To those who still read this poor corner of the website, we have merged with the Citizenship International. Henceforth, the new address for future pamphlets is....
www.derivepolitics.com
Sunday, January 11, 2009
Wednesday, January 07, 2009
Tuesday, November 04, 2008
Jumping on the bandwagon? Hardly.
It is true that earlier in the election cycle I had endorsed Ralph Nader for President. This is because I believed that at the time he offered the best possible policies for the country. After all, he was the only candidate who would have implemented single payer health care and attempted to kick out the massive agricultural pork we have been handing out. Those two issues I considered to be the major differences between him and Barack Obama and John McCain. Though Nader had no realistic shot of winning, a vote for him would be a vote for my conscience back when I realized that whether I voted in New Jersey or Illinois my vote wouldn't matter.
As time went on, however, Nader's anti-free trade position began to eat away at me. This might have thrown my vote towards John McCain, except that now I was left with 3 candidates, none of whom I agreed with perfectly on the issues: I agreed with Nader on health care and special interests but not economic or foreign policy, I agreed with Obama on special interests and foreign policy, but not on economic policy or health care, and I agreed with John McCain on economic policy and special interests, but not on foreign policy and health care. In a sense, all of these issues were a wash.
But with the coming of the economic crisis I realized something: these issues don't matter as much as the expectations of who we elect. Voting for Nader would not symbolize the necessary direction this country needs to go in. Voting for McCain would send the wrong message to our allies abroad. Voting for Obama would both create a new direction that I can generally agree with and reinforce our world standing abroad. A vote for Obama would be a vote for calmer economic times and a better foreign policy.
It was based on that alone that I am voting for Barack Obama (assuming, of course, that my voter registration actually got through). I am endorsing him for change we need.
As time went on, however, Nader's anti-free trade position began to eat away at me. This might have thrown my vote towards John McCain, except that now I was left with 3 candidates, none of whom I agreed with perfectly on the issues: I agreed with Nader on health care and special interests but not economic or foreign policy, I agreed with Obama on special interests and foreign policy, but not on economic policy or health care, and I agreed with John McCain on economic policy and special interests, but not on foreign policy and health care. In a sense, all of these issues were a wash.
But with the coming of the economic crisis I realized something: these issues don't matter as much as the expectations of who we elect. Voting for Nader would not symbolize the necessary direction this country needs to go in. Voting for McCain would send the wrong message to our allies abroad. Voting for Obama would both create a new direction that I can generally agree with and reinforce our world standing abroad. A vote for Obama would be a vote for calmer economic times and a better foreign policy.
It was based on that alone that I am voting for Barack Obama (assuming, of course, that my voter registration actually got through). I am endorsing him for change we need.
Monday, November 03, 2008
On the Federal Reserve's rate cute
The Federal Reserve's lowering of the Fed Funds target rate to 1% is the latest in a series of moves attempting to keep liquidity flowing in the financial markets. This one, unlike previous moves by the Fed, comes through its main channel. It was completely expected, which explains the stock market's relatively muted response. The Federal Reserve, however, is approaching the bottom of its bag of tricks.
At 1% the Fed Funds target rate is at the lowest it has been since 2003-2004. Because of the huge amount of liquid assets the actual target rate is lower than 1%. If the Fed somehow bottoms out and makes the interest rate reach 0%, they face the same problem that the central bank of Japan faced when it committed similar actions. The Federal Reserve cannot go much lower. It has to resort to alternative measures.
What this means is that the Fed Funds target rate's days as the primary tool of Federal Reserve policy are over. During this crisis alternative tools, like credit swaps, will replace the target rate in primacy. It is unlikely that the target rate will return to prominence except during inflation fighting. Thus, it is very likely that the Federal Reserve has effectively split its tool chest for achieving its two directives of economic growth and controlling inflation: the target rate will be used primarily for the latter now.
This is a welcome change. No longer will interest rates be used in a desperate attempt to boost economic growth at the expense of inflation as it was in the past. We might be seeing the rise of a new era of controlled inflation and economic growth through alternative tools at last.
