennings Bryant, free silver, etc) never won a Presidential election but both the Republicans and Democrats co-opted many of their platform positions because they sought to attract voters they were losing to the Progressives.

I don't see how Libertarians can look at a party that has fielded John McCain (author of speech restrictions) and Mitt Romeny (author of the proto-Obamacare) as any sort of long-term home.  Heck, the Republicans more seriously considered Rick Santorum and Donald Trump than Gary Johnson or Ron Paul.  I respect what Mr. Paul has done in bringing libertarian issues to the debate, but as long as he keeps reliably delivering his voters to whatever lame statist candidate the party fields, the GOP is never going to seriously address libertarian concerns.

I was pretty bummed out that Gary Johnson is not to be included in the debate slate for New Hampshire.   I am not one (most definitely not one) to invest all my hopes and dreams in a political candidate, but I really like Gary Johnson and thought he could bring a new libertarian voice (in addition to Ron Paul's) to Republican discussions dominated by statists like Romney and Huckabee.   I have met him once and listening talk about things like the costs of the war on drugs and immigration is just so refreshing from a politician of any sort, particularly a Republican.    And in contrast to Ron Paul, who comes off as a bit wacky (and wonky), Johnson does it all in a very non-threatening way.   Many people in this country self-identify as fiscally conservative and socially liberal -- this is their guy.  They just haven't heard of him yet.

As an ex-governor well respected by independents, he strikes me as infinitely more worthy of a debate spot than, say, Donald Trump, who did receive an invitation.  I wrote a whole column on the importance of being previously famous, rather than experienced, as a qualifier for office nowadays.

From my column today at Forbes.com, this week on Donald Trump and campaign finance reform. An excerpt:

Have you heard the news?  Apparently Donald Trump is running for President.  Of course you would have to be living in a hole not to know that.  Over the last couple of weeks, based just on media stories tracked by Google News, there have been over a thousand news stories a day mentioning Trump’s potential run for the White House.  In fact, there are more than double the number of articles on Trump’s potential run than their are on the actual candidacies of Gary Johnson, Ron Paul, and Tim Pawlenty combined.

Do you like candidacies by crazy populist billionaire reality TV stars?  If so, then by all means, let’s have campaign spending limits.

For a while now I have been saying that Obama is not promoting Socialism, but rather an European-style corporate state -- where a troika of large unions, powerful politicians, and favored corporations worked together mainly to get themselves in power and to protect each other from competition.

It seems that Ron Paul sees it the same way:

Republicans and tea party activists are fond of accusing President Barack Obama of being a socialist, but today party gadfly Ron Paul said they had it wrong."In the technical sense, in the economic definition, he is not a socialist," the Texas Republican said to a smattering of applause at the Southern Republican Leadership Conference.

"He's a corporatist," Paul quickly added, meaning the president takes "care of corporations and corporations take over and run the country."

I think my post from Inauguration Day one year ago holds up pretty well, though I caught a lot of grief for it at the time  [a few spelling errors fixed]

OK, I was really going to remain silent today, because no one seems to want to hear a rant about today's imperial coronation.  But as I sit here watching the press coverage and waiting for John the Baptist to show up, and as I observe the general cultish hysteria and the swooning of normally serious adult people, I just can't help myself.  For a libertarian like myself, its like watching people line up at 3am to be the first to be in the store when McDonald's switches its fountain drinks from Coke to Pepsi.   Heck, I was creeped out by the cult following of Ron Paul this year, a politician I agree with a lot, so I certainly am going to get the willies from the love-fest for an admitted statist like Obama.

