Canadian Cincinnatus

Maybe the kinds are all right after all: according to the LA Times they don’t care about movie stars

The LA Times interviewed a ‘posse’ of young people about some current movies. Here are some of their comments:

“The film is populated with prominent names, notably Colin Farrell, Kate Beckinsale, Jessica Biel and Bryan Cranston. But of the 11 members of the posse, only two knew anyone who was in the film (both of them pinpointing Farrell).”

“But even such top-tier stars as Will Smith, Robert Downey Jr. and Dwayne (The Rock) Johnson barely registered — and not always in a positive fashion. When discussing “Snow White and the Huntsman,” Max Nath, 16, could characterize Charlize Theron only as “that other woman.””

“After hearing the posse share its views, it was clear that it has a serious case of superhero fatigue. That even includes “The Avengers,” which is already breaking box-office records, but finished in the middle of the pack with the posse. As Isaac Galan, 15, put it: “It really feels a little cartoonish. I mean, is it a movie or a video game?”

For the posse, the superhero-style films, from “G.I. Joe” to “Spider Man” and “Men in Black” were simply underwhelming. “The frequency of all those superhero movies makes you think they’re just doing them to get another movie out,” said Jeremy Arnold, 17. “I wish they’d think of something more original. I mean, how many superheroes is too many superheroes?””

Fantastic. The less enamored they are with ephemeral pop stars and “role models” (i.e. people who play heroes but aren’t heroes themselves), the better.

For what it is worth, I believe their ambivalence to movie stars is a reflection of the fact that the very idea of a ‘movie star’ is in low repute these days. In Hollywood’s golden age, movie stars had a high reputation because the studios were very careful about cultivating their image. No alienating political opinions and no scandals (keep your dirty linen indoors). Or you are out. I think that Hollywood has been living on this cultural capital until recently. But they have finally spent it. Years of tawdry sex scandals, idiotic  opinions, shameless look-at-me behaviour and hypocritical pronouncements that serve only to highlight their intellectual limitations have finally taken their toll. Though the stars probably don’t know it yet, it will take years of hard work to regain their good will with the public.

 

Finally, a mainstream economist who agrees with me that Greece must leave the Eurozone

In Friday’s edition of Slate, an article by economist Nouriel Roubini appeared with the title, Greece Must Go: The nation is likely to leave the eurozone sooner or later. Sooner is better. Thank you. I had been saying the same thing from at least July of last year, when I stated:

The important thing for the EU is not to save Greece – it is all but lost – but to teach the other PIIGS (Portugal, Ireland, Italy and Spain) a lesson. The EU can do without Greece. 

Some sample quotes from Roubini’s Slate column:

Greece is stuck in a vicious cycle of insolvency, lost competitiveness, external deficits, and ever-deepening depression.

A return to a national currency and a sharp depreciation would quickly restore competitiveness and growth.

Economics teaches us that the worst way for a government to interfere with its economy is to set prices. With the Euro, the EU is manipulating the most important price of all – the price of money. The price of the Euro is appropriate for Germany; it is too high for the siesta culture of the Mediterranean. At some point, the resulting imbalance has to balance. That point is now.

Of course, the process would be traumatic, and not just for Greece. The most significant problem would be capital losses for core eurozone financial institutions. Overnight, the foreign euro liabilities of Greece’s government, banks, and companies would surge. Yet these problems can be overcome. Argentina did so in 2001, when it “peso-fied” its dollar debts.

Some argue that Greece’s real GDP would be much lower in an exit scenario than it would be during the hard slog of deflation. But that is logically flawed: Even with deflation, real purchasing power would fall, and the real value of debts would rise (debt deflation), as the real depreciation occurs. More importantly, the exit path would restore growth right away, via nominal and real depreciation, avoiding a decade-long depression. And trade losses imposed on the eurozone by the drachma depreciation would be modest, given that Greece accounts for only 2 percent of eurozone GDP.

Bankruptcy is an essential part of the healing process in a free market system. Bad debts can’t be allowed to fester. By preventing bankruptcy, all you do is to prolong the recession. This is why Japan’s ‘lost decade’ is entering its third decade. The TARP bailout has played a similar role in the Great Recession. By preventing bad banks from going under, the federal government has ensured that the US economy has flat-lined for over 3 years.

Those who claim that contagion from a Greek exit would drag others into the crisis are also in denial. Other peripheral countries already have Greek-style problems of debt sustainability and eroded competitiveness.

