I'd Vote For 'Em

You know, I guess what we need is an independent leader. Maybe you and I should run together on a unity ticket, Joe?

I think we could do that. [ Laughs ]

The unity ticket of Scarborough and Bill Maher. I'll be happy to be the vice president because you have experience in Congress and I don't really want to get up before noon.

Although I say it half jokingly, I think the concept of comedian and HBO late night political talking head Bill Maher and MSNBC political analyst and host of "Morning Joe" Joe Scarborough running together on an independent ticket really says something about the state of the union. In an interesting quasi-mutual interview on Newsweek, Bill and Joe undertake an entertaining dialogue that brought a few things to mind for me. Check out the entire script here, it is a must read if for entrainment value only.

1. The Talking Heads Can Actually Have Meaningful Discussion - It is sad when two self proclaimed polar opposites on the political spectrum can have more meaningful dialogue than our elected leaders. Bitter partisan jockeying is paralyzing Washington and although I haven't followed politics closely for too long, by all historical accounts it now seems worse than ever. I understand Joe and Bill don't have to worry about securing future votes and satisfying constituents and that definitely helps cut through the political talking points and BS associated with many of our nation's most important issues, but should it really make that much of a difference?

2. Republican Does Not Equal Conservative; Democrat Does Not Equal Liberal - I actually just finished Joe Scarborough's book on audio book where he talks about this issue a bit. It was one of the main principles that I took away from the book and it is definitely a root cause of the stagnate political environment described above. Congress is more concerned with voting based on party than they are with voting based on principle. Don't believe me? Need a few examples? Well look at the Bush era where a Republican president, who was elected based on his supposed conservative principles, and a majority republican congress took over a budget surplus and turned it into the greatest deficit the nation has ever seen. A more recent example is the surge in Afghanistan. I heard an interesting question posed the other day along the lines of, "if President Obama was still Senator Obama how do you think he would have voted for sending more troops to Afghanistan?" I will let you answer that one but regardless more troops are heading over there in a Democratic majority congress that largely opposed the surge into Iraq where the conflict strategy was much more clearly defined that the Afghanistan conflict. It is examples like these and the talking point laced interviews on major media outlets that have led me to this political truth.

3. Independents Are Taking Over The World - Although the title of this post is somewhat satirical in nature, I can't help but feeling a sense of camaraderie with my a younger generation who shares this sentiment. Although there is certainly no shortage of people out there who disagree with my political views or anybody else's for that matter, I think the growing majority of the younger generations are becoming disenfranchised with the way things are going politically in this country. Here is what Joe and Bill had to say:

Is it time for an independent?
Independent?

Yeah.
An independent? Well, that's possible. Isn't the independent registration now bigger than either political party?

It's up in the 40s. It's the highest it's ever been, according to Gallup.
That's twice as many as Republicans, and I think it's more than Democrats too. You know, I guess what we need is an independent leader. Maybe you and I should run together on a unity ticket, Joe?

The statistics are there to support my inkling and although the percentage of actual voters generally increases with age it is only a matter of time until the younger generations begin voting in greater numbers. And with the undoubted increase in political awareness largely stemmed by the recent election and technological advances in social media, etc. this time may come sooner than later. I think that there are more and more people who, like myself, are finding themselves agreeing more with the combination of progressive Bill Maher and Conservative Joe Scarborough than they are with the political parties they see on the TV screen. Perhaps this change is the natural adjustment to combat the political bickering described above. Let's only hope.

War Tax, Our National Debt, And The Illusive Terrorist

This is one of the few times I actually want more taxes! Read the full article on a proposed war tax here. The average American doesn’t recognize the immense cost of maintaining an expeditionary force overseas. I would rather have to fork out the extra money in taxes than continue to grow our astronomical national debt, the majority of which lies in the hands of the Chinese.

"There ain't going to be no money for nothing if we pour it all into Afghanistan," House Appropriations Chairman David Obey told ABC News in an exclusive interview. "If they ask for an increased troop commitment in Afghanistan, I am going to ask them to pay for it."

Obey, a Democrat from Wisconsin, made it clear that he is absolutely opposed to sending any more U.S. troops to Afghanistan and says if Obama decides to do that, he'll demand a new tax -- what he calls a "war surtax" -- to pay for it.

"On the merits, I think it is a mistake to deepen our involvement," Obey said. "But if we are going to do that, then at least we ought to pay for it. Because if we don't, if we don't pay for it, the cost of the Afghan war will wipe out every initiative we have to rebuild our own economy."

There was another article on MSN regarding the immense costs of borrowing that we as Americans are dealing with. Not only is it an immense cost now but it may get much worse in the near future.

“The government is on teaser rates,” said Robert Bixby, executive director of the Concord Coalition, a nonpartisan group that advocates lower deficits. “We’re taking out a huge mortgage right now, but we won’t feel the pain until later.”

The United States government is financing its more than trillion-dollar-a-year borrowing with i.o.u.’s on terms that seem too good to be true.

But that happy situation, aided by ultralow interest rates, may not last much longer.

Treasury officials now face a trifecta of headaches: a mountain of new debt, a balloon of short-term borrowings that come due in the months ahead, and interest rates that are sure to climb back to normal as soon as the Federal Reserve decides that the emergency has passed.

The potential for rapidly escalating interest payouts is just one of the wrenching challenges facing the United States after decades of living beyond its means.

Even as Treasury officials are racing to lock in today’s low rates by exchanging short-term borrowings for long-term bonds, the government faces a payment shock similar to those that sent legions of overstretched homeowners into default on their mortgages.