I am not enough of a historian to speak for much more than the last thirty years, but the popularity of non-incumbent political candidates has typically been proportional to 1) their personal charisma and 2) our lack of knowledge of their exact proposals.  Seriously, can you name any other difference (on the plus side) between Obama and Hillary other than these two?  We forget, but GWB was the unknown newcomer in 1992.  As was Clinton and Carter.  Reagan was an exception, but was running against an incumbent who really had a terrible four years, and Bush I was an exception as well, though he was running against one of the weakest candidates and campaigns the Democrats have fielded in 50 years.  Folks are excited about Obama because, in essence, they don't know what he stands for, and thus can read into him anything they want.  Not since the breathless coverage of Geraldo Rivera opening Al Capone's vault has there been so much attention to something where we had no idea of what was inside.  My bet is that the result with Obama will be the same as with the vault.

There is some sort of weird mass self-hypnosis going on, made even odder by the fact that a lot of people seem to know they are hypnotized, at least at some level.  I keep getting shushed as I make fun of friends' cult behavior watching the proceedings today, as if by jiggling someone's elbow too hard I might break the spell.  Never have I seen, in my lifetime, so much emotion invested in a politician we know nothing about.   I guess I am just missing some gene that makes the rest of humanity receptive to this kind of stuff, but just for a minute snap your fingers in front of your face and say "do I really expect a fundamentally different approach from a politician who won his spurs in "¦. Chicago?  Do I really think the ultimate political outsider is going to be the guy who bested everyone at their own game in the Chicago political machine?"

Well, the spell will probably take a while to break in the press, if it ever does "” Time Magazine is currently considering whether it would be possible to put Obama on the cover of all 52 issues this year "” but thoughtful people already on day 1 should have evidence that things are the same as they ever were, just with better PR.   For God sakes, as his first expenditure of political capital, Obama is pushing for a trillion dollar government spending bill that is basically one big pork-fest that might make even Ted Stevens blush, a hodge-podge of every wish-list of leftish lobbyists that has been building up for eight years.  I will be suitably thrilled if the Obama administration renounces some of the creeping executive power grabs of the last 16 years, but he has been oddly silent about this.  It seems that creeping executive power is a lot more worrisome when someone else is in power.

It has been suggested by some that today is less a cultish coronation but a big victory party in the battle against racism.  Well, I am certainly willing to accept it on those terms.  I have been arguing for years that it is time to declare victory on the worst aspects of race and gender discrimination, and move on to problems of interest to all races (like individual freedom or giving kids options to escape crappy public schools).   Unfortunately, I fear that too many folks in power are dependent on the race/gender/class wars continuing, so you and I may think we are declaring victory, but those with power over our lives have not.

I really like our AZ Congressman Jeff Flake -- the libertarian goodness of Ron Paul without the weirdness and connections to racism.  This is pretty funny, from his site (ht:  Radley Balko)

Washington, D.C., Oct 28 - Republican Congressman Jeff Flake, who represents Arizona's Sixth District, today released the following statement regarding his vote against H.Res.784, a bill "honoring the 2560th anniversary of the birth of Confucius and recognizing his invaluable contributions to philosophy and social and political thought."

"He who spends time passing trivial legislation may find himself out of time to read healthcare bill," said Flake.

Frequent readers will know that unlike most other libertarian blogs, I have not plastered the site with hopeful articles and endorsements for Ron Paul.  I have always been 99% supportive of his work in Congress and was happy to have him there.  But I resisted even registering in the Arizona primary to vote for him.  Arizona requires that to vote in a primary, I have to register as belonging to that party, and I am just not going to do that.

Part of my reluctance to jump on the bandwagon has been my general disaffection with politics and some ambivalence as to whether my elected overlord is from Coke or Pepsi.  The rest, I think, was a subliminal fear of supporting any Libertarian candidate because they always seem to turn out to be wing-nuts.  QED.

Update:  The excuse that he didn't know what was in a series of ghost-written newsletters is just ridiculous.  I will accept that excuse for one issue, a mistake in selecting partners (I am sure there are bloggers out there who regret guest-blogger selections) but a long series of newsletters implies tacit approval or at least acceptance. 

