Glenn A Knight

Glenn A Knight
In my study

Monday, November 16, 2009

What Hath the 2000s Wrought?

Daniel Gross's piece is really, really depressing. It confirms my wife's feeling that the economy, at least as far as ordinary people are concerned, has been spinning its wheels for a long time. Gross is asserting that America's "lost decade" isn't the next ten years, but the decade that began with January 1, 2000, and will end in six weeks. He gives lots of examples of economic and market indicators that are, today, at the same levels they were at in 2000.

I think it's worth reading, even if it isn't exactly cheerful. I also think that it may, just may, reveal a deeper problem. There's a tendency to measure performance by the measures you have, the ones that are convenient to collect. Sometimes that leads you to overestimate the importance of easily-determined indicators, and to ignore problems that don't show in the metrics you're using. A lot of companies have gotten into trouble trying to manipulate the markets to elevate their stock prices. The Bush administration got into trouble trying to elevate the home ownership numbers.

From Gross's piece, I'd have to say that such efforts to game the markets were not only misguided, but futile. We're back to square one.

An Appeal for Passion

Michael Gerson's article, on Obama's Afghan decision makes what I think is a very important point, although Gerson himself may not be fully aware of it: Reason doesn't motivate. President Obama's decision may be driven by reason and calculation, but it needs to be justified to the public and the military with feeling, with passion, with a bit of fervor.

So far, I think Gerson is right. People don't send their kids to war, they don't like to see kids sent to war, because it's the reasonable thing to do. They have to feel the rightness of the policy. So Mr. Obama does need to use his rhetorical gifts to sell the public on this war, as well as to show the military that he is committed to this policy.

However, when Gerson wrote speeches for George W. Bush, he used emotion, and Bush ended up as the most unpopular President since Nixon, and regarded by many as the worst President since James Buchanan. There are two problems with appeals to emotion:

First, emotion can be used to replace reason, to support policies that aren't really justified. One of the dangers here is that emotion can suppress debate, can prevent the consideration of reasoned alternatives.

Second, once the public and the military have been persuaded of the rightness of a course, once they are fully committed to the policy, the leaders lose their flexibility. If you look at the end of Vietnam, one of Richard Nixon's problems was that so many Americans looked at the negotiations with North Vietnam and the Viet Cong as a betrayal of the men and women who had died in the war. And those Americans were the ones who supported the war, the ones who enabled Nixon to maintain some momentum in Congress.

Appeals to emotion may be necessary to gain public support for an increasingly unpopular war, but if Obama takes that course, he may find himself riding the tiger of public opinion.

Saturday, November 14, 2009

The Three Climate Musketeers

John Kerry, the (now) senior Senator from Masschusetts, Democrat, and his party's candidate for President in 2004.

Joe Lieberman, the senior Senator from Connecticut, Independent (against his will), and his party's candidate for Vice-President in 2000.

Lindsay Graham, the senior Senator from South Carolina, Republican, and one of the leaders of the effort to impeach President Clinton (Graham was then in the House).

These are the guys who are going to be responsible for the passage of some kind of climate bill. I think you should be reading up on these three Senators, and what they're trying to do.

I Don't Go Where I'm Invited - Khamanei

There were a lot of conservatives - still are, I suppose - who criticized Barack Obama's campaign promise to negotiate with Iran "without preconditions." I do believe that Ms. Clinton herself criticized that initiative as naive. Well, as this report indicates, we really have nothing to fear. It doesn't matter how naive we are in asking the Iranians to the diplomatic ball, if they follow the supreme leader's advice, they won't dance.

New Books on Sarah Palin

I know, Sarah Palin's own book is out now, but this review of two accounts of the Palin phenomenon could be interesting either as background before reading Palin's own book, or for fact-checking after you read her account. Those of you who are in need of more political reading matter - here you go!

So you shouldn't have to look into the link provided above, here are the two books in question:

The Sudden Rise and Brutal Education of a New Conservative Superstar
By Scott Conroy and Shushannah Walshe
PublicAffairs. 301 pp. $26.95

How the Elite Media Tried to Bring Down a Rising Star
By Matthew Continetti
Sentinel. 226 pp. $25.95

The Pursuit of Shared Interests

The accompanying article by Scott Wilson of the Washington Post is a very good analysis of the principles underlying President Barack Obama's approach to foreign policy. Wilson provides a number of examples of cases in which President Obama has made the pursuit of shared interests the basis of his efforts to persuade other nations to join with us in various endeavors. The idea that international relations should utilize shared interests to build cooperative relationships is hardly a new idea, but it has been a productive source of policy initiatives in the past.