With the national debt now topping $12 trillion, the White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically. Other forecasters say the figure could be much higher.

I am always amazed at the propensity for government officials and political pundits to try and defy the laws of finance based on the premise that government spending is different than personal finance. I disagree. There are some obvious differences, however basic principles like the cost of capital, the power of compounding interest, and spending more than you make aren’t moot just because a sovereign government is doing the spending. That is why I think developing a clear “end state” or perhaps more accurately an “exit state” for Afghanistan is so important. Right now we are likely going to bolster troops in a war that to my knowledge has no clear goal other than to prevent the harboring of terrorists. That argument might be enough if the majority of the terrorists in the 9-11 attacks hadn’t masterminded in Europe. A more recent example is the Ft Hood tragedy. It is a new world out there with bolstering interconnectivity of those worldwide. And if we continue to treat these terrorists as if they are actors of a nation state we will continue to be behind the eight ball when it comes to combating them. Terrorist activity, as has been proven time and again, can arise from anywhere. It can cross any border into any nation and is more of a mental disposition than a national association. If we are going to continue financing a war without an end state in mind we may as well do it from our own pockets vice the interest bearing dollars of other nations.

The Afghanistan Mafia State

Consistent readers of BadskiBlog have likely picked up on my general skepticism of our elected officials and the claims that they make. However, do not mistake me for an anarchist. I love the country we live in and I believe government serves a very important role in maintaining its greatness. Although I am hesitant towards any government encroachment of the freedoms we enjoy as American’s I strongly believe that the good ol’ US of A does a pretty damn good job of protecting it’s citizens freedoms from the dangers of lawlessness, crime, and corruption. I found this article on Afghanistan’s President Hamid Karzai and his vow to clean his country of corruption.

It was no secret what the world wanted to hear from Hamid Karzai when Afghanistan’s president was sworn in for a second term on Thursday November 19th: a commitment to get tough on corruption. Visiting Kabul for the inauguration, Hillary Clinton, America’s secretary of state, said Mr Karzai had a “window of opportunity” to show tangible results. American officials say he has just six months to tackle what one calls “Afghanistan’s mafia state”.

In his inauguration speech, he said ministers in his administration must be “competent and just”. But heeding Western concerns about their behaviour does not come naturally to Mr Karzai. He has been in a combative mood since the West’s much-resented demand that he accept that his re-election was marred by massive vote-rigging. In a recent American television interview he batted back questions about corruption in his government with his oft-repeated line that foreign donors must clean their own act up and stop development funds from being wasted. Such wastage, however, is at least lawful, unlike the Afghan government’s practice of selling jobs to officials who then repay themselves through extortion. Nor is it akin to the impunity the well-connected enjoy.

We focus so much on the war fighter in our conflict in Afghanistan. We focus on our battle against the Taliban. I would argue that they are not our greatest challenge. If you watched the documentaries I recommended on a previous BadskiBlog post you would see that the Taliban are merely players in a much more complicated problem. In fact our, and I use the term loosely, “strategy” in Afghanistan is now engaging the people of Afghanistan in an effort to rebuild their nation and align them with US interests. We are tasking our war fighters to protect the local population, to get the local population to trust us, to get the locals to continue their daily life, and in theory to reject Islamic extremists that hide amongst them. However, this article illustrates a fundamental problem with this strategy. How are we supposed to empower a 19 year old army private to win over the local population when we are supporting a corrupt government that is seen by the people as completely inadequate in representing and protecting their rights? Karzai’s own half brother is said to be one of the main beneficiaries of the now flourishing drug trade and Karzai's own reelection was internationally exposed as a farce.

For some Americans, the crucial test of Mr Karzai’s seriousness in tackling corruption is his willingness to sack Ahmed Wali Karzai, his half-brother, who lords it over the south as head of Kandahar’s provincial council. Both he and his brother deny longstanding allegations that Ahmed Wali is involved in the drug trade. And parts of the foreign effort in Afghanistan also rely on Ahmed Wali, including allegedly the CIA (though he denies reports he is on the agency’s payroll). As one NATO official in Kabul put it, Ahmed Wali’s “ruthless use of patronage” has annoyed many people and possibly increased support for the insurgents. But it has also kept many other people on side. “Ahmed Wali is the only thing holding Kandahar together right now,” says the official, speaking of a city second only to Kabul in importance, and suggesting that in tackling this important symbol of perceived corruption it is not just Mr Karzai who has a conflict of interest.

Not to mention that the current US strategy does little to address Pakistan as a player in the Afghanistan scenario. I have been happy to see that Pakistan has become more involved by sending actual troops into areas inhabited by the Taliban, but only time will tell how serious they are in their efforts. I will be much happier if Pakistan acknowledges that a stable Afghanistan is good for Pakistan and carries out the actions to prove it.

The Dollar And The Gun

You are in a conversation with an acquaintance. The conversation turns to politics. You make it clear you are for capitalism, laissez-faire capitalism. Eloquently, you explain the case for capitalism in terms of man’s rights, the banning of physical force and the limitation of government to the function of protecting individual freedom. It seems clear, simple, unanswerable.

But instead of seeing the “light-bulb look” on the face of your acquaintance, you see shock, bewilderment, antagonism. At the first opportunity, he rushes to object:

"But government has to protect helpless consumers from the power wielded by huge multinational corporations.”

Or: “Freedom is impossible under strict capitalism: people must have jobs in order to live, and they are therefore forced to accept the employer’s terms.”

Or: “In a complex industrial society such as ours, government planning must replace the anarchy of the marketplace.”

