Saturday, February 19, 2005

Victor Davis Hanson on the Middle East

Victor Davis Hanson on the Middle East and Reform: "Now in hindsight, few seem to object to the ostracism of Arafat or estrangement from Saudi Arabia. The moral?
As a rule of thumb in matters of the Middle East, be very skeptical of anything that Europe (fearful of terrorists, eager for profits, tired of Jews, scared of their own growing Islamic minorities) and the Arab League (a synonym for the autocratic rule of Sunni Muslim grandees and secular despots) cook up together. If a EU president, a Saudi royal, and a Middle East specialist in the State Department or a professor in an endowed Middle Eastern Studies chair agree that the United States is 'woefully naive,' 'unnecessarily provocative' or 'acting unilaterally,' then assume that we are pretty much on the right side of history and promoting democratic reform. 'Sobriety' and 'working with Arab moderates' is diplo-speak for supporting or abetting an illiberal hierarchy.... "

And, "The American effort to democratize postwar Afghanistan and Iraq has placed a heavy burden on the United States to develop a coherent and consistent policy of supporting reformers throughout the Middle East. We should continue with demands for elections in a Lebanon free of a tyrannical Syria, elevate dissidents in Iran onto the world stage, pressure for change in the Gulf, and say goodbye to Wahhabi Saudi Arabia. If Western elites are really worried about the legitimacy of past elections in Iraq, let them go instead to Lebanon where they can worry first about having any at all, and then later complain about the proper degree of voter participation. The forces of history have been unleashed and we should cease apologizing for the deluge and instead steer the waves in the right direction.

Americans understandably focus on the hot wars in Iraq and Afghanistan. Yet just as important are the unsung successes that received little praise, and then have a weird tendency to drift off into the collective global amnesia as if they arose from natural, not American-induced, reform."

Do read it all and all of anything VDH writes. His homepage can be found here.

Iwo Jima

Iwo Jima Posted by Hello

WSJ: "Sixty years ago today, more than 110,000 Americans and 880 ships began their assault on a small volcanic island in the Pacific, in the climactic battle of the last year of World War II. For the next 36 days Iwo Jima would become the most populous 7 1/2 square miles on the planet, as U.S. Marines and Japanese soldiers fought a battle that would test American resolve even more than D-Day or the Battle of the Bulge had, and that still symbolizes a free society's willingness to make the sacrifice necessary to prevail over evil--a sacrifice as relevant today as it was 60 years ago."

A Little International Economics - Again, Not to Worry about US Trade Deficits

Here are the understandable highlights {with key points in bold from me} from an article in the International Herald Tribune today - U.S. hegemony has a strong foundation: "Would-be Cassandras have found a new threat to U.S. hegemony: overdependence on foreign capital and growing foreign debt."

Despite the pervasiveness of this doomsday prophecy, U.S. hegemony is solidly grounded: It rests on an economy that is continually extending its technological lead, ensuring its continued appeal for foreign investors. The dollar's role as the global monetary standard is not threatened, and the risk to U.S. financial stability posed by large foreign liabilities has been exaggerated. If anything, the world's appetite for U.S. assets bolsters U.S. predominance rather than undermines it.
The classic doomsayer argument - that growing foreign indebtedness results from too little savings by Americans - neglects the fact that savings and investment are seriously undervalued in U.S. economic accounts. When you include capital gains, 401(k) retirement plans, and home values, U.S. domestic saving is around 20 percent of GDP, the same as in most other developed economies. And when you consider "intangible" investment (like new-product development and design experimentation) as part of total, the supposed increase in consumer spending as a share of GDP turns out to be a statistical artifact.
Indeed, much of the explanation for chronic current account deficits relates to the U.S. economy's strong fundamentals, not fatal structural flaws. Thanks to strong economic growth reinforced by a bias toward imports and a still overvalued currency, American consumers have tended to spend a disproportionate share of their incomes on imports. More important, with the United States expected to grow faster than Europe and Japan over the next decades and wealth growing rapidly in Asia, foreign private investors and central banks will continue to flock to U.S. financial markets. Asian governments must continue to finance U.S. imports of their manufactured goods, since the United States is their largest market and a major source of inward direct investment. And the spread of information technology to new sectors of the U.S. economy will make a revival of U.S.-bound private capital flows likely as well.
To be sure, the economy will at some point have to adjust to a decline in the dollar and a rise in interest rates. But these trends will at worst slow the growth of U.S. consumers' standard of living, not undermine the U.S. role as global pacesetter. The dollar will remain dominant in global trade, payments and capital flows, based as it is in a country with safe, well-regulated financial markets. For foreign central banks, U.S. Treasury bonds, government-supported agency bonds and deposits in highly rated banks will remain, for the foreseeable future, the chief sources of liquid reserve assets. And provided U.S. firms maintain their entrepreneurial edge - and despite much anxiety, there is little reason to expect otherwise - global asset managers will continue to want to hold portfolios rich in U.S. corporate stocks and bonds.
The real threat to U.S. hegemony, then, is not that the sentiments of foreign investors will make foreign debt unsustainable; it is that protectionism and isolationism at home will put an end to the dynamism, openness and flexibility that power the U.S. economy.
(David H. Levey was formerly managing director of Moody’s Sovereign Ratings Service. Stuart S. Brown is a professor of economics and international relations at Syracuse University.) "

