Sunday, November 04, 2007


Reagan Recession (1981-82)
Black Monday (1987)
Saving & Loan Crisis (1988-89)
Bush I recession (1990-91)
Clinton Bubble (1995 - 2001)

It's amazing that one doesn't trip over the unemployed selling apples on street corners on a daily basis. Now we have fear peddling within business press clamoring for a "recession soon" (very hopefully no later than next quarter - in order to maximize the negative impact on the Rebublicans prior to elections). When I see gargle such as:

"Banking analyst Richard Bove over at boutique brokerage Punk Ziegel points out that debt in the U.S. economy over the past five years has grown at a pace three times faster than income. Nominal gross-domestic-product growth has advanced at 3% while financial debt has grown at a 9.7% clip to $13.8 trillion."
it engenders great curiosity. The "nominal" GDP comes from the Chained Dollar, Bureau of Econmic Analysis stats while the "financial debt" number is derived from the Federal Reserve Flow of Funds report (buried around page 100, usually). That's the BEA source for the line item "Net Worth of households" which is found in an addenda to a reconciliation report between the Fed and the BEA regarding personal savings. The source for the writer's very necessary quote is conflating an income statement line item with a balance sheet line item in order to generate the appropriate sense of dread to justify a call for "recession soon".

There is another way to look at the matter using the same Flow of Funds Report. The long view (26 years) of personal asset/liability/net worth numbers shows the last four years (excluding the 911 aftermath) substantialy outperforming the 26 year average increase in growth of net worth with the five year average (including the 911 aftermath) still outperforming the Clinton Bubble years.

The last chapter of the housing "bubble" story won't be written until around the first quarter of 2010. The houses involved will still be standing and most of them will still have the same owners, content with their decision to satisfy the need for shelter through purchase. That is in marked contrast to the discontent of purchasers of 100 shares of Vaporware Inc. At the end of the Clinton Bubble all they had was wallpaper. By the spring of 2010 many of the people who lied on mortgage applications will be back to renting and, hopefully, many of the people responsible for accepting the lies will be looking for employment outside the mortgage industry. In a wholly just world, the credit rating agencies which issued sterling ratings for junk financing backed by liar's mortgages would have new management (and ownership). That's very unlikely to happen but investors have now been fully appraised of the "value" of the service which the rating agencies perform.

The list of setbacks at the top of this piece is proof that the path to the ownership society laid out by Ronald Reagan is neither absolutely smooth nor without risk. The fact remains that the growth rate of net worth has averaged 7.4% through 26 years in spite of setbacks (and, by far, the worst losses were engendered by the Clinton Bubble). There may well be a minor recession ahead but it is neither necessary (as was the Reagan recession) nor apt to be other than minor. Houses aren't vaporware and the actual overbuild in housing amounts to much less than a year's worth of product. Shelter isn't an expense that can be postponed indefinitely and population growth alone posits a requirement of 1.25 million new units per year (based upon the occupancy rate of 2.4 persons per unit, which has been relatively steady for forty years). Add the exodus from states such as Michigan, where Democratic governance in partnership with unions has successfully destroyed the possibility of growth in employment, toss in 1/2 per cent of existing stock annual replacement rate and the new housing "need" number rises to 1.7 million units.

Having lived through every one of the minor setbacks enumerated at the top of this article, I have absolutely no fear of what the future may bring under Republican political leadership. I would not say the same if the history were extended to include the miserable period of Carter's inept presidency and the future included another unskilled, unaccomplished and unpromising Democrat of his ilk. If fear is necessary to force one to the polls then consider that Carter had a better resume in 1976 than all three of the leading Democrat candidates today could produce if they combined their total accomplishments.

Sunday, October 09, 2005


Tuesday, August 23, 2005

Truepeer - Flenser

Flenser, speaking of Derbyshire, would you agree with this "racialist" take on constitutions? If so, would it be possible to have a polite discussion to flesh out the pros and cons?

Sunday, May 01, 2005

Jaffa versus Mansfield

There is a long but interesting article by Thomas G. West at the Claremont Institute, titled "Jaffa versus Mansfield; Does America Have a Constitutional or A "Declaration of Independence Soul".

The complete piece runs to almost twenty pages and covers a great deal of ground in areas of history, philosophy, religion, and Constitutional law. I think it is well worth reading, even though I disagree with it in many respects. To set the stage for those who have not read the complete article, he discusses an argument which has been simmering for a long time between legal scholars on the political Right; is the purpose of the Constitution to reflect the ideals of the Declaration?

