We all have the same problem: At least one drawer full of obsolete and duplicate chargers for cell phones, digital cameras, music players, gaming devices and similar gadgets. Almost every time you switch or upgrade your cell phone, you need a new wall charger, a new synchronization cord for your PC, and a new car charger. The average American upgrades the cell phone once a year, and replaces it even more often because of lost/stolen/destroyed phenomena. The end result is that we end up with several obsolete chargers every year.
This massive waste and expense is about to end. Most cell phone brands agreed in September 2007 to standardize on MicroUSB for wired connectivity and chargers. Other devices such as photo cameras, video cameras and gaming devices are likely to follow. The first MicroUSB cell phones started hitting the stores approximately mid-2008. I conducted a survey in a few cell phone stores in recent days, and came to the following conclusion: Sprint (S) and Verizon Wireless (VZ) have already implemented MicroUSB in over 50% of their cell phones. AT&T (T) and T-Mobile remain under 20%. I estimate that we will be at 100% MicroUSB by the end of 2009, perhaps with the exception of the iPhone.
Apart from un-cluttering our drawers and making our lives easier, the standardization on MicroUSB will have at least two other benefits:
There will no longer be any point in including a charger in the box with every new phone sold. Once you have your initial MicroUSB charger, car charger and synchronization cable, there will not be any point in getting another one for a long time. Every time you upgrade your device from that point, the salesperson can ask "Do you need a charger to go along with your new cell phone?" At that point, assuming you haven't lost or destroyed your old MicroUSB charger, your answer is likely "no." This will enable cell phone box packaging to be much smaller, with all of the environmental and cost benefits that go along with those savings. Just look at what Apple (AAPL) has done with creating small packaging for their products; now turbo-charge that miniaturization approach.
According to Nokia (NOK), the energy wasted from inefficient cell phone chargers – drawing too much power while not actually performing the charging function – is equivalent to two medium-sized power plants, when serving three billion cell phone users. In a world where every cell phone will be using the same kind of MicroUSB charger, and where they are not included in the cell phone box, there will be a market for people striving to buy the most energy-efficient chargers. For starters, on November 19 this year, Nokia, LG (LGERF.PK), Samsung (SSDIF.PK), Motorola and SonyEricsson agreed to a common energy rating system for cell phone chargers. This will have a meaningful impact once all cell phones are MicroUSB and the chargers are not included in the box, but rather sold separately. People will deliberately shop for those chargers that will minimize their electricity bills, something which wasn't possible or practical in the pre-MicroUSB world.
What's the bottom line for cell phone and related stocks? I believe it will have a positive effect. Prices will come down, reflecting the lower cost of industry-wide standardization. People will be more prone to upgrade when they are making an investment in a standards-based technology that will require fewer accessories being purchased over time. On the other hand, one near-term risk is that consumers are now postponing purchases of pre-MicroUSB cell phones before their favorite phones include this interface. One such example is the Blackberry 9000 Bold, which was among the last pre-MicroUSB Blackberries to be launched. With the Blackberry 8900 Curve about to be launched also by AT&T, some consumers have held off on buying the 9000 Bold because they don't want to invest in one more pre-MicroUSB device. If this theory is true, the pent-up demand for the 8900 Curve is unusually strong for a new Blackberry this time.
Wednesday, December 24, 2008
Thursday, December 18, 2008
Government’s Ponzi Scheme Beats Madoff 1000x
By now we have heard about Bernie Madoff’s $50 billion Ponzi scheme, where the life savings of at least hundreds of people – perhaps thousands – went up in smoke. We are all being told that this represents the biggest Ponzi scheme of all time, by a wide margin. Right?
Wrong. Madoff’s Ponzi scheme isn’t even close to the biggest one ever, by far. The biggest Ponzi scheme is one in which we are all victims, to the tune of close to $50 trillion – not billion. It’s the unfunded liabilities of the US Federal Government, particularly Medicare and Social Security.