Once again I am saying do not listen to the naysayers worried about US Trade Deficits (yet...) Also if you are into this the entire article is interesting and not very technical.

The Yankee or Dixie Quiz

Courtesy of the fine folks at Southern Appeal (a blog I heartily endorse and read regularly) you have to go take The Yankee or Dixie quiz. I scored 87% Dixie. Let me know what you scored and pass the test along.

And More from the Vatican

I found this interesting that a discussion of sainthood even touches on disagreements between Christianity and Islam. The Word From Rome February 18, 2005: "In most cases, processes for beatification involve some degree of uncertainty, since one never knows quite how it will go. Every now and then, however, there's a slam-dunk candidate for whom it's only a matter of time. Such was the case with Mother Teresa when she died in 1997, and such is the case again this week with Carmelite Sr. Maria Lucia of Jesus and of the Sacred Heart, better known as Lucia dos Santos, the last of the three visionaries of Fatima, who died last Sunday.
Lucia passed away on the 13th of the month, the same day in May 1917 that, according to the Fatima tradition, the Virgin Mary began appearing to three small children in this remote site in Portugal. It's a spot named after the wife of Ali, the cousin of the prophet Muhammed, and hence a reminder of the Muslim conquest of the Iberian peninsula. (In some Koranic schools, especially in Shi'ite circles where devotion to Fatima is strong, it's long been believed that Mary, who is also venerated in the Koran, didn't come to Fatima for Christians at all, but for the Muslims). "

If you are interested the rest of the discussion is fascinating as it delves into Pope John Paul II's faith in soon to be Saint Lucia and also the intriguing tale of the relationship between the Visionaries of Fatima and the failed assassination attempt on the Pope

Pope John Paul II Meeting Isreali and Palestinian Officials Feb. 25

The Word From Rome February 18, 2005: "The Ministers of Tourism for Israel and the Palestinian National Authority are scheduled for a joint private audience with Pope John Paul II on Friday, Feb. 25. It will be the first time that officials from Israel and the Palestinian Authority have met the pope simultaneously, and will undoubtedly be taken as another sign of a thaw in the Israeli-Palestinian relationship. "

"The two ministers are coming to Rome in large part to ask Christians to resume pilgrimages to the Holy Land, assuring them that the two sides are cooperating to assure tourists safe access to the Holy Sites and easy movement back-and-forth across borders. Due to the violence associated with the Israeli-Palestinian conflict, tourism to the region has been in decline for years. As one indicator of that reality, the number of American tourists visiting Israel in 2000, just before the second intifadah, was 539,512, according to TravelAge magazine. In 2003, it was 294,672, a decline of almost 50 percent. A 'photo op' with the pope is thus seen by both sides as an ideal way to lure potential Christian visitors. "

First, this shows the Pontiff is recovering and has His attention on the Mid-East situation. Second, the fact that officials from Isreal and the PA will be in the same room is a positive as well.