As the Rev Jeremiah Wright is fond of saying, “the chickens are coming home to roost.”

The experience of Iceland and many emerging markets over the past 20 years shows that nominal depreciation and orderly restructuring and reduction of foreign debts can restore debt sustainability, competitiveness, and growth. As in these cases, the collateral damage to Greece of a euro exit will be significant, but it can be contained.

Another example is the US recession of 1920. President Warren Harding’s policy was to do nothing. The result was an intense but short recession. Why was that depression short-lived? Because the bad debts were allowed to clear.

But hey, who needs free market solutions when we have access to Keynesian pump priming? Sure worked well to keep the Great Depression going for a decade. 

 

Steve Schmidt: the reason John McCain lost

One of the reasons I had so many reservations about Mitt Romney is that I feared, being an establishment moderate, he would run the kind of gentlemanly loser campaign that John McCain ran in 2008. With the exception of picking Sarah Palin as the running mate, McCain’s campaign did everything wrong. And it even managed to mismanage that one success: after Palin’s firebrand acceptance speech - the one that propelled McCain ahead of Obama in the polls (for the first time in months) - the McCain campaign hid her away but did nothing to prepare her while she was sequestered. The architect of that defeat-from-the-jaws-of-victory debacle was the bullet-headed Steve Schmidt.

For this reason, I was much interested in this expose article on Schmidt at Big Journalism. A very informative article that deserves to be read in its entirety.

For some background information, check out Schmidt’s wikipedia entry. This is what it says about his early campaigns:

In 1995, Steve Schmidt managed the unsuccessful campaign for Kentucky Attorney General of Will T. Scott, who is now Deputy Chief Justice of the Kentucky Supreme Court [in other words Scott was good, his 1995 campaign run by Schmidt just sucked]. This Kentucky campaign's advertising strategy was featured in the second edition of George Magazine. In 1998, Schmidt ran California State Senator Tim Leslie's unsuccessful race for Lt. Governor of California. Also that year, he was the Communications Director for California State Treasurer Matt Fong's unsuccessful campaign to unseat U.S. Senator Barbara Boxer [I remember this campaign; Fong was widely viewed as having a credible shot at unseating Boxer]. In 1999, he was the Communications Director for Lamar Alexander's presidential run, leaving in June when the campaign reduced its senior staff.

You will notice that the two things common with each campaign: Steve Schmidt, and the fact that his employer lost. While it is true that he led Arnold’s 2006 successful gubernatorial campaign, this was accomplished when Arnold was at the apogee of his popularity. As far as I am able to determine, this has been Schmidt’s only campaign victory - ever.

I agree with Moe Lane, who said:

The faction of Team McCain represented by Steve Schmidt and Nicolle Wallace should not be allowed anywhere NEAR a Republican Presidential campaign for the rest of their lives.

Hear, hear. Steve Schmidt is the John Tory of American politics.

European austerity is the wrong answer to Europe’s problems

As a small government conservative, I might be expected to champion government austerity wherever I find it. However, this is not the case. For instance, I am greatly opposed to the European-style austerity programs that are being foisted upon Greece and Spain.

But isn’t government austerity good, the fiscal equivalent of cod liver oil? Depends on what you mean by austerity. In Europe, austerity doesn’t just mean cutbacks in government spending. It also means tax increases, particularly on the wealthy. Do you still like austerity - European-style?

The reason such a program cannot work is that the biggest factor determining the state of a government’s budget is economic growth. The reason is twofold: the government’s principal source of revenue is income tax, which declines in a recession; and its biggest expenditure is welfare spending, which skyrockets in a downturn. For this reason, an economic slowdown negatively impacts government revenues and outlays at the same time. In contrast, economic growth positively impacts both items at the same time. Therefore, an economic plan that does not stimulate growth will not work well.

Unfortunately, thanks to steep tax hikes for job creators, European austerity plans are not neutral with regard to economic growth. These plans are job killers - and growth killers. Therefore, while the spending cuts will help the government bottom line, the tax increases will throw more people out of work and cut government revenues even more – negating the positive effects of the cuts. With pain increasing both on the job market and the welfare office, the country finds itself in a death spiral, with government cuts chasing lost government revenues.

This can be seen in the US federal budget since the 2008 meltdown. As I mentioned a year ago. 

Much of the current deficit is caused by a combination of a loss of income tax revenue corresponding with an increase in social spending due to the Great Recession. Medicare, AFDC, Section 8 vouchers, food stamps, unemployment insurance: all of these programs have grown by 50% or more in the past 3 years.

