Financial reform? Not exactly.

I was sent a link to this opinion piece and although I disagree with his quick blurp on the solution to the problem (mostly because it's an incompletely described idea), I think the article does show merit. Enjoy!
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This article was written by David Frum. David Frum writes a weekly column for CNN.com. A special assistant to President Bush in 2001-02, he is the author of six books, including "Comeback: Conservatism That Can Win Again" and is the editor of FrumForum.
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Washington (CNN) -- Financial reform? Not exactly. The bill before Congress does nothing to address the fundamental background causes of the crash of 2008.

Wall Street may have been the instrument of the crash. But the crash was made elsewhere: in Washington's failed policies for middle-class families -- and in China's distorted rush for economic growth.

The story is not a simple one. But I hope you will pay attention to the details. If you don't, you may find that the pocket that has been picked is your own.

As you've heard, the crash begins with the huge excess load of debt built up in the last two decades by American households. Why did Americans borrow so much? Some like to tell a story of irresponsibility: We borrowed too much because we were self-involved yuppies who just could not deny ourselves the latest flat-screen doodad for our McMansions.

Maybe that describes some people. But many millions of middle-class families plunged into debt for a very practical reason. Their incomes were not keeping pace with the cost of crucial items of the middle-class lifestyle: housing, medical care, college tuition. At the same time as housing, medical care and tuition were jumping in cost, the cost of borrowing was dropping to historic lows.

Adjusted for inflation, the typical American family earned less in 2007 than that family had earned in 2000. Meanwhile, everyday necessities such as energy were becoming more expensive: By 2007, the typical American family paid more for energy than it did for clothes and entertainment combined.

As everyday bills piled up, families borrowed to pay extraordinary bills. Mom needs nursing care? Junior got admitted to Chapel Hill? The roof needs refixing? No worries -- just cash out with a cheap refinance deal.

In the 1950s, the total debt of all American households amounted to less than one-third the nation's gross domestic product. In 1980, household debt amounted to less than one-half. As recently as 1990, it was still under 60 percent. In 2000, it was under 70 percent. On the eve of the 2008 crash, total household debt had bulged to 96 percent of gross domestic product.

All this borrowing might look like the road to ruin. And in fact it was the road to ruin. But that's not how it looked at the time. At the time, it looked like a bargain. Between 1980 and 2008, the household debt load doubled as a share of the economy. Yet the interest cost to carry that debt rose much more modestly. In 1980, the average American family devoted about 13 percent of its disposable income to debt service; by 2008, the average family was spending about 17 percent of its disposable income to service debt.

Why was debt so cheap?

This takes us to another fundamental cause of the crisis: the growth of China.

Maybe you've heard that we bought a lot of goods from China and now we are deeply in debt to China. That's true obviously -- but the cause and effect are upside down.

China lent us a lot of money so that we would keep buying Chinese goods.

Export booms do not usually last very long. The exporting country accumulates more and more of the importing country's currency. Eventually the exporting country decides it wants to use some of that currency. It exchanges the importing country's currency for its domestic currency -- and that has the effect of making its exports more expensive. The boom bumps up against its own natural limits.

That did not happen with China. Desperately eager to create more and more jobs to employ the tens of millions of peasants flowing into China's huge cities, China not only accumulated dollars by the hundreds of billions -- it held them. Then it went into the foreign currency market to buy still more billions of dollars, sometimes $1 billion a day.

All that dollar buying prevented China's currency from going up in value, which would have increased the price of China's exports -- and that kept China's factories turning.

What do you "buy" when you buy "dollars"? There are only so many Benjamins in the world, nowhere near enough. Buying "dollars" means buying dollar-denominated debt, and far and away the biggest source of U.S. dollar debt is U.S. mortgage debt.

With China so eager to buy, U.S. bankers went to work to create mortgage paper to sell. It didn't have to be good-quality paper -- the Chinese didn't really care about that. Did you get a great deal on your refi in 2005? Thank the Central Bank of China.