There are a few problems with the approach, however, and I would like to mention those that come to mind.

Problem one is that every nation has a particular set of interests. While some of those interests may coincide with ours, others may conflict. That means that one needs to make one's pitch to act in accordance with the shared interest in a manner which makes the interests we don't share less important. For example, China is a big importer of oil. The United States is a big importer of oil. Therefore, we both have important interests in the free flow of oil out of the Persian Gulf area and into the areas where it is to be consumed. So the Chinese might be expected to cooperate with us in clearing pirates out of the Malacca Straits.

We also see our interest in the free flow of oil as demanding that we oppose instability in the Middle east. We should be in favor of moderate democratic reform, while opposing Islamic extremists, violent revolutions, or the seizure of power by parties which might cut off the flow of oil. (See Kenneth Pollack's excellent book A Path Out of the Desert: A Grand Strategy for America in the Middle East for lengthy discussions of all the points raised in the last two sentences.) China, on the other hand, has based its oil policy on signing long-term contracts with countries will to sell cheap because no one else will do business with them. China has, for example, oil deals with Iran and Sudan, and has invested heavily in developing oil fields in Sudan. Therefore, the Chinese have not been cooperating in pressing the government of Sudan about Darfur or other human rights issues.

Problem two is that the interests of the leadership of some countries don't coincide with the interests of their people. Governments in the Middle East have consistently mismanaged their economies, partly out of fear of business becoming a competing power center in their societies. We can talk all day to Hosni Mubarak about the ways in which the long-term economic interests of Egypt depend upon a thorough-going reform of the educational system, and he'll block those reforms as too likely to produce a generation of young people ready to think for themselves and to defy authority.

Pollack suggests that, in some of these cases, we may have to provide incentives (subsidies, bribes) to induce the governments to do what is in their countries' interests. This should not be necessary, but we don't live in a perfect world.

Finally, there is the problem of cost. All nations, with a few exceptions, have an interest in at least slowing climate change. But this is a very expensive proposition, so they also have an interest in minimizing the cost to themselves. (Is this an example of the tragedy of the commons? I think it is.) So India may agree that carbon emissions need to be reduced, while also arguing that it is other countries who should bear the burden of those reductions.

Following shared interests to find agreement is a great idea, and it will produce results. But it will also encounter a lot of difficulties.

Friday, November 13, 2009

Listening to Failure to Appear by J. A. Jance

J(udith) A. Jance. Failure to Appear. A Dramatic Reading by Gene Engene. Spokane, WA: Books in Motion, 1994. 8 Audiocassettes. Approximately 10.2 hours.

J. P. Beaumont, whom we left happily sipping McNaughton's in Seattle, turns up in Ashland, Oregon, looking for his runaway daughter, and stumbles into the Oregon Shakespeare Festival, an AA meeting, and a murder. He does find his daughter, but her appearance in the novel is only intermittent.

The first murder victim appears to have been run over by car, until Beaumont cuts himself on the knife protruding from the corpse's chest. The murder weapon turns out to have been stolen from the production of Romeo and Juliet being staged at the festival, and all eyes quickly turn to Juliet. This Juliet may have killed more than the envious moon, and she certainly isn't what it says in the playbill.

Beaumont sets off on a series of wild-goose chases and red-herring pursuits that take him to such garden spots as Walla Walla, Washington, and Medford, Oregon. He manages to stand up his new girlfriend at least once too often. And his guards red Porsche is destroyed when a gas explosion destroys an old farmhouse when Juliet and other actors hang out.

In the end, we solve a lot of mysteries, we get Beaumont's daughter married off, we see a murderess off the stage - permanently. But we don't get to see Beaumont take a drink. Through all the stress and strain, the Serenity Prayer, or something, keeps him high and dry.


Audiobooks: The Technology of Reading

The accompanying article by David Frum comes from the May 2009 issue of Commentary. Mr. Frum used to be a Canadian, then he became a speechwriter for George W. Bush. He is the author of Comeback: Conservatism That Can Win Again and the proprietor of Here's a link to that site.

