Cognitive dissonance and democracy

John Scalzi declares that it is absolutely an act of hate to destroy legal, existing “marriages”, never mind that they weren’t legal three months ago, they probably won’t be legal in another month, and the legal state of the relationship is not tantamount to the relationship itself. This declaration also raises the obvious question: if there is nothing wrong with homosexuality, then what is wrong with hate?

Meanwhile one of his commenters demonstrates that liberal fascism is alive and well: “I think the people behind prop 8 should be treated like anyone else guilty of hate crimes.”

The amusing thing is that she almost surely calls herself a “Democrat”.

This may sound familiar

The negligence and incompetence of the nominally conservative commentariat on economic matters has really been quite remarkable when one considers how often and how favorably they tend to write about the so-called “free market”. I wrote this email to Rich Lowry in response to his amazing assertion on NRO that the failure of the Paulson plan to “restore confidence” to the markets should not be taken as a failure of the Paulson plan.

Mr. Lowry, with all due respect, you’re missing the point. The Paulson plan cannot and will not work. It is hopeless and was from the very moment of its conception. It’s a Keynesian solution to an Austrian problem; all the Treasury is doing is ensuring that the crisis is exacerbated and extended in exactly the same way that Hoover and FDR did. This is the classic “pushing-on-a-string” problem that all the contrarians have been warning about for some time now. You cannot correct fundamental investment misallocations caused by cheap money by providing more liquidity. It’s spraying gasoline on the fire.

This is not about “a crisis of confidence” or “animal spirits” or all the usual Keynesian blather that is spouted by the half-educated in political economy. They’re only addressing the symptoms, not the disease which as they try to fight off the contraction that inevitably stems from previous inflationary expansion. It worked in 1996 when they inflated equities. It worked again in 2003 when they inflated housing. Now, there’s nothing left to inflate and the contraction will be much more painful than it would have been if they hadn’t tried to fight it off the two previous times. So, it doesn’t matter when the Paulson plan was put into play, since it couldn’t have worked anyhow. I know Mr. Kudlow and your other mainstream Keynesian and Monetarist contacts will tell you otherwise; they are wrong, as you will see.

It’s a basic matter of defying economic gravity. After the boom, the bust must come eventually. And please don’t confuse the bounce coming next week with an actual recovery; because just when everyone breaths a sigh of relief and starts writing about how the worst has passed, the bear will return with a vengeance.

It’s a beautiful ideal, it merely hasn’t been implemented properly. Now, where have we heard THAT ONE before?

UPDATE – NRO’s John Hood concurs with my take on the matter in a note to Rich Lowry:

You’ll get no disagreement from me that it’s very, very difficult to draw quick conclusions about the relationship between public policy and financial markets…. That said, though, think back to when the House initially voted down the Paulson plan. There was a large subsequent drop in equity values, which many pundits, including some Corner contributors, blamed on the irresponsibility of House Republicans. Now that the plan, more or less intact, has been voted into law, the markets have truly plummeted. Sure, it’s possible that the bear market would have been even hairier and growlier if the Paulson’s bailout notion had never passed, but a certain Medieval philosopher’s shaving equipment would tend to discourage that line of reasoning.

Your correspondent is correct, I think. This is an Austrian moment being described almost entirely in Keynesian terms. No wonder people are panicked and confused. I think the case against Treasury’s plan remains persuasive.

The trans-continental economic war

This is an interesting perspective on the situation. It’s not anywhere nearly as far-fetched as it may seem, as I recall that years ago, Alan Greenspan smugly explained how it was European investors who would be sent the bill for the irrational exuberance of the American economy:

What has emerged are the outlines of two opposite approaches to the unfolding crisis. The Paulson plan is now clearly part of a project to create three colossal global financial giants – Citigroup, JP MorganChase and, of course, Paulson’s own Goldman Sachs, now conveniently enough a bank. Having successfully used fear and panic to wrestle a $700 billion bailout from the US taxpayers, now the big three will try to use their unprecedented muscle to ravage European banks in the years ahead. So long as the world’s largest financial credit rating agencies – Moody’s and Standard & Poors – are untouched by the scandals and Congressional hearings, the reorganized US financial power of Goldman Sachs, Citigroup and JP Morgan Chase could potentially regroup and advance their global agenda over the coming several years, walking over the ashes of a bankrupt American economy made bankrupt by their follies.

By agreeing on a strategy of nationalizing what EU finance ministers deem are ‘EU banks too systemically strategic to fail,’ while guaranteeing bank deposits, the largest EU governments, Germany and the UK, in contrast to the US, have opted for what will in the longer run allow European banking giants to withstand the anticipated financial attacks from the likes of Goldman or Citigroup.

The dramatic selloff of stocks across European bourses and across Asia is in reality a secondary and far less critical issue. According to market reports, the selloff is being driven mainly by US hedge funds desperate to raise cash as they realize the US economy is going into economic depression, that they are exposed and that the Paulson Plan does nothing to address that.

A functioning solvent banking and interbank system is far the more strategic issue…. Certain more conservative EU hands are not about to buy the remedy being offered by Washington.

What those who correctly subscribe to the conspiracy theory of history often tend to forget is that there is no one great overarching conspiracy of bad men. Reading Roman, Byzantine, and Greek history quickly teaches one that there are multiple conspiracies of men who rapidly shift from one conspiratorial faction into another, always trying to maximize their own individual benefit at all times. Paulson’s long-term objective is very different than Bush’s, let alone Obama’s or the average Wall Street cheerleader’s. And none of these have the American public’s interest in mind, unfortunately, the American public has neither the capacity nor the interest in even beginning to grasp these tectonic struggles taking place beneath the foundations of their society.

Now that Iceland has fallen, it’s pretty clear that neither Europe nor Japan are going to be in any mood to tolerate Mr. Paulson’s master plan to salvage American financial dominance.

Comment shuffle fixed

In which the blog collectively performs a service:

We were tracking a bug were in some very rare occasions the comment was improperly sorted after an edit. But as we were not able to reproduce it (although we spent lots of time creating and editing comments…..), we were struggling with it….. As you reported some comments with this problem on your blog, we have been able to identify the issue and this is fixed now.

God clearly works in some very mysterious ways… considering that even Jamie’s incoherencies work towards the common good.