American homeowners borrowed because they could not earn enough. China loaned to keep its factories turning. Money flowed in a frenzied torrent across the Pacific. And somebody had to make it all happen: Wall Street. It created the debt instruments China wanted to buy and packaged the mortgages that Main Street felt pressured to sell. With trillions of dollars changing hands, even a small percentage fee could pay a lot of people a lot of billions in fees.

No doubt some of those fee-takers did abusive things. But the whole dynamic was abusive and dangerous. And so-called financial reform is a petty distraction from that larger, more important, and more urgent dynamic: raising American incomes so Americans borrow less, and redirecting Chinese trade to the home market so that the Chinese lend less. Until we achieve those two things, any recovery will only invite the next disaster.

The opinions expressed in this commentary are solely those of David Frum.

Bernanke gets a second term?

This just in: Bernanke was just confirmed for a second term as Fed Chairman. Anyone guess how the market responded? Down $115.70. The vote passed 70-30. Anyone else curious who voted 'yea'? Let's see: (info as per senate.gov)

Grouped by Home State
Alabama: Sessions (R-AL), Nay Shelby (R-AL), Nay
Alaska: Begich (D-AK), Nay Murkowski (R-AK), Yea
Arizona: Kyl (R-AZ), Yea McCain (R-AZ), Nay
Arkansas: Lincoln (D-AR), Yea Pryor (D-AR), Yea
California: Boxer (D-CA), Nay Feinstein (D-CA), Yea
Colorado: Bennet (D-CO), Yea Udall (D-CO), Yea
Connecticut: Dodd (D-CT), Yea Lieberman (ID-CT), Yea
Delaware: Carper (D-DE), Yea Kaufman (D-DE), Nay
Florida: LeMieux (R-FL), Nay Nelson (D-FL), Yea
Georgia: Chambliss (R-GA), Yea Isakson (R-GA), Yea
Hawaii: Akaka (D-HI), Yea Inouye (D-HI), Yea
Idaho: Crapo (R-ID), Nay Risch (R-ID), Nay
Illinois: Burris (D-IL), Yea Durbin (D-IL), Yea
Indiana: Bayh (D-IN), Yea Lugar (R-IN), Yea
Iowa: Grassley (R-IA), Nay Harkin (D-IA), Nay
Kansas: Brownback (R-KS), Nay Roberts (R-KS), Nay
Kentucky: Bunning (R-KY), Nay McConnell (R-KY), Yea
Louisiana: Landrieu (D-LA), Yea Vitter (R-LA), Nay
Maine: Collins (R-ME), Yea Snowe (R-ME), Yea
Maryland: Cardin (D-MD), Yea Mikulski (D-MD), Yea
Massachusetts: Kerry (D-MA), Yea Kirk (D-MA), Yea
Michigan: Levin (D-MI), Yea Stabenow (D-MI), Yea
Minnesota: Franken (D-MN), Nay Klobuchar (D-MN), Yea
Mississippi: Cochran (R-MS), Yea Wicker (R-MS), Nay
Missouri: Bond (R-MO), Yea McCaskill (D-MO), Yea
Montana: Baucus (D-MT), Yea Tester (D-MT), Yea
Nebraska: Johanns (R-NE), Yea Nelson (D-NE), Yea
Nevada: Ensign (R-NV), Nay Reid (D-NV), Yea
New Hampshire: Gregg (R-NH), Yea Shaheen (D-NH), Yea
New Jersey: Lautenberg (D-NJ), Yea Menendez (D-NJ), Yea
New Mexico: Bingaman (D-NM), Yea Udall (D-NM), Yea
New York: Gillibrand (D-NY), Yea Schumer (D-NY), Yea
North Carolina: Burr (R-NC), Yea Hagan (D-NC), Yea
North Dakota: Conrad (D-ND), Yea Dorgan (D-ND), Nay
Ohio: Brown (D-OH), Yea Voinovich (R-OH), Yea
Oklahoma: Coburn (R-OK), Yea Inhofe (R-OK), Nay
Oregon: Merkley (D-OR), Nay Wyden (D-OR), Yea
Pennsylvania: Casey (D-PA), Yea Specter (D-PA), Nay
Rhode Island: Reed (D-RI), Yea Whitehouse (D-RI), Nay
South Carolina: DeMint (R-SC), Nay Graham (R-SC), Yea
South Dakota: Johnson (D-SD), Yea Thune (R-SD), Nay
Tennessee: Alexander (R-TN), Yea Corker (R-TN), Yea
Texas: Cornyn (R-TX), Nay Hutchison (R-TX), Nay
Utah: Bennett (R-UT), Yea Hatch (R-UT), Yea
Vermont: Leahy (D-VT), Yea Sanders (I-VT), Nay
Virginia: Warner (D-VA), Yea Webb (D-VA), Yea
Washington: Cantwell (D-WA), Nay Murray (D-WA), Yea
West Virginia: Byrd (D-WV), Yea Rockefeller (D-WV), Yea
Wisconsin: Feingold (D-WI), Nay Kohl (D-WI), Yea
Wyoming: Barrasso (R-WY), Yea Enzi (R-WY), Yea