Rhett, Get That Woman a Julep! or Education: More Dissection of Harvard President Summers

More on the Harvard situation from Kathleen Parker: Truth and consequences:

"Male chauvinist pigs (remember them?) can take a vacation as long as women like MIT biology professor Nancy Hopkins are defending women's intellect. Upon hearing Summers' words, Hopkins told reporters that she felt she was going to be sick. That her 'heart was pounding' and her 'breath was shallow . I just couldn't breathe .'

Rhett, oh Rhett, get that woman a julep, for cryin' out loud. "

And "...girls are far exceeding boys in school at nearly every level. Sixty percent of college students today are female. At the high school level, girls receive 60 percent of the A's, while boys earn 70 percent of the D's and F's..."

"The larger, more compelling concern to educators would seem to be helping boys improve their reading and writing skills so that they can survive in the information age, rather than counting the number of female Ph.D.s in science as some measure of gender equality.Meanwhile, it's too bad Summers felt forced to apologize and that he faces further censure from faculty. When the president of the nation's oldest university has to say he's sorry for saying something true, the opposite of Truth seems the victor."

Flying or On a Blind Date Soon?

New York Post Online Edition: news:
" A Newark Airport security screener is being reassigned after officials said she failed to spot a 5-inch butcher knife in a passenger's pocketbook.
Katrina Bell, 27, of Greensboro, N.C., had cleared security and was waiting to board a flight with her sister on Saturday morning when she discovered she had forgotten to remove the knife from her bag. She had put it there in preparation for a blind date Thursday night, her sister, Tikisha Bell Gowens, 30, told the Star-Ledger. "

Thomas Sowell on JFK2 & Form 180

Follow up to the last post ; here is an excerpt from the Sowell column I mentioned and have since found: Thomas Sowell: Tainted media:
" One of Jimmy Carter's first acts as President was to issue an order granting amnesties to draft dodgers who had fled the country during the Vietnam war and also allowing an upgrading of military discharges that had been less than honorable.
There is more to this than simply a strange date on an honorable discharge. The covering memo refers to U.S. Code Title 10, sections 1162 and 1163. Anyone who bothers to read those sections will discover that they are about unusual circumstances for issuing discharges from the military services.
Senator Kerry never signed Form 180 to make all his military records public, as President Bush had done -- and the media didn't press him to do so. Even after Kerry's widely publicized role as a war hero was challenged by numerous men who had served with him in Vietnam, the media remained totally uninterested in checking out his record."

"Maybe there is a perfectly innocent explanation for Senator Kerry's late-dated honorable discharge during the Carter administration. But no explanation has been asked or given, even though there may also be a not so innocent explanation.
What is well known is that, during the Vietnam war, John Kerry went to Paris on his own and engaged in discussions or negotiations with representatives of the country with whom we were at war, even though he was still an officer in the naval reserve.
That raises legal questions about unauthorized personal diplomacy which naval authorities may not have overlooked as generously as the media did, and which could have affected the kind of discharge that Kerry received."

Kausfiles: "JFK2, We're Just Not That Into You!"

How to get the message to Dems 2004 loser? By Mickey Kaus:

"The 180 Solution: Has John Kerry signed his Form 180--allowing journalists full access to his military records--yet? He told Tim Russert he would! ...'Yes, I will.' ... Not much wiggle room there (though Kerry then seemed to ineptly try to craft an 'only-if-everyone-else-signs-theirs' loophole). ... Maybe Form 180 is the magic answer to the how-to-get-hm-to-go-away dilemma. Something Democrats could unite around!"

Thomas Sowell's last column also made a huge point on Kerry's Form 180. [Update-next post.]

I doubt if we ever see full disclosure of the records as it will clearly show the details of Kerry's original US Army discharge prior to the disclosed discharge during the Carter Administration - years after Kerry left the service and after the Carter pardon of almost all Vietnam related situations.

Friday, February 18, 2005

Bear Stearns: Economic Bull

David Malpass, Bear Stearns chief economist today:

"Upside Breakout on the Horizon? It's more likely than not."

"Some economy watchers have been looking for a slowdown, but a speed-up is more likely. Right now the U.S. is in the early to middle stages of a long, durable, and relatively fast expansion, one that has positive implications for U.S. and foreign equities (but not for bonds). The growth engines include the dollar's exit from deflationary territory in 2002, low interest rates, the 2003 tax cuts, and the increasing level of U.S. employment."