At 1% the Fed Funds target rate is at the lowest it has been since 2003-2004. Because of the huge amount of liquid assets the actual target rate is lower than 1%. If the Fed somehow bottoms out and makes the interest rate reach 0%, they face the same problem that the central bank of Japan faced when it committed similar actions. The Federal Reserve cannot go much lower. It has to resort to alternative measures.
What this means is that the Fed Funds target rate's days as the primary tool of Federal Reserve policy are over. During this crisis alternative tools, like credit swaps, will replace the target rate in primacy. It is unlikely that the target rate will return to prominence except during inflation fighting. Thus, it is very likely that the Federal Reserve has effectively split its tool chest for achieving its two directives of economic growth and controlling inflation: the target rate will be used primarily for the latter now.
This is a welcome change. No longer will interest rates be used in a desperate attempt to boost economic growth at the expense of inflation as it was in the past. We might be seeing the rise of a new era of controlled inflation and economic growth through alternative tools at last.
Friday, October 31, 2008
The future of the newspaper
The biggest news of the day in the media world is the revelation that starting in April of next year, the Christian Science Monitor will no longer be a daily newspaper. It will instead switch to being mainly an online presence and a weekly publication. In this regards, it will become more like the Economist rather than USA Today.
This is a sensible move to counteract the major weakness of the CSM: its lack of a consistent base. Unlike other publications who are able to become national, like the New York Times, the Christian Science Monitor has no major city from which to draw a relatively steady stream of readers. That leaves it in a competition with the USA Today and other papers for a national audience, something which it is hard pressed to do. The Christian Science Monitor, after all, is best known for relying less on the wire services than other papers and its analysis. It doesn't compete on breaking news, unlike other papers like the Washington Post. Thus a weekly magazine-esque paper with an online presence best allows the CSM to attract a wider audience more suited to its own strengths.
The collapse of the CSM as a daily, though, brings up interesting questions about the future of the newspaper in general. Though large papers might continue to see their circulations shrink, there is almost no chance of the medium as a whole disappearing. The major newspapers of the cities will still survive, albeit in a smaller form. It is those small-town newspapers, however, which are in danger of being eliminated the most.
Small town newspapers have only one strength: their locality. Because they are relatively small they can target local business advertisements and local news stories that wouldn't otherwise be picked up. This might be enough to save newspapers in towns that can sustain a relatively moderate circulation. But as the economy goes, so do the newspapers: revenues from advertisements fall with falling economic times.
Papers of all kinds are likely to survive nonetheless. Because, and so long as, they provide a service unavailable elsewhere, newspapers will be able to withstand the rise of the Internet. If they can't, well, they can look to the examples of the New York Times and Christian Science Monitor for a post-newspaper era.
This is a sensible move to counteract the major weakness of the CSM: its lack of a consistent base. Unlike other publications who are able to become national, like the New York Times, the Christian Science Monitor has no major city from which to draw a relatively steady stream of readers. That leaves it in a competition with the USA Today and other papers for a national audience, something which it is hard pressed to do. The Christian Science Monitor, after all, is best known for relying less on the wire services than other papers and its analysis. It doesn't compete on breaking news, unlike other papers like the Washington Post. Thus a weekly magazine-esque paper with an online presence best allows the CSM to attract a wider audience more suited to its own strengths.
The collapse of the CSM as a daily, though, brings up interesting questions about the future of the newspaper in general. Though large papers might continue to see their circulations shrink, there is almost no chance of the medium as a whole disappearing. The major newspapers of the cities will still survive, albeit in a smaller form. It is those small-town newspapers, however, which are in danger of being eliminated the most.
Small town newspapers have only one strength: their locality. Because they are relatively small they can target local business advertisements and local news stories that wouldn't otherwise be picked up. This might be enough to save newspapers in towns that can sustain a relatively moderate circulation. But as the economy goes, so do the newspapers: revenues from advertisements fall with falling economic times.