If I had to choose one word that describes why I despair of politics, it is "calibration."  Recently, it has been observed that Ron Paul, for example, cannot possibly win because he sticks to a basic set of beliefs and never calibrates his message to the electorate and recent polls.  On the other end of the scale, Hillary Clinton is famous for endlessly calibrating everything she does in the hopes of maximizing the votes she receives.

Calibration is one of those dangerous words that tend to obfuscate the underlying reality.  Because, there are only two possible definitions of calibration as used in this political context:

• Lying, i.e. telling the electorate what they want to hear with the intention of acting differently once in office
• Total nihilism,, i.e. willingness to shift beliefs based on whatever is effective

Russell Roberts describes the situation pretty well:

But there is little difference between Republican and Democratic
Presidents in what they actually do. In what they say? Sure. Both
Reagan and Bush talk about individual responsibility and the market
blah blah blah. Bill Clinton talked more about feeling people's pain
and the downtrodden blah blah blah. Similarly, in the current
presidential campaign, there are stark rhetorical differences between
say Giuliani and Romney on the one hand and Obama and Clinton on the
other.

But will the actual results be different? Will Hillary double the
minimum wage? Change our health care system to be more socialized?
Eliminate corporate welfare? Will Giuliani make the health care system
less socialized? Eliminate the minimum wage? Get rid of farm subsidies?
Stop spending federal money on education?

Most of it is talk and it's not just because change is hard to
achieve. It's because they really don't want change. Did Bill Clinton
get rid of income inequality? Dent it? The share of income going to the
top 1% rose throughout most of the Clinton administration. Was it his
policies? The steady rise in the share of income going to the top 1%
started rising in 1976. Was it Carter's doing?

Was Bush or Reagan a hard core free trader in practice? Nope. They
used protectionism when it was politically expedient. Just like Bill
Clinton signed welfare reform and NAFTA and then chose not to enforce
the truck provision of NAFTA because the Teamsters didn't like it.

Government gets bigger under both Republicans and Democrats. What
they spend money on is a little different, yes. But to hate George Bush
for being a free market guy is to miss what is really going on. And to
hate Hillary because she doesn't understand the power of markets and to
love, say, Mitt Romney, is to misunderstand both of them. They use
rhetoric to dupe you. Don't be duped.

This all leads to the question of into which category should we place Paul Krugman - lier or nihilist?

Paul Krugman worries that,
although trade between high-wage countries is mutually beneficial,
"trade between countries at very different levels of economic
development tends to create large classes of losers as well as winners"
- and so is suspect because it likely harms ordinary American workers
("Trouble With Trade," December 28).

A famous trade economist
argues that this concern is misplaced.  In a 1996 essay, this economist
- responding to a protectionist who fretted that western trade with
low-wage countries would harm workers in the west - wrote that this
protectionist "offers us no more than the classic 'pauper labor'
fallacy, the fallacy that Ricardo dealt with when he first stated the
idea, and which is a staple of even first-year courses in economics. In
fact, one never teaches the Ricardian model without emphasizing
precisely the way that model refutes the claim that competition from
low-wage countries is necessarily a bad thing, that it shows how trade
can be mutually beneficial regardless of differences in wage rates."

Oh - the economist who wisely warned against the pauper-labor fallacy is none other than Paul Krugman.

As defined by Kevin Drum:

Well, since you asked, the reason I
think Ron Paul is a crank is because he wants to repeal the 16th
amendment, eliminate the personal income tax, abolish the minimum wage,
deep six the Federal Reserve, and return the United States to some kind
of weird quasi-gold standard.

I almost never ever post on politics and political races, but I had an interesting conversation the other day.  As a secular libertarian, I find no one (beyond Ron Paul) among the Republican candidates even the least bit interesting.  I trust none of them to pursue free market and small government principals, and several, including McCain, Giuliani, and Huckabee, have track records of large government intrusiveness.

What I found interesting was a conversation with a friend of mine who self-identifies as a Christian conservative  (yes, I know it is out of vogue, but it is perfectly possible to have quality friendships with people of different political stripes, particularly considering that I am married to a New England liberal Democrat).  My Christian conservative friend said he found no Republican he was really interested in voting for.