How does it add up to $50 trillion? In a classical Ponzi scheme, the government has promised pay-outs of monies under the guise of “Social Security” and “Medicare” (among the two largest schemes) for whom taxpayers will be on the hook in the future. What about the Social Security “trust fund?” It consists primarily of IOUs denominated in government bonds, to be paid for by future taxpayers. Madoff would only have been so proud to be in charge of this giant scheme.
There are just over 100 million households in the US, although only approximately half of Americans are significant Federal income taxpayers. What that means is that some 50 million Federal income taxpayers could be the ones carrying the burden of funding this $50 trillion Ponzi scheme. That’s $1 million per taxpayer, folks. If the government expands the tax base to 100 million people, it’s $500,000 per person. That’s the average net worth of all Americans. Everything we own is spoken for in the government’s $50 trillion Ponzi scheme.
What’s the bottom line? Sure Bernie Madoff is a giant crook, but even this giant pales in comparison to the Ponzi scheme in which we are all victims to the tune of anywhere from $500,000 to $1m each. One can also suspect that this number will increase further, because the government may be expanding its activities into further areas of society, including health care, the banking system, industries such as automobiles, and so forth. Are you enjoying the service you receive at The Post Office? At your airport’s TSA station? Then you will increasingly love the world of entitlement socialism, built on these giant Ponzi schemes.
There are many things of which we can be critical of President George W. Bush, such as the new Medicare Ponzi scheme, the bailout mania, the general insane increase in government spending (all with massive Democrat support in Congress). However, for what it’s worth, President Bush warned against, and tried to do something about, two of the biggest problems of all time: He tried to (1) Put the lid on the corrupt Fannie Mae and Freddie Mac that led to the mortgage crisis, and (2) Convert Social Security from a Ponzi scheme to a private 401(k)-style savings account. In future years, historians will look back at those who opposed President Bush’s reform proposals in those two areas, in the same way we are now looking at Bernie Madoff, except this Ponzi scheme is 1000x larger.
Wrong. Madoff’s Ponzi scheme isn’t even close to the biggest one ever, by far. The biggest Ponzi scheme is one in which we are all victims, to the tune of close to $50 trillion – not billion. It’s the unfunded liabilities of the US Federal Government, particularly Medicare and Social Security.
How does it add up to $50 trillion? In a classical Ponzi scheme, the government has promised pay-outs of monies under the guise of “Social Security” and “Medicare” (among the two largest schemes) for whom taxpayers will be on the hook in the future. What about the Social Security “trust fund?” It consists primarily of IOUs denominated in government bonds, to be paid for by future taxpayers. Madoff would only have been so proud to be in charge of this giant scheme.
There are just over 100 million households in the US, although only approximately half of Americans are significant Federal income taxpayers. What that means is that some 50 million Federal income taxpayers could be the ones carrying the burden of funding this $50 trillion Ponzi scheme. That’s $1 million per taxpayer, folks. If the government expands the tax base to 100 million people, it’s $500,000 per person. That’s the average net worth of all Americans. Everything we own is spoken for in the government’s $50 trillion Ponzi scheme.
What’s the bottom line? Sure Bernie Madoff is a giant crook, but even this giant pales in comparison to the Ponzi scheme in which we are all victims to the tune of anywhere from $500,000 to $1m each. One can also suspect that this number will increase further, because the government may be expanding its activities into further areas of society, including health care, the banking system, industries such as automobiles, and so forth. Are you enjoying the service you receive at The Post Office? At your airport’s TSA station? Then you will increasingly love the world of entitlement socialism, built on these giant Ponzi schemes.
There are many things of which we can be critical of President George W. Bush, such as the new Medicare Ponzi scheme, the bailout mania, the general insane increase in government spending (all with massive Democrat support in Congress). However, for what it’s worth, President Bush warned against, and tried to do something about, two of the biggest problems of all time: He tried to (1) Put the lid on the corrupt Fannie Mae and Freddie Mac that led to the mortgage crisis, and (2) Convert Social Security from a Ponzi scheme to a private 401(k)-style savings account. In future years, historians will look back at those who opposed President Bush’s reform proposals in those two areas, in the same way we are now looking at Bernie Madoff, except this Ponzi scheme is 1000x larger.