Papers of all kinds are likely to survive nonetheless. Because, and so long as, they provide a service unavailable elsewhere, newspapers will be able to withstand the rise of the Internet. If they can't, well, they can look to the examples of the New York Times and Christian Science Monitor for a post-newspaper era.
Sunday, October 26, 2008
The end game strategy for John McCain
It is often comical that the most accurate predictions of who the candidates will be before the Presidential election were those that simply focused on who was the most electable in the general election. After all, the prevailing narrative before primary voting began on the Democratic side was that Hillary Clinton had it locked up, but would most likely lose the general election, which Barack Obama, who was not going to win in the primaries, would have locked up. On the Republican side, everyone acknowledged that John McCain was probably the most electable combination of Republican and independent ideology - but that he would never make it to become the candidate. In less than 2 weeks we will get the Obama vs. McCain matchup that back before this season started seemed to be the best for both parties' chances of getting into office. It appears that the voters for both parties ultimately only care about electability, and not much else.
Unfortunately for the Republicans, factors have not broken their way. The Republican party's best shot of being elected after 8 years of President Bush was John McCain, but those odds have been greatly reduced, partly out of luck (economic problems) and partly out of choice (hiring the guy who got Bush elected in a season where Bush is toxic was not a good idea). With less than 2 weeks to go, McCain is down in the national polls and losing states that he cannot afford to, like Colorado and Virginia. He is limited by money and time and enthusiasm, all of which favor Obama. There is honestly very little chance that he can still pull out a win.
At some point McCain must look towards the future. This election cycle needs to be a rebuilding year for the Republican party. McCain has a chance to redefine the party in much the same way Barry Goldwater had the chance to during his election loss to LBJ. While McCain's loss might not be as great, it is likely to happen.
McCain's natural political positions are very much appealing to the electorate. His shift rightward was unnecessary and harmful to his chance of being elected. If McCain were to have run on a platform of his natural positions, he could have realigned his party to ensure that even though he might have lost this election, the Republicans would become extremely competitive in future elections. Sadly, he is avoiding this chance. While he might have lost the election while securing the future of the party, he is likely now to lose the election and the party's future as well.
Unfortunately for the Republicans, factors have not broken their way. The Republican party's best shot of being elected after 8 years of President Bush was John McCain, but those odds have been greatly reduced, partly out of luck (economic problems) and partly out of choice (hiring the guy who got Bush elected in a season where Bush is toxic was not a good idea). With less than 2 weeks to go, McCain is down in the national polls and losing states that he cannot afford to, like Colorado and Virginia. He is limited by money and time and enthusiasm, all of which favor Obama. There is honestly very little chance that he can still pull out a win.
At some point McCain must look towards the future. This election cycle needs to be a rebuilding year for the Republican party. McCain has a chance to redefine the party in much the same way Barry Goldwater had the chance to during his election loss to LBJ. While McCain's loss might not be as great, it is likely to happen.
McCain's natural political positions are very much appealing to the electorate. His shift rightward was unnecessary and harmful to his chance of being elected. If McCain were to have run on a platform of his natural positions, he could have realigned his party to ensure that even though he might have lost this election, the Republicans would become extremely competitive in future elections. Sadly, he is avoiding this chance. While he might have lost the election while securing the future of the party, he is likely now to lose the election and the party's future as well.
Tuesday, October 14, 2008
The fragility of the market
There is no need to state the obvious: the world's financial markets are in serious trouble. After all, the Dow Jones Industrial Average lost something on the scale of 2000 points within 2 weeks, a fall that probably hasn't had an equal in history. Other stock markets, ranging from Japan's, to Hong Kong's, to Indonesia's, to European stock markets are all feeling the aftershocks. The entire financial structure of the country of Iceland has failed. These times are truly extraordinary: as former Fed Chairman Alan Greenspan proclaims, such a devastation is usually seen only "once in a century".
Why did this happen? After all, it is said that those who do not understand history are doomed to repeat it. And for the sake of the next century (the third time's the charm?), it is necessary to examine why this financial crisis happened.