Does any of this sound familiar? It is a battle that is all but new. In fact it represents the fictional battle that ensues throughout one of the greatest pieces of literature ever written (my opinion). The literature I am speaking of is Atlas Shrugged by Ayn Rand. The book is controversial, however in my opinion I think that if you put your philosophical beliefs aside you will appreciate the mastery with which Rand has interwoven politics, business, philosophy, love, religion, etc all within an amazingly entertaining fictional tale.

I recently began following The Ayn Rand Center on Twitter which posts publications in line with Rand's philosophy. One that I read the other day was entitled "The Dollar and the Gun." It was written by Harry Binswanger as published in Why Businessmen Need Philosophy back in 1983. The work centers on many of the central premises of Atlas Shrugged, specifically the distinction between economic and political power.

"Political power” refers to the power of government. The special nature of that power is what differentiates government from all other social institutions. That which makes government government, its essential attribute, is its monopoly on the use of physical force. Only a government can make laws—i.e., rules of social conduct backed up by physical force. A “government” lacking the power to use force is not a government at all, but some sort of ugly pretense, like the United Nations.

A non-governmental organization can make rules, pass resolutions, etc., but these are not laws precisely because they cannot be enforced on those who choose not to deal with that organization. The penalty for breaking the rules of e.g., a fraternal organization is expulsion from the association. The penalty for breaking the law is fines, imprisonment, and ultimately, death. The symbol of political power is a gun.

A proper government points that gun only at those who violate individual rights, to answer the physical force they have initiated, but it is a gun nonetheless.

Economic power, on the other hand, is the ability to produce material values and offer them for sale. E.g., the power of Big Oil is the power to discover, drill and bring to market a large amount of oil. Economic power lies in assets—i.e., the factors of production, the inventory and the cash possessed by businesses. The symbol of economic power is the dollar.

A business can only make you an offer, thereby expanding the possibilities open to you. The alternative a business presents you with in a free market is: “Increase your well-being by trading with us, or go your own way.” The alternative a government, or any force-user, presents you with is: “Do as we order, or forfeit your liberty, property or life.”

As Ayn Rand wrote, “economic power is exercised by means of a positive, by offering men a reward, an incentive, a payment, a value; political power is exercised by means of a negative, by the threat of punishment, injury, imprisonment, destruction. The businessman’s tool is values; the bureaucrat’s tool is fear.” (Capitalism: The Unknown Ideal, p. 48)

Whether you agree wholeheartedly or are completely opposed to the above line of thinking, the argument should be had. As I was reading through a second time I came across the excerpt below.

In today’s depressed economy where “obscene profits” have turned into (lovely?) losses, the anti-business theme is being played in a new key: the target has shifted to foreign businesses. The equation of the dollar and the gun remains, however. To wit: “Senator Paul Tsongas (D-Massachusetts) believes that the hightechnology challenge from Japan is as serious to the United States’ long-term security as the defense threat posed by the Soviet Union.” (Infoworld, May 30, 1983)

The Soviet Union threatens us with nuclear annihilation. The Japanese “threaten” us with the opportunity to buy cheap, reliable computer parts.

One could point out that the law of comparative advantage, a cornerstone of economic science, dictates that one country’s superior productive ability can only benefit all those with whom it trades; that if Japanese firms can produce computer parts at lower cost than U.S. firms can, then our firms will necessarily have a comparative advantage in some other area of production; that any government intervention to protect some U.S. firms from foreign competition sacrifices other U.S. firms and the public at large to inefficiency, lowering our standard of living. But all this would be lost on the kind of mentality that equates imports with bombs.

Does that sound familiar? It should. Because we aren't far off from the same situation today. Just replace Japan's cheap products with China and add in cheap labor from India and it is one and the same. I really enjoyed the way in which the author employed a Socratic method-esque approach to debating common accusations against capitalism.

It is true that laws protecting rights are a precondition for the production of wealth, but a precondition of production is not production. In enforcing proper laws, the government does not produce anything—it merely protects the productive activities performed by private individuals. Guns cannot create wealth. When a policeman prevents a mugger from stealing your wallet, no value is created; you are left intact, but no better off.

The absence of a loss is not a gain. Ignoring that simple fact is involved in the attempt to portray the government’s gun as a positive, creative factor. For instance, tax relief is viewed as if it were government encouragement. In reality, tax breaks for schools, churches, homeowners, etc., are reduced penalties, not support. But socialist Michael Harrington writes:

The Internal Revenue Code is a perverse welfare system that hands out $77 billion a year, primarily to the rich. The special treatment accorded to capital gains results in an annual government benefit of $14 billion for high rollers on the stock exchange. (Saturday Review, November 1972)

Harrington equates being forced to surrender to the IRS one quarter of your earnings (the tax rate for capital gains), with being given a positive benefit by the government. After all, the IRS could have taken it all.

Just as the absence of a loss is not a gain, so the absence of a gain is not a loss. When government handouts are reduced, that is not “balancing the budget on the backs of the poor”—it is a reduction in the extent to which the poor are balanced on the backs of the rest of us.

And:

I will conclude with another scenario. Imagine that you survive a shipwreck and have to steer your lifeboat to one of two desert islands where you will have to remain for several years. On each island there is one inhabitant. The western island is the property of a retired multi-millionaire, who lives there in high luxury, with a mansion, two swimming pools and all the accoutrements of great wealth. The eastern island is inhabited by a propertyless beachcomber who lives in rags and eats whatever fruit and fish he can scrounge up. Let’s add that the millionaire is an egoist and strict capitalist, while the beachcomber is a saint of altruism who will gladly share his mud hut with you. Would you, or anyone, head east to escape being “exploited” by the millionaire’s economic power?