"Except for the third quarter of 2003 when GDP grew at 7.5 percent, annualized quarterly growth has been between 3.3 percent and 4.5 percent for each quarter since the second quarter of 2003. In all likelihood, growth for the fourth quarter of 2004 (soon to be revised) and the first quarter of 2005 will fall within that range.When the U.S. breaks out of that range, it is more likely to be toward the high side than the low side. The U.S. economy will probably register a 5 percent growth quarter before it turns in a 2.5 percent quarter. Why? Huge levels of liquidity, low inventories, unabated monetary and fiscal stimulus, a solid household balance sheet, robust investment activity, and continued strength at retail are all part of today's economic story. This is the stuff of accelerations, not slowdowns."

The Success of the 2003 Bush Tax Cuts

William P. Kucewicz on NRO Financial:
"The Bush tax cuts of 2 years ago continue to lay the foundation for a prolonged economic expansion, owing to a conspicuous shift in private expenditures from consumption to investment. The June 2003 tax cuts, in fact, are functioning precisely as promised: boosting GDP to the benefit of all Americans, regardless of income. It's one of the marvels of supply-side fiscal policy. By raising the incentive to invest, marginal tax-rate reductions augment the ratio of financial capital to labor capital, thus raising labor productivity and, in turn, accelerating growth. "

"Democrats, however, aided by a pliant (and largely economically illiterate) Washington press corps, continue to foist the fiction that the Clinton tax hikes produced the 1990s boom by closing the federal budget deficit. This is patent nonsense. For a start, they've got the cause-effect deficit-GDP relationship backwards: The deficit closed because economic growth quickened, not the other way around.GDP growth is clearly more responsive to changes in private investment than personal consumption. Personal consumption expenditures, as a percentage of GDP, have a tendency to rise during economic contractions, while private fixed investment usually shrinks; again confirming the pivotal supply-side role played by investment versus consumption. "

"Truth is, the more after-tax money people have at their disposal, the greater the propensity to save rather than to consume. Much of any increase in real DPI finds its way into nonresidential fixed investment. Increased business investment of course generates further increases in personal income (via enhanced labor productivity and corporate profitability), making even more financing available for business creation and expansion.Lastly, President Bush's envisioned ownership society would stimulate strong and lasting economic expansion. His calls for tax cuts and tax simplification, as well Social Security reform, would enhance the economy's long-term growth prospects by improving the all-important ratio of private investment to personal consumption.In jawboning members of Congress, therefore, the administration's strongest argument for new and permanent tax cuts is that they work. Tax-rate reductions redound to everyone's benefit regardless of income level by raising the incentive to invest and thus accelerating the pace of economic expansion. Yes, a rising tide does lift all boats."

The article is also accompanied with factual quantification and supporting diagrams.

Senator Burr's Duty of Honor

From John McCaslin:
"If it's his maiden speech in the U.S. Senate, then why is Sen. Richard M. Burr, North Carolina Republican, delivering a 45-minute farewell address?
Actually, Vice President Dick Cheney and Senate Majority Leader Bill Frist selected the freshman senator to deliver the traditional reading Friday of George Washington's farewell address. It has been delivered on the floor of the Senate every year, on or near Washington's birthday, since 1896.
When he finishes, Burr will inscribe his name and a few comments in a black, leather-bound book kept by the secretary of the Senate.
And how does the freshman senator feel to join other notable senators to have read the address, including Henry Cabot Lodge in 1898, Henry Cabot Lodge Jr. in 1937, Hubert H. Humphrey in 1956 and Barry Goldwater in 1957?
'The United States Senate is an institution deep in tradition,' he says, 'and I appreciate the opportunity to participate in such an honored part of that tradition.'
Last year's address was delivered by outgoing Sen. John B. Breaux, Louisiana Democrat."

Education: America's Separation of Its Mind and Soul

Much debate is going on over Ward Churchill, Lawrence Summers at Harvard, the cost of higher education, NCLB, the lack of conservative freedom in US universities, and overall public policy for education. The best summary statement of the seriousness of the situation so far is today in David Frum's Diary on National Review Online:
"The corruption of the universities is a terrible shame upon the United States and a cause of profound sadness among American conservatives. When we complain about the abuses on campus, it is not out of glee at scoring a point against an ideological opponent, but out of terrible regret that some of the most essential institutions of this great country - the institutions at which learning and inquiry ought to be honored and served - have so often perverted their best natures to serve bad causes.