As you may know by now, I not only read books, I listen to them. This is in part Dave Drake's fault. Years ago, in an act of great kindness, he gave me copies of the audiobook versions of his books Lord of the Isles and Queen of Demons. Since then I've listened to many, many books, sometimes in the car while driving, sometimes while jogging or exercising, sometimes while sitting my study, and sometimes while lying in bed. Overall, it's been a good experience, but there have been technical glitches. For one thing, the players tend to work up over one's belt or waistband, resulting in the player, and the tape, crashing to the ground. This is hard on players, and it's hard on the nerves having one's headphones suddenly yanked to one side.

Mr. Frum asserts that the iPod provides a superior audiobook experience. Listening is still best reserved for lighter reading. Multivolume histories, books of closely-reasoned logic, and scientific treatises may not be so suitable. I listen to a lot of mysteries and thrillers, and so, apparently, does Mr. Frum. In fact, having read his essay, I'm going to look up Alan Furst. Whether I have an iPod with which to listen to his books is in the hands of the gods. Or Santa Claus.

All of you addicted readers should find David Frum's essay of interest, and some of you will find his suggestions about the iPod and the selection of material useful. Of foremost importance, perhaps, is his point about the quality of the narrator. There are some terrific narrators out there, like Richard Ferrone, who does John Sandford's Prey novels. For one thing, he pronounces "Porsche" correctly.

Three Obstacles to Health Reform

I mentioned in my previous post that I had submitted an essay to The Washington Post's pundit contest. This is not that essay; it is the original version, before I realized that the contest had a 400-word limit. (This piece runs 655 words, or so Word tells me.) I hope you enjoy it.

I think I’m a pretty typical American, so far as my health insurance situation is concerned. I get my health insurance through my employer, and my share of the cost comes out of my bi-weekly checks in an amount small enough to cause me very little pain. I’ve been happy with the service I’ve gotten from my healthcare providers, including my radiation treatments for prostate cancer, though I was irritated to learn that my favorite eye doctor was excluded from the latest list of preferred providers. I think it’s really too bad that some people don’t have insurance, and I worry that my own insurance might either go away or become so expensive that I won’t be able to afford it.

There are problems with our current system, and I think something ought to be done about them. At the same time, I don’t want to wreck a system that seems to produce pretty good results most of the time. So I welcome the initiatives by the Obama administration and the Congress to reform the system. There are just a couple of areas in which I think the pro-reform forces (and their opponents) seem to ignoring the elephants in the room.

First, there’s the simple matter of supply and demand. If demand for a good or service goes up, what did our economics teachers tell us would happen to the price? The price will go up as well. What does the act of providing insurance to many uninsured people, or insisting that their employers and the insurance companies provide coverage, amount to but an increase in demand? As many as twenty-five million people who do not have insurance today will be able to walk into a doctor’s office or a hospital, flash a card, and demand service. That is a ten percent increase in the demand for medical services, and I would expect the prices of such services to increase accordingly.

The second elephant in the room is the rate schedule. Doctors and hospitals complain that Medicare and Medicaid pay less than the “cost” (read: list price) of various procedures and tests. Congress has declined to enforce limits on payments to doctors in the past. And some doctors won’t take Medicare patients. When people compare the U.S. system to that in other countries they need to note that the rates for some procedures are set much lower than those here, and that doctors and hospitals aren’t permitted to decline to treat people. One way to lower costs is to enforce a reasonable rate schedule and demand that all doctors and hospitals accept payments according to that schedule or lose their licenses.

Third, there is the shibboleth about coming between the doctor and the patient. We don’t want, says President Obama, to have any bureaucrat, government or private, coming between the doctor and the patient. Well, we may not want that, but that’s exactly what we need to do. We need to stop doctors from ordering unnecessary tests (especially when they own a share in the laboratory), from performing unnecessary procedures, and from prescribing unnecessary drugs. The total of healthcare costs is the total income of hospitals, medical workers, insurance companies, pharmaceutical companies, and the government agencies involved (Medicare, Medicaid, USPHS, Indian Health Service, and so on). In order to lower healthcare costs, we have to lower the incomes of some of those people and organizations.