I think we all know what to do. Let's do it.

Hidden messages in junk DNA?

April 13th, 2005

From Scott Adams' Dilbert Newsletter #60:

Sometimes my brain ties together things that are better left alone. Here are three things I've thought about recently:

* Microchip designers often embed microscopic messages on the surface of the chip as a way of signing their work.
* DNA has a lot of "junk" parts that don't seem to have any function.
* A lot of people think evolution is obviously "designed" by someone.

I wonder if any cryptographers have looked at that junk DNA to see if it's a message from the designer. I'm guessing that it's a code that says something like, "I am Kaloopah, from the star system Nebulon IV. I have sent this evolution program into space as my eighth grade science project."

Facebook Capitalism/Socialism Discussion

This discussion happened over the last couple of days in response to my facebook status update. Very worthwhile and informative. If only this discussion could be as openly discussed with every person who thinks government participation in markets is okay. Enjoy!

Brad ***** The government gets it's power from its citizens. It can not justly do anything that I as a citizen can not do myself. If it does, that action is criminal; period.
Sat at 9:14pm · Comment · LikeUnlike · View Feedback (18)Hide Feedback (18)

Bryan *****, Dave *****, J Kalani ***** and 2 others like this.

Brad Green
Aside from posting that statement, I'd like to mention that I agree with the cultural norms of our grandparents: Anyone participating in government handouts may be justly shunned for their role in stealing our property and freedom, and consequently their own. TAKE RESPONSIBILITY OF YOUR LIFE FOR CRYING OUT LOUD!
Sat at 9:18pm · Delete

James *****
Wait...that makes sense. It sounds like what the founders talked about. It sounds like what Ayn Rand wrote about. It sounds like what Ezra T. Benson preached about. Now why can't our lawmakers who swore an oath to defend these Constitutional principles follow it? Why do so many of our fellow citizens encourage them to do so rather than be productive and earn their keep?
Sat at 11:41pm · Delete

Cory *****
In the last year and half i've been through 4 jobs, lost my house, my car, moved from my home city and started anew in a completely foreign place (well mostly - Northern Utah is a different animal from SLC). I didn't stop working at any point - if one job ended I went to find the next one. I am back in school 12 hours a semester, working full time and trying my ass off to provide for 4 kids. This is not someplace I had planned to be at 32 years old, but I have tried my best to make the most of it. If not for things like food assistance (WIC) and CHIP, the last couple years would have been a lot tougher than they were. My family has helped us as best they can, my church has pitched in as needed, but thank God that Utah has a pretty well run welfare program that has proved things for my kids that I have not been able to, despite my best efforts. Hopefully when I am back on my feet I can provide that kind of assistance to other families who have fallen on hard times and are doing their best to get back up, but I pray that these state programs can provide in the interrim for those people. The point is I've taken responsibility for my life at every turn - I've made more lemonade in the last 2 years than i care to ever remember - but sometimes all the responsibility in the world just can't put food on the table or get your kid to see a doctor when it's absolutely neccesary. I heed the worlds of the prophets, too, guys. But if this last couple years of trials for me and my family sounds like the kind of thing you are talking about, start shunning me by removing me from your friends list.