Though it is difficult to compare this crisis to the Great Depression, due to the differences in how monetary policy was conducted and how money was supported, it is the only event of comparable scale for the current global financial meltdown. Here, a major difference appears: while the Great Depression was the cause of credit being too tight, the initial cause of the current financial crisis was too much loose credit.
Two causes of the current crisis are evident, one of them being more important than the other. The most important cause of the current financial crisis was the Federal Reserve's policy of keeping interest rates incredibly low throughout the 90's. Though it would appear that such a policy seemed justified at the time and helped contribute to the United States' incredible growth during that period, the policies were not reversed quickly enough once the growth began slowing. Indeed, the Fed did what they saw as necessary in keeping interest rates continually low once economic slowdown seemed to arrive. However, with a lack of investment opportunities in new technologies due to the Internet bubble bursting, there was a lot of freely available credit without a lot of places to hand it out.
This changed once Fannie Mae and Freddie Mac were given mandates to provide mortgages to individuals traditionally disadvantaged individuals. The merits of wanting greater equity in home ownership can be debated later. Needless to say, though, that these two reasons led to a massive extension of credit in the housing sector.
A housing bubble has one uniquely devastating affect on the economy. For example, while normal recessions have housing related spending falling first, a housing bubble prevents that. This makes recovery that much harder. More problematic, though, is that the extension of so much credit has drastically changed expectations: bankers expect this much credit to always be available: once it's not, bankers panic, investment greatly falls and the economy slows down.
Now we have a situation in which the Fed is caught between a rock and a hard place: if it continues to extend credit, it preserves the economy but creates a long term effect of an inherently riskier market. If it tries to correct expectations now the world economy could quite literally collapse.
Fortunately, there is a way out. If the world governments start by continuing to extend credit and gradually reduce that credit, then the damaging effects should be mitigated and the world economy can return to normal. If it does not, then economic collapse will not just be a doomsday scenario: it will be reality.
Why did this happen? After all, it is said that those who do not understand history are doomed to repeat it. And for the sake of the next century (the third time's the charm?), it is necessary to examine why this financial crisis happened.
Though it is difficult to compare this crisis to the Great Depression, due to the differences in how monetary policy was conducted and how money was supported, it is the only event of comparable scale for the current global financial meltdown. Here, a major difference appears: while the Great Depression was the cause of credit being too tight, the initial cause of the current financial crisis was too much loose credit.
Two causes of the current crisis are evident, one of them being more important than the other. The most important cause of the current financial crisis was the Federal Reserve's policy of keeping interest rates incredibly low throughout the 90's. Though it would appear that such a policy seemed justified at the time and helped contribute to the United States' incredible growth during that period, the policies were not reversed quickly enough once the growth began slowing. Indeed, the Fed did what they saw as necessary in keeping interest rates continually low once economic slowdown seemed to arrive. However, with a lack of investment opportunities in new technologies due to the Internet bubble bursting, there was a lot of freely available credit without a lot of places to hand it out.
This changed once Fannie Mae and Freddie Mac were given mandates to provide mortgages to individuals traditionally disadvantaged individuals. The merits of wanting greater equity in home ownership can be debated later. Needless to say, though, that these two reasons led to a massive extension of credit in the housing sector.
A housing bubble has one uniquely devastating affect on the economy. For example, while normal recessions have housing related spending falling first, a housing bubble prevents that. This makes recovery that much harder. More problematic, though, is that the extension of so much credit has drastically changed expectations: bankers expect this much credit to always be available: once it's not, bankers panic, investment greatly falls and the economy slows down.
Now we have a situation in which the Fed is caught between a rock and a hard place: if it continues to extend credit, it preserves the economy but creates a long term effect of an inherently riskier market. If it tries to correct expectations now the world economy could quite literally collapse.
Fortunately, there is a way out. If the world governments start by continuing to extend credit and gradually reduce that credit, then the damaging effects should be mitigated and the world economy can return to normal. If it does not, then economic collapse will not just be a doomsday scenario: it will be reality.
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