As I said earlier, you may not agree with the premise of the writing but I definitely recommend reading the article in its entirety here. I would love to hear comments as this is a polarizing topic amongst many.

CEO Causes Stir...For Making Sense!

We are all responsible for our own lives and our own health. We should take that responsibility very seriously and use our freedom to make wise lifestyle choices that will protect our health. Doing so will enrich our lives and will help create a vibrant and sustainable American society.

Does this sound like a crazed lunatic that is on a evil right winged agenda to destroy President Obama's health care reform campaign? I didn't really think that it did, but apparently there are many out there who do. Whole Foods CEO John Mackey wrote an op-ed piece for the Wall Street Journal that has many people vowing never to shop at Whole Foods again. I found out about the public outrage surrounding his piece through this article on ABC News which you can read here.

"I will never shop there again," vowed Joshua, a 45-year-old blogger, who asked that his last name not be published.

Like many of his fellow health food fanatics, Joshua said he will no longer patronize the store after learning about Whole Foods Market Inc.'s CEO John Mackey's views on health care reform, which were made public this week in an op-ed piece he wrote for The Wall Street Journal.

Michael Lent, another Whole Foods enthusiast in Long Beach, Calif., told ABCNews.com that he, too, will turn to other organic groceries for his weekly shopping list.

"I'm boycotting [Whole Foods] because all Americans need health care," said Lent, 33, who used to visit his local Whole Foods "several times a week."

"While Mackey is worried about health care and stimulus spending, he doesn't seem too worried about expensive wars and tax breaks for the wealthy and big businesses such as his own that contribute to the deficit," said Lent.

I read Mackey's full op-ed here, and not only did I not find the article off color, I thought he wrote a very well written article with actual solutions and recommendations. I have been fairly absent from the health care debate and will be the first to admit my knowledge of the issues is fairly limited. However, that is not the point. The point is that many people blast anyone who has an "opposing view" without really knowing what is going on. Blogger Ben Casnocha recently wrote an interesting little blurb on opting out of the health care debate, you can read it here.

I think that with the massive amounts of information available today through phones, internet, ect most people are settling on headline deep knowledge of the issues at hand. We are all guilty of this. However, it is the most ignorant people who yell the loudest who often get the most attention. Unfortunately I feel that their theatrics come at the expense of the masses who, in an effort to run their daily dose of information through a sieve, end up recycling the same half truths and partisan bullet points. Check out what Seth Godin had to say in a similar topic on being willfully ignorant vs. aggressively skeptical.

If you still don’t understand what I am getting at then read the following from the original ABC news article.

The op-ed piece, which begins with a Margaret Thatcher quote, "The problem with socialism is that eventually you run out of other people's money," has left some Whole Foods loyalists enraged. Many say Mackey was out of line to opine against the liberal base that has made his fortune possible.

Christine Taylor, a 34-year-old New Jersey shopper, vowed never to step foot in another Whole Foods again.

"I will no longer be shopping at Whole Foods," Taylor told ABCNews.com. "I think a CEO should take care that if he speaks about politics, that his beliefs reflect at least the majority of his clients."

Apparently Christine thinks that in order to shop for organic fruits and vegetables you must be "liberal." And furthermore, if you are a CEO of a company you should adopt the political views of your customers. Now can you see how out of whack the line of reasoning of some of these people is?

Now I am not going to go into whether or not Mackey's eight proposed solutions make sense or not because as I said before I am fairly ignorant on the topic at large. However there was one suggestion that I haven’t heard yet that I thought was a pretty cool idea.
 

Finally, revise tax forms to make it easier for individuals to make a voluntary, tax-deductible donation to help the millions of people who have no insurance and aren't covered by Medicare, Medicaid or the State Children's Health Insurance Program.

Obviously I have been pretty involved in my non-profit Checking For Charity Corporation as of late and it has shown me to never underestimate the will of mankind to help a cause that they believe in. I think this recommendation rests on this very belief.

Troops In The Middle East

A lot is going on the middle east right now. American soldiers are 'leaving' Iraq and we are surging in Afghanistan. It's crazy times in that area of the world and I am not sure that there is a clear vision of how things are going to play out in the future. Here are some highlights from the past week or so.

Iraqi forces assumed formal control of Baghdad and other cities Tuesday after American troops handed over security in urban areas in a defining step toward ending the U.S. combat role in the country. A countdown clock broadcast on Iraqi TV ticked to zero as the midnight deadline passed for U.S. combat troops to finish their pullback to bases outside cities.

"The withdrawal of American troops is completed now from all cities after everything they sacrificed for the sake of security," said Sadiq al-Rikabi, a senior adviser to Prime Minister Nouri al-Maliki. "We are now celebrating the restoration of sovereignty."

The Pentagon did not offer any comment to mark the passing of the deadline.

This article was published on MSNBC last week. I must say that I am really happy to hear this. How different our overall troop footprint is remains to be seen but this can only be seen as a good thing, even if violence increases. At least responsibility to control the violence will have been shifted into the hands of the Iraqis. I think that the occupation fear is running ramped in this area of the world and who can blame them when you look at history.

The Economist has more.

Iraq’s prime minister, Nuri Al-Maliki, is certainly marking the occasion as one for celebrations. He says that the deadline for American soldiers to leave Iraq’s cities is a “great victory” over the occupiers, not unlike a rebellion against British soldiers in 1920. Tuesday has been declared a national holiday.