But it sounds like I owe you guys and the people who 'liked' this thread an apology for stealing your property and your freedom, and for not staying productive and earning my keep. I am sorry for that; I wish I had some control over things in the last little while. But on a positive note, I didn't take the mortgage refinance and chose to face foreclosure instead, I turned down Medicare insurance for my wife and I (we are both uninsured now) and I sold my car at a loss rather than try to trade it in during the cash for clunkers thing. Now I get to walk home from work usually once a week. Fortunately global warming has kept Logan from dropping below freezing before about 9 PM so it's not too cold yet. Yes that was sarcasm I don't buy into global warming. Just trying to be funny cuz there's not much to laugh about at the tail end of thread accusing you of being a thief and a lout. How's that for crying out loud?
Yesterday at 11:37pm · Delete

Brad *****
Cory, I understand where you're coming from. This post was my way of responding to one of my most respected mentors' attempted persuasion that I should take advantage of all the free programs out there. I choose not to. Until the time comes where my children are threatened by starvation or exposure to the weather, I will view these programs as a worse evil. Allowing my children to starve would be worse, however in my opinion.

Now about my last couple of years: In 2007 I made just over one million dollars. By the end of January 2008 the real estate market had changed enough that I couldn't close any deal I needed to keep my business afloat. I tried unsuccessfully until May when I informed my creditors that I would have to personally repay their money someday because my business was dead. Since then, I've lost my two BMWs, two snowmobiles, and all of my houses (to foreclosure) including my home. After six months without income, I finally gave up being self-employed and went to work as a salesman for a plumbing wholesaler. It has been very difficult to keep food on the table and the heat on. We've been shut off a few times but have managed to get through. We live in a 4-plex apartment now and have one 12-year old car we've spent two weeks trying to get past safety inspection so we can pay another tax to drive our own property. In the mean time, the police are pulling us over for late registration.

As I said, I know where you're coming from. I understand the justification going on in your head. If you're honest with yourself, I believe you'd admit that your kids wouldn't have starved or frozen to death had you not let the government bail YOU out. Do I think you should go to jail for your involvement? No. But I have no problem with you feeling embarrassed by it; and if you are, then you're still okay in my book. That means you don't feel entitled to it. I believe when the government gets out of the people's way, we'll recover in huge leaps and bounds economically. Until more people start relying on themselves instead of the government, we're going to slip further and further into poverty and totalitarianism.

Thank you for sharing your personal experience. May life be better for us all.
13 hours ago · Delete

Cory *****
Well I'm glad to hear that I'm not the only one; clearly you've been through rougher times than me in the last little bit, and well done on keeping up the effort. In brief I'll say this: I refused every form of federal government assistance that was offered to me on the grounds that I don't think the fed has any authority to take money from one to give to another, but I have taken state assistance for the fact that my interpetation of the 10th amendment gives the state that right. However I am embaraased by the fact that I have been unable to provide these basic things for my kids at times, and due to that fact I will work tirelessly until I feel right with the world again. There is no question that I don't feel entitled to anything someone else produces, but I also have to be thankful for the fact that these programs wre in place when I needed them most. Those I could decline, I did (like insurance), but thank God for the fact that a couple of them were available to me as an option when all my other channels had worn out.

In short I concede your point but argue the mechanics of it. Perhaps I took too hard-nosed a stance in my initial response, but I'm sure you can see from my perspective how this thread looked. I'm glad we got the chance to share some stories, and indeed may God bless us all in His own way in the times to come.
10 hours ago · Delete

Michael *****
Aren't we supposed to go to the Church before the government though? They will always help with feeding one's family. In my opinion, there is never a reason to go on the socialist government dole and use taxpayer's money which was forced from them and into programs that they have no control over.
6 hours ago · Delete

James *****
Can you imagine...if instead of paying 36%+ in taxes, what if i paid them 2% (for Constitutionally approved items), and kept the other 34%? What would I do with that? Create more jobs? Absolutely. Spend a little more on my family? You bet! Donate more to local churches and charities? YES!