Tuesday, October 28, 2008
White Spaces, In Contrast
The white space debate, for all its technical complexity, is otherwise very simple to judge. So many frequencies remain unused or dramatically underutilized – either in space, or in time, or both. A cognitive radio should therefore be able to fill in these blanks with useful stuff, such as Internet access akin to WiFi, WiMax, HSPA, EV-DO and LTE.
Most of these frequencies are between 150 and 850 MHz. This makes them particularly complementary to most of the cellular frequencies, who start at 850 MHz in the US (soon 700 MHz) and at 450 MHz in some other European countries (although mostly 900 MHz). Most other cellular frequencies reside between 1700 and 2200 MHz, while WiFi and most mobile WiMax launches are between 2300 and 2700 MHz.
These lower frequencies are used for things such as old-fashioned broadcast television and military applications. Some of those military applications have limited geographic scope, and many of the allocated television channels are also not used in most areas. Those are cases where this spectrum ought to be privatized outright, under any circumstance. At a minimum, this spectrum can be repurposed for as long as no interference is proven. Basically, there is no downside to trying. In this respect, the advocates of white space use legalization are 100% correct.
However, the white space argument is even stronger and ought to be taken at least one full step further. Over 90% of American households have cable TV, satellite TV, or some other form of non-terrestrial broadcast TV such as wired TV from a telco (Verizon FiOS, AT&T U-Verse etc.). This percentage has also been increasing. With only a few remaining households taking up this valuable real estate in the air, it’s beginning to look like the “bridge to nowhere.” Basically, we are foregoing an untold billion dollars (perhaps trillions) in consumer welfare just so that a tiny single-digit percentage of households can get to watch a handful of channels without paying for TV from cable/satellite/telco. This is a shameful exploitation of government property, at a huge expense.
The solution is of course very simple: The government a long time ago should have told the TV broadcasters that the game is up. No more any free ride. No more exploitation at the public trough. This is valuable real estate, which, just like almost all government property, should be sold to the highest bidders as soon as possible. Just this February, the sale of a few tiny thin slices of the 700 MHz spectrum fetched $20 billion. Imagine what the spectrum all the way down to below 200 MHz would fetch?
This idea isn’t new; I have been proposing it for years. The rebuttal has always been that this is somehow politically impossible. I have never understood this argument, because we talking about less than 10% of households who are exploiting the other 90%+. Any politician worth his salt ought to be able to explain that the only thing standing in the way of vastly more available, capable and lower-priced wireless broadband are a bunch of people who refuse to get cable/satellite/telco TV, just like the rest of us.
Some say those 10% are unusually poor, and need access to free TV. To this I say: If they are that poor, they are probably watching too much TV, and working too few hours. Daytime TV is also a bad influence, culturally. Besides, those same people who insist on watching free TV, are also the same people who smoke and drink for a lot more money than it would cost them to pay for the same kind of cable/satellite/telco TV subscription that the rest of us do. People shouldn’t have to run around and pay for each other’s entertainment habits. What’s next – government-subsidized movie tickets, opera passes or ballpark games? Wait – don’t give the new Congress any ideas…
Most of these frequencies are between 150 and 850 MHz. This makes them particularly complementary to most of the cellular frequencies, who start at 850 MHz in the US (soon 700 MHz) and at 450 MHz in some other European countries (although mostly 900 MHz). Most other cellular frequencies reside between 1700 and 2200 MHz, while WiFi and most mobile WiMax launches are between 2300 and 2700 MHz.
These lower frequencies are used for things such as old-fashioned broadcast television and military applications. Some of those military applications have limited geographic scope, and many of the allocated television channels are also not used in most areas. Those are cases where this spectrum ought to be privatized outright, under any circumstance. At a minimum, this spectrum can be repurposed for as long as no interference is proven. Basically, there is no downside to trying. In this respect, the advocates of white space use legalization are 100% correct.