But nothing is so clear cut in Iraq. For a start, despite the official claims, many Americans will remain within cities. American trainers will stay embedded with Iraqi units, and those trainers themselves will be protected by other American troops. (The American forces still worry about attacks from within the ranks of the Iraqi army). All told, at least 10,000 trainers, and possibly thousands more, will remain in Iraq’s urban areas.

In addition, large numbers of Americans remain in big “forward operating bases” in some cases in the desert, but in other cases very close to the cities. They are to be called on when needed by the Iraqis, according to the Status of Forces Agreement that was signed by Mr Maliki’s government and the Bush administration last year. An indication of the circumstances in which Americans might need to return to active, urban operations came in recent weeks. A spate of attacks by insurgents, including spectacular bombings in Kirkuk and Baghdad, and several co-ordinated bombs last week, was a show of strength designed to show that Mr Maliki’s government will struggle to contain opponents. One big bomb was planted in Sadr City, a part of town where the Americans had asked to keep an outpost but were told to stay away by the Iraqi government. The attack happened days after the Americans left.

Obviously when you are talking about situations like the current situation in the middle east you must talk about some of the political implications of each and every move.

Thus the eventual withdrawal of American soldiers from the country will be a complicated task. Next year, according to last year’s agreement, American combat troops should not be active in the country. And by 2011, all America troops are supposed to be out. Mr Maliki and others will of course cheer the exit of the foreign forces, but will also know that—if violence flares again—he may have to ask for foreign help once more.

What isn’t discussed in either article is that the majority of these troops that are supposedly leaving are merely being shifted over to Afghanistan. This is where I see that Obama’s relatively high popularity is giving him an advantage. Most people are likely under the impression that we are pulling troops out of the middle east when in fact we are merely shifting them to a different and arguably much more difficult area. Couple that with the fact we still have a very significant troop presence in former battlefield from Germany to Korea to Japan, it is pretty safe to say that we are not leaving anytime soon. However it is also safe to say that shifting responsibility to the native government, whether its a political play or merely the agreement that we must be invited to help now, is a good thing for long term relations with the most important and relevant portion of the middle east; the general population.

The Waiting Game: The Government and Youth of Iran

I came across this article on CNN today. The article does a good job showing how an Iranian government truly does business. I thought it was an odd play to call out President Obama who is not only extremely popular, but serves as the world's most famous figure as well. A famous figure that to this point has remained fairly restrained in his involvement in the Iran election crisis.

Also Thursday, Mahmoud Ahmadinejad, the declared winner in the disputed June 12 election, told President Obama to stop "interfering" in Iran's affairs, the semi-official Fars news agency reported.

"Do you think that this kind of behavior is going to solve any of your problems? It will only make people think you are someone like Bush," Fars reported Ahmadinejad as saying.

Obama is walking a diplomatic tightrope in finding the right response to the crisis. Since taking office, the U.S. leader has sought rapprochement with Iran, but this week he said he was "appalled and outraged" by the post-election violence.

I think that Ahmadinejad couldn’t be more wrong in his statement. I think this will bring more and more of the conservative Iranian population towards the middle. Ahmadinejad has continued his antagonistic behavior through two presidents that the majority of the world likely views as polar opposites. What is the common denominator in this situation?

My time in the Air Force has taught me a valuable lesson that I think is very applicable in this scenario. When a squadron is stuck with a horrible commander there is some pain and maybe even a few martyrs along the way. Yet on the outside it looks as though people are just mindlessly following orders and carrying on with business as usual. However the underlings have something on their side that the poor leader will never have, and that is time. The subordinates will basically wait out their time under the current regime and look forward to better days ahead. I see a very similar pattern emerging in Iran. I have watched numerous discussions on MSNBC and other outlets about whether or not Iran is ready for freedom, and the ever-present conservative population that supports Ahmadinejad. But that is not the point. The point is that the majority of Iran’s youth are not supportive of the Ayatollah and the current regime. As the youth continues to grow older and continues to be inundated with new information and connections with the world (unless the government continues to limit information rich technologies such as the internet) they will, in essence wait out their poor leader. Whether that time frame is a two year tour in the Air Force or the lifespan of a radical regime the concept is the same.

Banks and Balance

Not sure I agree with everything in this article in Forbes, but there are some good points made. I think when it comes to banks it is a little trickier because people don’t act rationally when banks start failing. Banks are only required by law to maintain but a portion of the cash on hand that is managed within their institution. When people start pulling money out en masse banks don’t have the ability to get all the people their money. That reason alone makes it a little trickier to say that banks should be allowed to fail. However, I love how he illustrates the slippery slope of the 'too big to fail' mentality that I have blogged about numerous times.

For the institutions supposedly lucky enough to be tapped by our federal minders as too big to fail, the much remarked upon "optimistic" scenario is one in which their cost of capital will drop for them being protected by Washington. This ensures that the many financial institutions not important enough to fit under the Fed's umbrella will be weakened for having to lend in an environment distorted by larger institutions profiting from their tight relationship with Uncle Sam.

I also like how he spoke about profit and loss being the real regulators. Legislation is flawed and people will always find the most profitable approach given new guidelines, and undoubtedly new problems will arise from new legislation. What remains unchanged though is the desire to make a profit and avoid a loss.

For banking institutions more broadly, the Obama plan involves raising their capital requirements while putting rules in place to make sure they're got more exposure to the loans they securitize and sell. What's forgotten here is that without investor capital there are no banks, so while it may be comforting to think that the federal government can rearrange the path to banking profits, if investors don't agree, they can surely take their money elsewhere.