As the government pushes out private companies (churches included) and takes their place in the market, people are willing to donate to these less. This is part of the plan. It is self destructive, but planned that way.

Because nature abhors a vacuum, and as people we are generally good natured, eliminating these government programs would lead to more charitable donations.
4 hours ago · Delete

Brad *****
Michael, "supposed" is a loaded word. You know that. ;) As to the comment, not all people have a "church" to go to. But interestingly, I showed this discussion to a coworker who is an LDS bishop and he says the recommendation from the church handbook is to have people ask for help from the following sources (in order) family, friends, government, then the church. However, I would probably rather steal from someone than let me children die of starvation or exposure. Even if the just consequence was for me to go to jail.

James, yes, Yes, YES! I'm actually writing a book about this exact phenomenon. As the government has increased its role in our lives, the citizens of this country have gradually become less charitable, less wealthy, less optimistic, and less happy. Or to look at the other side: more greedy, more poor, more pessimistic, more depressed.

Socialism: Modern Day Slavery
3 hours ago · Delete

Cory *****
to which I will add 2 things: if you are ever in a situation that you have exhausted every other means available to you and you genuinely don't know where your next meal is going to come from, then let's talk about "never a reason." Second, let's also remember that, so far as we are talking about state and local government, there are no constitutional restraints on which the local legislature cannot act beyond those enumerated in the US constitution. Therefore, as long as the citizens of Utah elect leaders they believe to be meeting their needs, they have complete say over what happens at a local level. So no taxpayer money is forced out of anyone; and if you feel like you don't have control, get out and campaign for new representation. The electorate dictates who goes to represent them, and to the extent that the representation does not satisfy the needs of its base, that same electorate can oust their representative. Congress is shackled by the constitution, but state government is specifically empowered by it. I'm not for government health care, but if it came up on Utah's capitol hill I couldn't make the argument that it's against the constitution; I'd have to find some other argument. It is the same with state welfare programs. The point is we have plenty of control over this stuff; your vote is your control.

All I'm saying is let's qualify these differences between state and federal governments. The Founder's recognized such differences and specifically created protections for that distinction. Federal burecrats have worked tirelessly in the last 100 years or so to erode those distinctions, but they exist nonetheless and for good reason. That's all I'm asking.

Lastly before we get too accusatory of socialism as a concept, someone please tell me what they think the United Order is. Perhaps a better interpretation is, when administered with compassion and in the absence of personal ambition, socialism can work great. But for our greedy and selfish times, yes indeed it is akin to slavery.
2 hours ago · Delete

Michael *****
Haha Brad you know me well ;) And I thought that in the handbook it said church then government. Thanks for setting that straight. And yes, I would rather steal than let my family starve. In an ideal society, we would care for those around us in need so that they would not need the dole, but this is hardly an ideal society at this point. And I'm sorry to hear that things turned south for you, but I know you and I know that you will bounce back well, given the time you need. I wish you all the best and you and your family are in my prayers. :)
about an hour ago · Delete

Brad *****
Wow. Cory, you and I could talk for hours about this topic and we should. There are a few things I think would differentiate my stand on government:

1. Government is a gun. The only power government has is the power to enforce laws using the threat of force. Taxes were originally voluntary, but now are enforced by threat of force.

2. Although the Constitution of the United States of America has reserved greater power to the states, each state has a constitution that is also designed to reign in government power to protect the freedom of its citizens. Most of these documents (including Utah's) reserved greater power for smaller government bodies, ie... counties, cities etc... Governments have been instituted among men to preserve liberty, not grant prosperity. Many of the roles the state governments play weren't allowed by their original constitutions. These documents have been amended to allow for greater role of government in their citizens lives. These laws are now completely legal much like the federal laws we disagree with, that doesn't make them morally right. They still take from some citizens without their consent with threat of force; use some and pass some on to other citizens. This is morally wrong.... Read More

3. This brings us to the united order. I once shared your opinion that the united order is just "righteous communism" with the dictator being the only innocent human to ever live on earth, human nature gets put on hold and we don't need to choose between ourselves and everyone else. There is an important difference between this order and communism: choice. Remember the war in heaven? Me either. But I do remember what I was taught about it. Force us to do what's right or let us choose and make mistakes. This is and has been the largest, longest-lasting war EVER. Force or choice. Which one is God's way?