America suffers from a dangerous separation of its mind and soul. Its elite intellectual institutions are too often hostile to the country's culture and founding values. As the Journal reporters mention, Harvard continues to ban ROTC from campus for fear of offending the university's militant gay lobby; as Samuel Huntington details in his important book, Who We Are, elite institutions like Harvard regard themselves as multinational, multicultural enterprises independent of the nation and the people that created, sustain, and defend them.

This separation serves nobody. It makes places like Harvard effete and irrelevant. I had lunch a little while ago with a representative of another prestigious school. 'We see it as our mission,' he told me, 'to train leaders.' But how can you do that, I asked, when you are instilling your leaders with an ideology that is despised and mistrusted by their potential followers?

At the same time, it badly disserves America to lose the services of places like Harvard. Despite the health and strength of its soul and sinew, a country cannot thrive in a dangerous world with a diseased mind."

Think about how serious this really is for America's future.

Krugman Attacks Greenspan

Paul Krugman, the former financial advisor to Enron, and the columnist I find to be the worst economic thinker in history, in his latest attack on social security privativation calls Chairman Greenspan a "partisan hack" in his column called Three-Card Maestro:

"On Wednesday Mr. Greenspan endorsed Social Security privatization. "

"...a disturbing thing about Wednesday's hearing was the deference with which Democratic senators treated Mr. Greenspan. They acted as if he were still playing his proper role, acting as a nonpartisan source of economic advice. After the hearing, rather than challenging Mr. Greenspan's testimony, they tried to spin it in their favor.But Mr. Greenspan is no longer entitled to such deference. By repeatedly shilling for whatever the Bush administration wants, he has betrayed the trust placed in Fed chairmen, and deserves to be treated as just another partisan hack. "

The entire world hangs on Dr. Greenspan's every word to Krugman's chagrin.

Thursday, February 17, 2005

Thomas E. Nugent on Economic Technology

NRO Financial:
"Since 1971, there have been three important advances in economic technology that have allowed the U.S. to maintain leadership in economic policy: the removal of the gold standard, a dramatic change in monetary policy, and pro-growth tax-rate reductions. Taken together, they represent the continuing triumph of economic technology. "

"President Bush's second term is likely to be characterized by further changes in fiscal policy that will lower taxes for most Americans and provide additional fiscal-policy stimulus to keep the U.S. economy on a growth track. One risk to a continued strong economy and bull market is the possibility that the majority of liberal politicians, along with some traditionally conservative politicians, fail to recognize the need for deficit spending when the economy is not operating at full capacity.Still, without the advances in economic technology during the last 35 years, we wouldn't be world leaders. The U.S. took the lead in the development and implementation of economic technology and changed the lion's share of world economies for the better. "

Read it all if you can.

More on Hariri from Fouad Ajami in the WSJ

OpinionJournal - Featured Article:

"It will not do for the Syrians to profess horror at this crime of Hariri's assassination. There is an old tradition, and an old saying, in the hard hill country of Lebanon about killing a man and walking in his funeral procession. The only antidote to this terrible, senseless death, is the eviction of Syria from Lebanon. "

"It would be fitting that the Syrian hegemony in Lebanon consolidated during the first war against Saddam Hussein would be undone in the course of this new campaign in Iraq."

"There is talk nowadays of spreading liberty to Arab lands, changing the ways of the Arabs, putting an end to regimes that harbor terror. The restoration of Lebanon's sovereignty ought to be one way for the Arabs to break with the culture of dictators and police states, and with the time of the car bombs. Hariri sought for his country a businessman's peace. His way was a break with the politics of charisma and ideology that has wrecked the Arab world; he believed in philanthropy and practical work. His vision may not have been stirring. But there was dignity in it, and a reprieve from the time of darkness. "

Freidman with Excellent Column

The headline that Tom Friedman had a good column is not unusual in my opinion. Mr Freidman is certainly left of me but an excellent writer and sometimes absolutely correct. Mr. Hariri's assassination has not received the attention it should in the MSM. A portion of Freidman in The New York Times: 'Hama Rules':