Along those lines, the beauty of finance is that it is fungible. If the stringent capital requirements make it difficult for stateside banks to operate profitably, the dollars that fill their coffers will move offshore along with myriad financial jobs. Almost to a man politicians worship at the altar of "job creation," but if the new capital requirements prove problematic, the creation of financial jobs will occur in London, Frankfurt and Tokyo--not on Wall Street. "Systemic risk" will simply find a new address.

A truly free market economy does not and will never exist, so to state simply that total free market policy will be a cure all is a little unreasonable. However, I feel that when the choice is the free market or government legislation and intervention I believe we should always err on the side of the free market. People look to blame the free market and capitalism for the mess we are in today, but the free market was only free within the boundaries that were set by legislation. Lobbying and legislation have contributed as much as, if not more than, greed has to fueling the build up and eventual downturn we are facing today. I guess like most things in life it is about balance. What is the lesser of two evils? Letting banks fail unconditionally or going down the dangerous road of the too big to fail mantra?

Are We Rewarding Innovation?

I came across this article in Forbes and I thought it was extremely well written and insightful. With the economy the way it is we as a nation have a greater need than ever for innovation. However, there are many factors stifling innovation in our nation.

While we know that many innovations are accidents, I'm not sure if they are necessarily random. The Internet, for example, came out of a sustained R&D effort over a long period of time. Various pieces of the puzzle fell into place in the mid-1990s, giving us a great discontinuity--an innovation of the scale unknown in decades--upon which markets, industries, jobs and the development strategies of entire nations such as India, could be created.

We need a few more Internets.

Easy to say, extraordinarily hard to do. Especially within a system that has created a fundamental problem compensating speculators way above creators. Besides that, we have systemic challenges of risk-aversion rampant at the moment, with venture capitalists behaving like bankers, and Wall Street's obsession with quarterly results that discourages long term R&D.

In my studies at the University of Tennessee Center for Executive Education during the last week, we have discussed the short term results oriented mindset at length. I hinted around this very topic on my lean is a growth strategy post. Innovation is an accelerated growth strategy, and the fact that short term thinking is holding investment in innovation back in a time of great need is troubling.

"A willingness to take intelligent risks and try something new is critical to both innovation and entrepreneurship. But the last decade has seen an increasing focus on short-term returns through risk taking without questioning or transparency to even understand the real level of risk. As a result, we replaced the foundation for real economic growth with the illusion of prosperity," writes Judy Estrin, a long-time entrepreneur and author of Closing the Innovation Gap.

Not only is funding for specific projects few and far between, but there is a lack in compensation for innovators relative to their peers.

There's good reason for the brain drain that has gone on from technology into finance. We have set up a system that does not compensate creators adequately and, instead, compensates speculators with outlandish amounts of money.

Perhaps the tough times in the economy will bring some balance back to the system with regard to compensation, but the short sighted challenge doesn't seem to be going away anytime soon.

Seeing as Atlas Shrugged is probably my favorite book of all time, this article really got me interested as it put a new twist on Ayn Rand's views of wealth redistribution.

Much has been written recently about Ayn Rand's classic, Atlas Shrugged. In Rand's book, the captains of industry went on strike when the government decided to practice wealth redistribution on an unacceptable scale. In our modern society, the problem we are facing is substantially more complex. It is no longer a government versus private sector issue. There's a terrible triangle of competing interests: the creators (those who add value) versus the speculators versus the government.

This passage reminded me of a topic discussed in the Meeting of the Minds video I posted a while back. Dr. El-Erian, CEO and co-CIO of PIMCO spoke in the clip about the extreme importance of maintaining trust between private industry and the government. The trust that private entities will play by the rules set forth, and the trust that the government will maintain those rules and uphold private industry's right to prosper. Obviously our current economic state illustrates that this trust has been breached, and this does not bode well for innovators who rely on that trust more than most.

Capitalism 2.0 must fundamentally be rooted in justice--justice for the entrepreneurs--or else we may see the value creators go on strike, leaving the speculators with nothing to speculate on, and the government with no wealth to redistribute.

I would argue that the power to change this dynamic lies within the hands of the American people. As we become more educated in personal finance the need for speculators inherently decreases. Choose index funds, invest for the long haul, take personal responsibility for your finances. As for the innovators, they have always risen to the challenge before in this country and I feel they will continue to do so. However, it might be about time we take a look at what exactly we are incentivizing as a nation.

Meeting of the Minds - The Future of Capitalism

I watched a CNBC original called Meeting of the Minds The Future of Capitalism yesterday and it was very interesting. The show brought together some prominent business minds to talk about some of the issues surrounding our current environment.

What will capitalism look like going forward? What will prosperity mean? And ultimately, how will businesses navigate this uncharted landscape?

There were a few things that I found intriguing about the show. First and foremost, I always enjoy watching leaders interact with eachother. Who better to learn from than some of the finest business leaders our nation has to offer. I am always amazed at how much the topic of government is discussed when talking about business. I guess some of the questions were tailored to spark some discussion of the business/government dynamic, but I am sure it would have arisen regardless. The leaders, although all relatively similar with regard to their practicing of business, had political views that ran the gamit of the political spectrum. The short one hour program revealed quite a bit surrounding the leaders political views. Although their political views varied wildly from leader to leader, there was almost unanimous consensus that growth is the answer to get our nation out of the financial prediciment it is in today.