As much as we conservatives like to think, Obama’s big spending initiatives have not been the biggest factor propelling the trillion dollar US deficits. It is social spending, caused by the recession. Grow the economy and these budget-busting items will shrivel all on their own – as revenue rises!

This is why I am also opposed to the IMF. They push the European brand of austerity to any troubled country that will listen to them. Fortunately, countries that turn down their strings-attached loans invariably do better.

Indeed. If you look at history, there are basically only two ways that governments have ever dealt with a crippling debt load. The first is to default. The second is to modestly reduce government spending, keeping discretionary expenditures constant in absolute terms for a number of years, while growing the economy so that tax revenues increase as social spending declines. These are the only two realistic choices. European-style austerity is not an option, at least not one that has ever worked in the past.

 

One cheer for France: France elects an anti-EU President

Say Cincinnatus, aren’t you one of those free market extremists?

Yes.

So why are you cheering (admittedly half-heartedly) about the defeat of France’s conservative president and the election, in his place, of an avowed socialist, who calls himself, “an enemy of finance”?

Good question. The answer is that I think the biggest pressing problem facing Europe today is the Euro. And the socialist central planners who set up the EU and the eurozone were so diabolically clever in setting it up that they got free market conservatives to champion central planning. They did this by joining free trade policy (which conservatives like) at the hip with central planning (which they want). As a result, France’s conservative president, Nicholas Sarkozy propped up the dying corpse of central planning throughout his reign with stop-gap measures like austerity and government bailouts.

This is why I am half-heartedly glad that he is gone. With Hollande, these programs will be that much less likely to be carried out. This has a number of good consequences that I am not sure Hollande does not intend. Without constant bailouts and austerity imposed by countries like Germany on countries like Greece, the EU will destabilize to the point where the PIIGS will depart the eurozone. When this is seen to not cause the end of the world, the entire EU edifice in Brussels will crumble.

But won’t Hollande’s prosperity-through-socialism prove to be economically disastrous for France? Oh, undoubtedly. But there is problem number 1 and problem number 2. In Europe today, problem number 1 is the price distortions caused by the centrally determined cost of money (i.e. the Euro) and Problem number 2 is everything else, whether the welfare state or unassimilatable Muslim immigrants. Problem number 1 needs to be dealt with today. Problem number 2 can wait until next week.

For instance, all of Greece’s current troubles are caused by the fact that it has to labour under a currency that is way too high for them. If it weren’t for the Euro, the Drachma would fall, the easy foreign credit would dry up (forcing Greeks to save), and Greek exports would become competitive again (putting Greeks back to work). As long as the Euro is in Greece, these things won’t happen and Greece will continue to bleed (and to get more indebted with each subsequent bailout package).

But wouldn’t a free-market-based disengagement from the European Union be better for France than more socialism, with its many negative side effects? Absolutely. But tell me, which candidate in the French Presidential elections is a reincarnation of Ronald Reagan? Such a politician currently does not exist in the French political landscape, so we have to settle for the lesser of two evils.

Machiavelli taught that if a political disease is too far-gone, the best solution is to let it run its course. The problem with Sarkozy is not that, in objective terms, he is a worse man than Hollande. He is not. He is a much better man. It’s just that he is good enough to keep the EU plodding along but not accomplished enough to tackle its contradictions head on. Machiavelli also taught that half-measures dig the grave deeper. By any measure, the Sarkozy legacy has been a series of half-measures.

 

Obama’s past girlfriends

In a Politico story that made headlines on the Drudge Report, it was revealed that the ‘mysterious white girlfriend’ that Barack Obama mentioned in his autobiography (the first autobiography, not the second) was a composite of different characters. This doesn’t surprise me a bit, as Stanley Kurtz in Radical in Chief states that the names of many individuals in Dreams From My Father (particularly the political types) are pseudonyms. Hmm... I wonder why he would do that?

What did strike me was the following passage (emphasis added):

"During an interview in the Oval Office, Obama acknowledged that, while Genevieve was his New York girlfriend, the description in his memoir was a “compression” of girlfriends, including one who followed Genevieve [Cook] when he lived in Chicago," Maraniss writes in his new biography, an excerpt of which was published online today by Vanity Fair.

So, let me get this straight: in addition to all the vacations, all the golf games, non-stop fundraising and the continuous campaigning, as well as taking time out to pick the winners of college basketball games, President Obama has room in his schedule to reminisce about his old flames.

Good thing he doesn’t have a demanding job!