There are a lot of specific improvements in the healthcare reform bills before the Congress. A lot of good things are going to be done. But none of those things will lower the cost of the healthcare system unless we face the three problems I have outlined above. Frankly, I don’t think that Congress is capable of dealing responsibly with problems whose solutions are likely to be very unpopular. But I can always hope that there are some adults up on Capitol Hill. I’d like to think that there are.

Sometimes I Haves A Great Notion

Sometimes I lives in the country,
Sometimes I lives in town,
Sometimes I haves a great notion,
To jump in the river an' drown.

Those lines are from a song called Irene or Goodnight Irene. My Uncle John used to sing that song, accompanying himself on the guitar. Some of you might recognize the third line as the source of the title of Ken Kesey's book Sometimes a Great Notion, which was made into a movie with Paul Newman and Henry Fonda. Irene is both memorable and evocative.

Some time ago I had the notion of setting up my own blog, posting my thoughts and musings to it, and eliciting comments from my hundreds of readers. So far, friends, the hundreds of readers have failed to materialize, but I still think this was a great notion. I have posted some very nice stuff to this site, and some of you have contributed your own essays, reviews, and comments. If there is any fault to be found here, it is all mine.

I have sometimes slacked off, contributing a brief review of an audio book, or reproducing someone else's column with only minimal comment. But I'm fighting back against that tendency toward intellectual laziness.

During the past few weeks, I've been involved with a terrific contest hosted by The Washington Post. The Post started by invited all comers to a contest to choose America's Next Great Pundit. The deadline for entry was October 21st, and some 4,800 of us responded. Yes, us, for I entered the contest. The essay on pluralism and monism which I posted here on October 24 was one of the pieces I drafted as potential entries in that contest. The one I submitted was on a different topic, and was cut to meet the contest's 400-word limit. In addition, I submitted a one-hundred-word statement about myself and why I should be selected.

Ten people were selected from 4,800 entrants, and I was not among them. Five of them were eliminated in the first round, after submitting 750-word essays. The rest of us entrants were invited to comment, and to vote, upon these essays. The five winners then moved into Round Two. Voting started today, and four of them will move into Round Three once the results are in on Sunday.

But it's Round Two I want to talk about. For three days, Tuesday through Thursday of this week, each of the entrants had to blog. On Tuesday, at least one submission had to be something that might turn into a regular feature. On Wednesday, in what was called the "Beyond the Comfort Zone Challenge," they were expected to attended a meeting hosted by the Council on Foreign Relations, concerned President Obama's upcoming trip to Asia, and post on that event. On Thursday, they had to respond to at least one of their readers' comments. So I got to see some samples of both good and bad blogging, and I hope I've learned some lessons.

The main lesson I've learned is that there is no substitute for good writing. And that's what I promise you'll see here at Knight's Castle.

And if you have any great notions, let me know.

Saturday, November 7, 2009

Listening to Taking the Fifth by J. A. Jance

J. A. Jance. Taking the Fifth. Read by Gene Engene. Spokane, WA: Books in Motion, 1993.

The longer we live, the more we learn. From my library catalog listing, I have learned that J. A. Jance's first name is Judith. The first of her main characters I came across, the heroine of Shoot/Don't Shoot, is named Joanna Brady. The protagonist of the last two Jance novels I've heard is J. P. Beaumont.

J. P. Beaumont, "My friends call me Beau," is a homicide detective on the Seattle police force. I was born in Seattle, and, though I haven't spent a lot of time there, I find that I enjoy running across familiar placenames. This novel starts with a murder near the Pike Place Market. It alludes to Queen Anne Hill, Bellevue, and Boeing Field. If you're not from Seattle, or don't know the place, it provides some of the value of a travel book along with your murder mystery.

This is the fourth of J. A. Jance's J. P. Beaumont series, but it's obvious that Beau has led an active life. He lives in a penthouse condominium purchased with an inheritance from his second wife. He drives a Porsche 928 which he somehow acquired from a woman featured in a previous book. (Gene Engene, who reads the book for Books in Motion, pronounces that "porsh," as a drunk might say "porch." We cognoscenti know that it is "por-shuh," after the late, great designer of the Volkswagen and the Tiger tank.) His partner is hospitalized, recovering from an accident suffering (one supposes) in the previous book. And Beau drinks McNaughton's whiskey, which, I happen to know, is going to get him in trouble later.