The leader that I found myself most drawn to was Jack Welch, former CEO of General Electric. I have listened to his audiobook before, but seeing him interact and share his views on this program solidified my belief that the guy is a real leader. Some people might not be able to look beyond his fiery personality, but many of the things he stands for resinate with me personally. In the program he used the word meritocracy. He spoke about how we need to not be ashamed to be business people. He said that the overwhelming majority of businesses and business people are inherently good. His answer for getting our nation out of the crisis was establishing and rewarding the winners while taking care of the losers. Not total cutthroat capitalism, yet a recognition that winners and the opportunity to succeed are what makes our country great. He really seems to celebrate personal responsibility and establishing systems that distinguish only based on merit; very noble ideals indeed. Check out some video footage of the show below. I highly recommend checking out the entire show.

Where's My Party?!?

I try not to get too political on BadskiBlog but I must say that I wish I had paid more attention to Ron Paul before the election. My beliefs in meritocracy and the role of government always had me siding slightly to the right of the political spectrum…especially with regard to business and the role of government. However, I am so disenfranchised with the republican party and all they stand for socially and with regard to the moral high ground approach to governance that I can't associate myself with them either. On one hand you have a party that picks and chooses which interest groups are entitled to our nation's tax dollars and on the other hand you have a hypocritical party that screams low taxes and small government but seeks to limit individual liberties because it is "morally" justified or in the interest of national security. WHERE'S MY PARTY? The more I hear and am exposed to libertarian views the more interested I become.

Watch Ron Paul and tell me that he doesn’t make a hell of a lot of sense. As for running a successful campaign against the two front runners of the democratic and republican party, I don’t really know how feasible victory is Ron Paul. Couple taking on the two de facto parties with the fact he comes across as a little nerdy and I think it is an uphill battle. But I must say I am beginning to like the way this guy thinks. Instead of arguing about who's right and who's wrong on some of the most divisive issues our country battles over, Ron Paul is looking at whether government even has the right to decide on those issues in the first place. I think some of his arguments really put things into perspective. If you look at the evolution of the federal government since its inception it is pretty frightening to see how it has gradually yet consistently encroached upon the rights which the states initially held sacred.

I may just be overly optimistic, but I imagine that I am not the only one who feels this way; especially amongst the younger generation. With the increased access to information in today's world, more and more young people will begin to become interested and exposed to politics. Like my own journey, I imagine more and more youth will become frustrated with the "leaders" who are serving our nation. If for nothing other than to explore something different than the traditional party views on government I feel that many will explore the libertarian party. Love him or hate him Barack Obama has opened the door to breaching the status quo. However there is a large void that remains unfilled. If a party or candidate can figure out how to fill that void I believe there will be a significant shift in American politics in the years to come. I could be wrong. What do I know? I am just an average young American who is paying attention. One thing that I do know is that I am not the only young American who has recently begun to pay attention. Watch the video and I would love to read some respectful and exploratory discussion in the comments section, especially those with a different world view.

Visit msnbc.com for Breaking News, World News, and News about the Economy

The Real Problem With Credit Cards Is...You!

I came across this article in Time magazine today talking about some interesting events and trends surrounding the credit card industry. The gist of the article is that although it is easy to blame the credit card industry for America's debt problem, it is not very accurate.

Credit-card companies, though, may not be the only ones we need to be protected from. Every penny of Americans' nearly $1 trillion in revolving debt started with someone — some individual person — whipping out a piece of plastic and making a decision to use it. We could consider that free will and just call it a day, but there's plenty of reason to believe the story isn't so simple. There are piles of evidence that people are bad decision makers when it comes to how they use credit cards. Even when presented with full and fair information, they often make decisions that are not in their own economic best interest — a reality only partly taken into account by the new rules and pending legislation.

The reason this article caught my attention is that it does a great job of addressing the psychology behind our money decisions. The economic right answer isn't the answer we as humans always make. And when poor decisions are made where do we point the finger? Generally not towards ourselves which, as illustrated by this article, is a problem.

The lack of personal responsibility regarding credit cards (and/or most other issues for that matter) brings to light an inherent flaw in the way of thinking we have towards government. Whenever something happens socially we feel the need to add legislation to "fix" the problem. The problem is that legislating lenders does nothing to change the behavior of the consumer which is ultimately the root cause of the problem to begin with. A lender with atrocious terms and no willing borrows is pretty harmless. Much of the legislation seeks greater disclosure so people can make better educated decisions but that doesn't seem to help either.

"There have been a lot of disclosure policies over the past 20 years, but they've had a limited effect on improving the market," says the University of Maryland's Ausubel. "The problem isn't in the availability of information. The problem is in the processing of the information."

I think that most people suffer from information overload. If you step back for a second, all you really need to know about a credit card is that you need to pay back whatever you borrow or you will begin to pay interest. That interest can compound in just the same way your investments can, only in the wrong direction! APR's, teaser rates, etc. don't really matter if you pay off your balance.

Inherently people know this simple truth. As a kid not many people grow up taking more out of their piggy bank than they put in thinking they are becoming rich. However, knowing is not enough. It is doing that truly matters. If knowing how to stay out of credit card debt was the answer then I would argue that most people wouldn't have any credit card debt. It's a lot more difficult to do than merely to know.

Is Anyone Else Nervous?

Am I the only person getting a little nervous about the dynamic between American government and American business? Rick Wagoner has been asked to step down by a presidential task force. Read one of the many articles here.

There are a few things that disturb me about what is going on. First and foremost, any time the government decides to try their hand at making business decisions I get queasy. This however is not any business decision, it is a request from the government of our nation for the CEO of a publicly traded company to step down. Talk about blurring the lines. Isn't that the shareholders' job?

