Wednesday, January 21, 2009

Marginalizing Calculated Risk


Blogger Calculated Risk wrote:
We will probably see a slew of articles over the next ten days on the various failures of the Bush administration. I think the two worst economic mistakes were the Bush fiscal policies (creating a huge structural budget deficit) and the administration's ideological opposition to regulation and oversight that allowed the housing and credit bubbles to form.

Okay, what the heck is *ideological opposition*?

To characterize an idea, disposition, or creed as ideological is to say absolutely nothing at all. Put it this way, what deliberate action would be insulated from such an accusation?

Maybe a *hypocritical* one, but that's about it. (And in such a case, the defendant might very well plead *rational*.)

More often than not, the *ideological* accusation comes from an outright partisan. I am no fan of Bush (click here and here), but it's been obvious for a while now that Calculated Risk is a, well, let's just call him a "non-Democrat hater". Heck the guy gushes over Paul Krugman - calling him "Professor" like a wide-eyed naughty school girl. If this isn't a Moron warning sign I don't know what would be!

Again, to say that Bush opposed regulation and oversight in the housing sector over *ideology* is to say nothing at all.

Furthermore, it's a COMPLETE FABRICATION! Here's commenter Average Joe smacking down this buffoon in the comment thread:
http://query.nytimes.com/gst/....%20freddie%20labaton&st=cse

"The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago....

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken.....

A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

"These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis," said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

"I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing," Mr. Watt said.

Yeah, Barney Frank actually said that! He said that Fannie and Freddie *weren't facing any crisis* more times than one could count. One might be bold enough to label his un-evolved stance as IDEOLOGICAL.

Calculated Risk also Marginalized himself in a recent post titled Demolition As Stimulus:
As the Obama team has noted, properly chosen infrastructure projects provide the best bang for the buck. These projects provide jobs today, and they are an investment in the future. We need more projects ...


And since Obama asked for suggestions ... How about a demolition program?

The idea that knocking down buildings, any buildings, could be stimulative should reek of stupidity even to non-students of economics.

It just so happens there is a well-known debunking of this very concept. It's called the Broken Window Fallacy:

Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact, that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation—"It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?"
Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.
Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier's trade—that it encourages that trade to the amount of six francs—I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.
But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, "Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen."
It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.



Now if you click on the Wikipedia link above, you'll find this ironic gem in the entry:

"Ghastly as it may seem to say this, the terror attack—like the original "day of infamy" which brought an end to the Great Depression—could even do some economic good. [...] the driving force behind the economic slowdown has been a plunge in business investment. Now, all of a sudden, we need some new office buildings. As I've already indicated, the destruction isn't big compared with the economy, but rebuilding will generate at least some increase in business spending."

Aha! Now guess what Moronic, Pulitzer-Prize winning economist uttered that and thus displayed the depth of their ignorance in the wake of 9/11?

It was "Professor" Paul Krugman....Calculated Risk's co-ideologue!

7 comments:

Funny Circus Bears said...

Calculated Risk - his name is Bill McBride.

Two Dogs said...

I am certainly no money guy, nor investment smartie-pants, but even I know that Krugman is a MORON.

As far as the broken window analogy, if played to the final result, breaking all windows would be AWESOME for the economy. I think that I shall start at my neighbor's house because he won't keep his damn cat off my cars. Get ready to get rich, boys!

Anonymous said...

Check out this exchange by Robert Reich and Charlie Rangel...Its 3 minutes long and the first 45 seconds is devastating if our government actually listens to Reich.

http://www.youtube.com/watch?v=opxuUj6vFa4

Kfell

TAYLOR said...

C,

Thanks for this. You actually bashed two of the posts that most enraged me over at CR.

CR is one of those guys who seems to have an idea of what's going on and can follow all the numbers, yet gets the remedy wrong OVER AND OVER AND OVER.

To use the now tired doctor-patient metaphor here, he's like a doctor who correctly diagnoses the patient has radiation poisoning, that he developed it from being X-rayed one too many times, and that he is recommending the patient be given radiation therapy as treatment.

Anyway, thanks again, this guy is much deserving of being marginalized and you nailed him good and hard for what he done did to the poor folks like me who occassionally check in to get the latest numbers and instead are exposed to more "ideological" Krugman worshipping.

CaptiousNut said...

FCB has all the inside info! I wonder if he knew who Tanta was before she was unmasked.

taylor,

I'll bet you that Calculated Risk is a religous-phobe.

And that's why he's insistent on distancing himself from the caricatures of his personal reality.

Anonymous said...

Just curious, how often do you CR haters accurately predict major macroeconomic events? Hmmm, thought so.

CaptiousNut said...

Not only have I successfully predicted macro-economic events....but I've also offered REAL TRADES here that you know, have practical application.

I've been renting the whole time; was short the financials from the top to the bottom; and have ZERO debt. Go look through my 3,000 posts and you'll discover far more prescience and actionable information than you'll ever find in the useless charts of CR.