Based on this book and Failure to Appear I'd say that Ms. Jance has an interest in the theater. In this case, the first victim is a stagehand at the Fifth Avenue Theater in Seattle. When the stagehand's roommate also turns up dead, Beau starts to suspect something. While checking out the theater, he arranges a dinner date with the star, Jasmine Day. He's impressed by her stage costume of long, blond hair, a cobalt blue dress, and matching Cole Haan shoes. So impressed that he ends up taking her home with him. Then he finds a witness who says that the murder was committed by a woman with long, blond hair, a long dress, and blue stiletto-heeled shoes. Uh-oh!

Taking the Fifth develops into a tale of disguise and deception, involving huge shipments of cocaine, a DEA agent with enough money to fly his own plane, and Beau nearly having his head knocked off by his lady friend. The scene in which Beau is on one end of a telephone line, with a terrified woman whose house is being invaded on the other end, is quite effective. This is, like most mystery novels, popcorn fiction. Or, one might say, Chinese dinner fiction: an hour after reading it you're hungry again. But Beau Beaumont is a reasonably appealing character, and the plot has enough twists and turns to hold one's interest.
Ferguson, Niall. The Ascent of Money: A Financial History of the World. New York: The Penguin Press, 2008. 442 pages. Acknowledgments. Notes. List of Illustrations. Index. $29.95. ISBN: 978-1-59420-192-9.

Niall Ferguson has become a very popular, very well-known, and probably quite wealthy historian. He has gotten into the business of writing television documentary scripts, which he converts into books that can ride the wave of publicity from the TV version. The Ascent of Money is one such, and I should say now that I did not see the television series. In fact, until I read the Acknowledgements at the end of this book, I was unaware that such a program existed. Its origin as a Ken Burnsian voiceover for a television audience helps to explain the simplicity and clarity of the narrative of The Ascent of Money. This is a very readable book, and it contains some charming and well-told stories.

The basic structure of this book is indicated by the title; Niall Ferguson portrays the development of our financial institutions as a matter of increasing complexity and hierarchical evolution. That’s fair enough, although, just as in biology, there are plenty of simple forms being created today, along with the complicated financial products that triggered the recent crisis. It is, by the way, a good thing, I think, that Ferguson wrote this book in early 2008, before the full dimensions of the crisis were known, and before its impact on the “real economy” was apparent.

The chapters reflect Ferguson’s structural assumptions. “Dreams of Avarice” is about the invention of money and the evolution of banking. While one of Ferguson’s first stories is about a mountain of silver, he makes it clear that, even in Sumerian times, money was as much a matter of accounting and marks on paper as of precious metal. A lesson that is clear throughout The Ascent of Money is that money is trust: credit really does depend upon credo. And that is true whether we’re talking about cash, bank accounts, bonds, stocks, real estate, or derivatives.

“Of Human Bondage” is about the development of bonds and the markets for them. “Blowing Bubbles” concerns stock markets and investment bubbles, primarily the grand-daddy of them all: The Mississippi Bubble. “The Return of Risk” takes up the story of the insurance business. “Safe as Houses” is about the real estate market, and the development of securities based on real property. The last chapter, “From Empire to Chimerica,” is the most speculative, but it does give a clear portrait of the interdependent relationship between Chinese productivity and American debt.

This is a very painless way to learn a lot about finance and something about economics. It may also serve to help some of us to understand some of the events that have shaken the banking system over the past two years. How was it that big insurance companies were so vulnerable to the machinations of supposedly private deals among wealthy investor? Why did the banks’ strategy of passing their mortgage risks off to other people through debt-based securities backfire? Why is it that we still do not know the full extent of exposure of American banks to these problems? And why has 2009 seen 99 bank failures, some of them of very large banks, when the government “rescued” the system a year ago?

I’ll recommend The Ascent of Money to those of you who don’t know much about finance. One of the things I have been learning is that you can’t know too much about the stuff that may determine whether you spend your golden years living in a refrigerator box under a bridge. Another is that most of us casual investors don’t have the time, energy, training, or instincts to understand finance on more than a very superficial level. Reading The Ascent of Money is an enjoyable way to get an overview of a subject that many people think of as dull. But the understanding it provides is, of necessity, less than profound.