God is a capitalist. Proper choices lead to positive results, force always leads to negative results. I stand on the side of choice. ALWAYS.
about an hour ago · Delete

Cory *****
You are right and I am not disagreeing. I'm only stating that local governments, which are more in touch with the people, are better able to serve the needs of their constituents, and those constituients can choose to pass laws or not based on their view of the community's needs. I'm not for a second disputing that even local governments are not serving their bases properly, or that they are not living up to their own constitutional requirments. To that end we don't disagree; these things are morally wrong. I guess I am just trying to suggest that the ends of compassion can be served by a government agency so long as that agency is in fact meeting the needs of its electorate, by which I mean adminstering compassion in a manner agreed upon by the voters. If it's within the scope of the supreme law (a constitution) and voted upon by the public, then it is morally acceptable. This also assumes that the voting public are a moral people who have compassion as their motivator and not selfishness. Clearly there is a problem with this logic, and I admit I am trying to take a "glass is half full" perspective with this line of reasoning. I am also trying to justify the fact that I have partaken of this system, more to my shagrin, and am grateful today for its existence. I suppose I should just own the fact that I am a hypocrit right now and stop trying to justify my acceptance of something I morally oppose. I'm just trying to do what's best for my kids. Insert some comment regarding "jusitification" and "masturbation" here.

And I agree whole-heartedly with what you said regarding the United Order. It is a socialistic system, but one predicated on choice which is why it works. This because those who participate in it have chosen to grant their labors to a cause greater than themselves, and it is administered by the only perfect being ever to have lived. If it were any other way, it would be no different than any socialist or communist regime before it. So as you aptly put, the difference is choice. We are clearly arguing the same point, at least so it appears to me.

We should indeed discuss this more at length, althought I fear we may end up preaching to the choir as we probably aren't as dissimilar in our views as these postings might indicate to the casual observer. If you're ever in Logan, let's do lunch.
43 minutes ago · Delete

Brad *****
Cory. Well stated. I believe very strongly in associating with like-minded individuals. We seem to be such. Next time I'm up that way, I'll let you know. It will probably be next Tuesday (a week from tomorrow). I go as far north as bountiful on Tuesdays. Likewise if you're ever in Utah county give me a call. I'll message you my contact info.

On a side note about the united order, I believe that the temple-worthy members of the LDS church are already supposed to be living this order. We've covenanted to such. I'm still struggling to get my home teaching done and get to church every week. No one's perfect; well there was this one guy once...
10 minutes ago · Delete

Somalian Pirate Terrorists

I'm reading all about Somalian pirates lately. Why the heck is this getting so much attention and how is it not more simple than this? When force is initiated by another against you, you have the right to return force.

Were I in charge of the situation, I would refuse to negotiate in any way with these terrorists. The 3-step plan I would use to remedy the situation follows:

1) Train as many weapons on the pirates as possible.
2) Notify the pirates that they have five minutes to surrender the captain and themselves to stay alive. Let them know that at the 5 minute marker we would shoot one pirate every minute until their complete surrender or annihilation. If harm comes to the captain, this would end our interest in their vessel and it would be completely destroyed with no mercy to occupants. (military ordinance sufficient to vaporize the boat is present)
3) Carry out the plan.

Is there risk that the US freight captain could be harmed or killed? Yes. There is fairly good likelihood already. The only card these pirates would have is the well-being of their hostage. Regardless of outcome in this situation, following this methodology would definitely be a very effective deterrent against future standoffs of this type.

"Stand up for freedom, no matter what the cost."