I find it interesting that the Republicans (again with the exception of Ron Paul, who I think they would like to disavow) unable to field a candidate that appeals to either of its traditional constituencies.  It strikes me the party is heading back to its roots in the 1970s in the Nixon-Rockefeller days.  Yuk.

Update:  Which isn't to necessarily say the Democrats have everything figured out.  For example, in response to a Republican President thought to be over-reaching, secretive, and overly fond of executive power, they seem ready to nominate Hillary Clinton, who may be one of the few people in the country more secretive and power-hungry.  Anyone remember how she conducted her infamous health care task force?  I seem to remember she pioneered many of the practices for which Democrats tried to impeach Dick Cheney this week.

I almost never ever post on politics and political races, but I had an interesting conversation the other day.  As a secular libertarian, I find no one (beyond Ron Paul) among the Republican candidates even the least bit interesting.  I trust none of them to pursue free market and small government principals, and several, including McCain, Giuliani, and Huckabee, have track records of large government intrusiveness.

What I found interesting was a conversation with a friend of mine who self-identifies as a Christian conservative  (yes, I know it is out of vogue, but it is perfectly possible to have quality friendships with people of different political stripes, particularly considering that I am married to a New England liberal Democrat).  My Christian conservative friend said he found no Republican he was really interested in voting for.

I find it interesting that the Republicans (again with the exception of Ron Paul, who I think they would like to disavow) unable to field a candidate that appeals to either of its traditional constituencies.  It strikes me the party is heading back to its roots in the 1970s in the Nixon-Rockefeller days.  Yuk.

Update:  Which isn't to necessarily say the Democrats have everything figured out.  For example, in response to a Republican President thought to be over-reaching, secretive, and overly fond of executive power, they seem ready to nominate Hillary Clinton, who may be one of the few people in the country more secretive and power-hungry.  Anyone remember how she conducted her infamous health care task force?  I seem to remember she pioneered many of the practices for which Democrats tried to impeach Dick Cheney this week.

As a libertarian, I tend to get turned off by most political pitches.  But here is one I can definitely buy into, and it is not even from Ron Paul.

As a libertarian, I am hugely excited that Ron Paul is getting some positive attention.  However, I have a terrible time syncing up the enthusiasm for him in some quarters with the historic indifference to libertarian ideas in the same quarters.  I am worried that this country has a 5-10% Howard Beale segment (I'm mad as hell, and I'm not going to take it any more) that will get enthusiastic about any third party candidate who seams to challenge the establishment.  Do these people behind Paul really understand him, or are they just the same folks who supported Ross Perot's populist melange?

It looks like Ron Paul will run for president again, though this time as a Republican (he ran as a libertarian a while back).  Don't let the "Republican" tag fool you.   He is the same libertarian, but this time he is going to try to shake up the Republican party.  (Here is his web site)

This is great news -- particularly given that the Republicans turned on the libertarian wing shortly after the last election  (presumably they feel they lost because they were not statist enough).  It is thrilling to see a legitimate, non-fruitcake libertarian candidate running on a major party ticket. 

This could make the Arizona primary, which is early in the race, a real event.  Arizona's Republican party nabobs are strong McCain guys.  Pitted against McCain and the party leadership is a Republican rank and file that has a strong Goldwater-libertarian streak and that is a bit tired of McCain's shtick.   This may be the first primary in years (maybe ever) that I have gotten excited about.

Its never surprising to see Arizona Congressman Jeff Flake or Texas Congressman Ron Paul voting against pork, they are pretty consistent libertarians in their vote.  However, I have only just begun to follow my own Phoenix-area Congressman John Shadegg.  I was pleased to see that he stood up to considerable pressure and opposed the recent pork-filled Highway bill.

Of late, I have felt used by the Republican party, who put on small-government clothes to entice libertarians like me but who have generally abandoned all spending restraint now that they are in the majority.