He identifies the two parties to the debate as "traditionalists" and Straussians. The former I think is a reasonable designation, the latter I think is not; however I'll use his terms for the purpose of discussion.

He comes to a few conclusions, which I'd like to take issue with.

First, he feels that the traditionalists do not have firm ground from which to assess the Constitution, and apply corrections to it when necessary. By contrast, the Straussians can turn to the principles in the Declaration and measure the Constitution by how successful it is at realizing them.

Second, moving from the general to the specific, he brings up the issue of slavery. A strict constructionist judge, he says, could not strike down slavery as un-constitutional, prior to the 14th Amendment. However, a judiciary which views it's role as correcting the errors in the Constitution by reference to the principles of Natural Law, as embodies in the Declaration, could in fact strike down slavery or any other practice which violates Natural Law.

"..the original Constitution was a noble but incomplete attempt to secure the equal right to liberty for all. Lincoln's career, and the constitutional amendments that it inspired, are at once the vindication and the completion of the original imperfect founding. The principles of the Declaration, in Jaffa's view, not only help us to understand the Constitution, but also helped us, in the nation's greatest crisis, to correct the Constitution and bring it into conformity with the true principles of justice."

"Unlike Mansfield, Jaffa never wavers in his insistence that the Constitution is only intelligible in light of its end, stated in the Declaration."

"But if we read the Constitution as ( the traditionalists) recommend(s), namely, as a document whose authority is not derived from the idea of equal individual natural rights, we cannot know, on the basis of the Constitution, that slavery is wrong. We cannot know that anything is wrong."

There are some glaring incongruities between the historical record and what West describes. Historically speaking, the Abolitionist movement in America was not driven by an abstract view of Natural Rights or social contract theory; it was motivated by religious zeal. Among those West includes in the traditionalist camp is Edmund Burke. Burke was an early advocate of abolishing slavery, even without the guidance of the Declaration, and even though he took a dim view of social contact theory. Conversely, Thomas Jefferson, who wrote the Declaration and whom West ropes into the Straussion camp, was a slave owner all his life.

Although West gives the impression that the Founders were of one mind in their dedication to the ideal of the Declaration and of Locke, there was considerable disagreement among them, which is why the slavery compromise was made in the first place.

Russell Kirk, another traditionalist he mentions, actually wrote a book, The Roots Of American Order, describing the moral foundations of the American Founding in the idea of Jewish and Christian religion, and Greek, Roman, and British philosophy and legal thought. The notion that "we cannot know that anything is wrong" if we accept the traditionalist perspective, appears to be nonsensical on it's face. It only makes sense if it is read as "we cannot know that anything is wrong, simply by reading the Constitution."

And that gets us to the heart of the matter. For West, and a great many people who think as he does, the Constitution is primarily a moral document, a secular version of the Ten Commandments. This is the Constitution as "living document", being constantly improved to bring it ever closer to some Platonic perfection.

Mr. West gives the impression that he would like to assign the responsibility for contemplating the "Natural Law" to the political class generally and the judiciary specifically. Such judges would become practically a new class of priest-kings, determining the proper structure of American society on the basis of their interpretation of the works of John Locke. This is the ultimate abolition of the separation of church and state, with the state now presuming to be the final authority on all moral questions.

The traditionalist response to this is that we do in fact believe in a moral law, which must in some sense be able to supersede the written Constitution on (rare) occasions, but that the keepers of this law are not some narrow class, but the people as a whole, and that it is their responsibility to see to it that virtue as they understand it is reflected in their Constitution to the degree they deem necessary. The Constitution, even with the inclusion of the Declaration, is not intended to be a comprehensive moral framework. Its role is to provide a structural civic framework within which the citizens may work out for themselves "the truth about the good society". In many cases, people will do this by reading the Bible, or Torah, or Koran, and the conclusions they come to me well be at variance with the views of John Locke, Thomas Jefferson, and the preamble to the Declaration. Or perhaps not. An often-overlooked clause in that preamble states that among our rights are those to self-governance.

If the Supreme Court decided tomorrow that the practice of allocating Senate seats by state rather than by population violated the principle that "all men are created equal", I'd hope that Mr. West would disapprove. But I don’t think he would have very solid grounds to do so.


Friday, April 29, 2005

Faith and Reason (Take 4816)

Jonah has a column up that continues the discussion regarding first principles outlined in the Jaffa versus Mansfield article that Flenser noted.

I'll return to this in a bit.

Thursday, April 28, 2005

Welcome to the Agora

The smart ones will be along soon.