"Rafik Hariri stopped playing by 'Lebanese Rules' - eating any crow the Syrians crammed down Lebanon's throat - and openly challenged Syrian imperialism. If the Lebanese want to be free, they have got to take the lead. They have to summon the same civic courage that Mr. Hariri did and that the Iraqi public did - the courage to look the fascists around them in the eye, call them in the press and in public by their real names, and confront the European Union and the Arab League for their willingness to ignore the Syrian oppression.
Nothing drives a dictatorship like Syria's more crazy than civil disobedience and truth-telling: when people stop being intimidated, stand up for their own freedom and go on strike against their occupiers. The Lebanese can't play by Hama Rules and must stop playing by the old Lebanese Rules. They must start playing by Baghdad Rules.
Baghdad Rules mean the Lebanese giving the Syrian regime - every day, everywhere - the purple finger. "

Wednesday, February 16, 2005

Washington Post AGREES with Personal Retirement Account Reasoning

Mr. Bush's Personal Accounts (

"It's true that personal accounts, by themselves, would not reduce Social Security's deficit. Mr. Bush's proposal gives workers the option of diverting part of their Social Security taxes into personal accounts; in return, workers who exercise that option accept a cut in future payments from the traditional Social Security system. This exchange is designed to be financially neutral for the government: hence the official comments. But this doesn't mean that personal accounts have no impact on Social Security's solvency. By investing partly in stocks, personal accounts would boost benefits for the average retiree -- and hence make it politically easier to take the tough steps necessary to fix the solvency problem. "

"In short, the equity premium is real even though its precise size is unknowable; it amounts to a strong argument in favor of personal accounts. "

Social Security:An Eighth of Every Paycheck

OK, just a couple of blasts from the recent past before I go real time. Check out the Boston Globe Op-ed:

"YOU DON'T have to be a financial wizard to know that Social Security is a lousy investment. Unlike the money you deposit in a bank or salt away in an IRA, you don't own the money you pay into Social Security. You have no legal right to get those dollars back, and when you die you can't pass them on to your heirs. Nor can you use your Social Security account before you retire -- you can't borrow against it and you can't cash it in. You aren't allowed to put the money into a balanced portfolio. You can't even watch as the interest accumulates, since your Social Security nest egg doesn't earn any interest."

"Your nest egg, in fact, doesn't even exist. Because Social Security is financed on a pay-as-you-go system, the dollars withheld from your paycheck today are immediately paid out to retirees. The benefits you receive when you retire will be funded by the payroll taxes then being collected. "

"Social Security wasn't always a sucker's game. As with all Ponzi schemes, players who got in early made out like bandits. For many years, Social Security deductions were minuscule. Until 1949, the combined employer/employee tax rate was only 2 percent, and it was imposed on just the first $3,000 of income, for a maximum payroll tax of just $60 a year. The first Social Security recipient was Ida May Fuller of Ludlow, Vt., who retired in 1940 after having paid a grand total of $44 in payroll taxes. By the time she died in 1975, she had collected $20,933.52 in benefits -- a return on her ''investment' of more than 47,000 percent."

"And a generation later? Today Social Security skims off 12.4 percent of the first $90,000 earned -- one-eighth of every paycheck. There are no exemptions, no deductions. It kicks in from the very first dollar of income. It is the biggest tax the average American household faces -- 80 percent of us pay more in Social Security taxes than we do in income tax.One tiny notch at a time, payroll taxes have been ratcheted up to a level that would have been unthinkable in Franklin Delano Roosevelt's day. No wonder Social Security is so unpopular among the young. It provides no security for their retirement, while impoverishing them in the present. In exchange for an eighth of their earnings today, it guarantees nothing but higher taxes tomorrow. That there are politicians who defend this arrangement wouldn't have surprised FDR. But how shocked he would be that they call themselves Democrats."

Finally Back

My "return shortly" was longer than I imagined. To make a long story very short, I sold one monitor which led to other things.... Anyway, I am back. I will not attempt to comment on all that has happened in the meantime knowing you are up to speed but merely resume posting as if the time warp never happened.