Not when the government uses taxpayer dollars to keep the company afloat you say. My point exactly! This is the embodiment of the slippery slope argument from my previous posts on government bailouts. The companies who sought government intervention should have been careful of what they wished for because they are definitely getting government intervention.  

Amidst all the actions that rub me the wrong way are a few that are just leaving me utterly confused. Try and stay with me on this one. A company that was deemed too big to fail was being kept afloat by taxpayer dollars. The creditors and unions, seeing that the company was not going to left by the wayside, refused to make any meaningful concessions. The administration who ran a heavy pro-labor campaign is now firing the CEO and refusing additional bailout funds for the company that we originally deemed too big to fail. Upon being fired Wagoner, who was making a whopping $1 salary, became entitled to a roughly $20 million retirement package. What is going on here? Does anyone stand for anything or are we just knee-jerking each and every week. I am all about being pragmatic in our approach to government problems but this just seems indecisive to me, not to mention it shouldn't be a government problem! 

Furthermore, I don't buy the too big to fail argument. I know the stats surrounding the big 3 and the amount of jobs both directly and indirectly they provide. However, I don't believe that if one of them went out of business it would be the end of the US as we know it. People need cars and that market share would shift to another car manufacturer. This is where it gets politically sticky, because the companies who are doing it best happen to be foreign manufacturers. Constituents don't like that. Consumers don't mind, but constituents do (we are all both). Ironically, most of these 'foreign' makers have plants right here in the USA. 

I have no doubt that there are consequences to these companies going out of business. The period of adjustment would be difficult to say the least and a lot of workers would be displaced. But does that justify our government using the tax dollars of everyone to string along a broken company that will likely not last in the long run anyways? Which is the greater evil? I guess no one can really be sure until everything plays out. I just think that the government is always so concerned with being fair and taking care of those in need, but what about those who need to fail? Who is not to say that five new American auto makers would rise to fill the void left by a fallen GM? Creative destruction anyone? Only time and tax dollars will tell!

Stimulus or stimuless?

I came across an interesting article this morning. http://money.cnn.com/galleries/2009/news/0901/gallery.money_summit/index.html
The article answers some of the questions that many of us have regarding the stimulus that congress and our president are pushing to pass. Some of the answers are very interesting, but take them for what they are worth. We are wading into uncharted territory and the truth is that no one knows what will work and what will not. Politicians and economists alike can make educated guesses on what will or will not work based on past experiences but as Dr. Ian Malcom illustrated in his beautiful Jurassic Park crash course of chaos theory no two experiences are ever truly the same.

Those who know me know where I sit on this issue. My stance is that the whole stimulus is bogus. When the government is involved the name of the game is incentives. What is the incentive to pass a stimulus? If you are really crass you could say that government officials are throwing our tax dollars around like candy at a parade to any corporation or special interest group that has sufficient lobbyist influence. Is this happening? I think the character revelations of our recent crop of politicians confirm that this is most definitely happening. Is it the largest incentive to pass the stimulus? The optimist in me says probably not. I think it is way less JFK conspiracy theory than that. I call it the chicken little syndrome. From a political standpoint, when something is going wrong or poorly it is much better to have done something than to have done nothing, even when history and common sense reveal that it only added to the mess. I think this is clearly evident by the way the politicians are pushing action. Hence the term chicken little..."the sky is falling the sky is falling". All we have heard throughout the passing of the first stimulus and the multiple bailouts is that we need to act quickly, something must be done now, the consequences of failure will be dire, etc. etc. But what has happened. Nothing. The economy still sucks and we have bolstered our ever growing national debt in the process. One could argue that we don't know where we would be had action not been taken. OK point taken. But this assumes that implementation of our government policy worked and I would ask when has the government truly been effective at implementing any decision of this scale throughout history. Is that a cricket I hear?

I think the first few questions and responses in the article are also interesting about savings and spending and how much direct impact the stimulus would really have. Now I was actually opposed to the stimulus the first time around even when I knew I was going to get a $1200 check. A lot of it was based on arguments that those stimuli in the past have yielded luke warm results at best, but most was due to the fact that it is a huge assumption of debt that is a temporary band aid. I am a free markets guy that thinks that eventually rates and home values or what have you eventually reach a point where those with cash or access to it can't resist sitting on the sidelines any longer. This assumes they have jobs. Which is why the new buzzword or catchphrase is job creation. But look at the package and a lot of the spending has nothing to do with creating jobs or getting money into the hands of consumers. The money that does likely will not make its way into the system so to speak for a matter of years in some cases. Are we willing to take on the, by some estimates, trillion dollar debt to carry out this stimulus? I am not. I think the luke warm taxpayer disbursement would be a better play especially since it would amount to $9,000 (I know if I instantly pocketed 9k that not all of it would be saved and I am probably more financially disciplined than most. Imagine all the new Iphones out there.).

None of this discussion even addresses the biggest problem I have with bailouts and stimulus.....the principle of the whole thing. Who is the government to decide who deserves to get a piece of the action? If you analyze this scenario it is a very slippery slope. Those who have read the greatest book of all time Atlas Shrugged can find themselves about to vomit at the prospect of this stimulus. An example would be, we NEED to bail out the banks because they are essential to working markets, but now the auto's are in trouble and they are essential to jobs in America. Well lets say that chicken farmer's are hurting as well. Well they NEED assistance as well. Are they as essential as the previous two? Lets say we decide not to help them out. Why? They NEEDED it just as much as the last two. You get the point. In an effort to cut this post off before it becomes a novel I am going to get back to work. But I would love to hear some counter arguments and views on this. Control what you can control and get your own finances in order because you never know what your elected officials might be planning with your money!