However, the white space argument is even stronger and ought to be taken at least one full step further. Over 90% of American households have cable TV, satellite TV, or some other form of non-terrestrial broadcast TV such as wired TV from a telco (Verizon FiOS, AT&T U-Verse etc.). This percentage has also been increasing. With only a few remaining households taking up this valuable real estate in the air, it’s beginning to look like the “bridge to nowhere.” Basically, we are foregoing an untold billion dollars (perhaps trillions) in consumer welfare just so that a tiny single-digit percentage of households can get to watch a handful of channels without paying for TV from cable/satellite/telco. This is a shameful exploitation of government property, at a huge expense.
The solution is of course very simple: The government a long time ago should have told the TV broadcasters that the game is up. No more any free ride. No more exploitation at the public trough. This is valuable real estate, which, just like almost all government property, should be sold to the highest bidders as soon as possible. Just this February, the sale of a few tiny thin slices of the 700 MHz spectrum fetched $20 billion. Imagine what the spectrum all the way down to below 200 MHz would fetch?
This idea isn’t new; I have been proposing it for years. The rebuttal has always been that this is somehow politically impossible. I have never understood this argument, because we talking about less than 10% of households who are exploiting the other 90%+. Any politician worth his salt ought to be able to explain that the only thing standing in the way of vastly more available, capable and lower-priced wireless broadband are a bunch of people who refuse to get cable/satellite/telco TV, just like the rest of us.
Some say those 10% are unusually poor, and need access to free TV. To this I say: If they are that poor, they are probably watching too much TV, and working too few hours. Daytime TV is also a bad influence, culturally. Besides, those same people who insist on watching free TV, are also the same people who smoke and drink for a lot more money than it would cost them to pay for the same kind of cable/satellite/telco TV subscription that the rest of us do. People shouldn’t have to run around and pay for each other’s entertainment habits. What’s next – government-subsidized movie tickets, opera passes or ballpark games? Wait – don’t give the new Congress any ideas…
Fund Manager Game Plan 2008
The plural of anecdote is data. Following many conversations with the nation’s savviest fund managers, I have discovered how we explain the timing of the 2008 market decline. It is essentially a two-step process:
First, once Obama won the Iowa caucuses in early January, it was time to start selling shares in anticipation of some probability of the risk that he may win on November 4. As the year progressed, this probability has been increasing, intensifying the market sell-off. The idea is that if you thought it were a 100% probability that Obama may win on November 4, you wanted to be in 100% cash (or 100% short, or some combination thereof). Right now, the www.intrade.com odds are close to 87%, which would indicate you may be in 87% cash, having left 13% on the table for now, in the market.
Second, assuming Obama wins on November 4, you would be in 100% cash by November 5, at which point you have a few weeks to transfer the money abroad before it would come under Obama’s 2009 IRS jurisdiction. If you transfer your money abroad by December 31, you would avoid a frontal collision with confiscatory socialism.
This is rational human behavior. The only irrational thing about this situation is that McCain has mysteriously failed to point it out.
First, once Obama won the Iowa caucuses in early January, it was time to start selling shares in anticipation of some probability of the risk that he may win on November 4. As the year progressed, this probability has been increasing, intensifying the market sell-off. The idea is that if you thought it were a 100% probability that Obama may win on November 4, you wanted to be in 100% cash (or 100% short, or some combination thereof). Right now, the www.intrade.com odds are close to 87%, which would indicate you may be in 87% cash, having left 13% on the table for now, in the market.
Second, assuming Obama wins on November 4, you would be in 100% cash by November 5, at which point you have a few weeks to transfer the money abroad before it would come under Obama’s 2009 IRS jurisdiction. If you transfer your money abroad by December 31, you would avoid a frontal collision with confiscatory socialism.
This is rational human behavior. The only irrational thing about this situation is that McCain has mysteriously failed to point it out.
No Such Thing As Redistribution
Language often contains subtle biases. Take the current spat over “spreading your wealth around” for example. The debate has finally moved into the area of Marxist philosophy, in which Obama is said to favor “redistribution of income” and/or “redistribution of wealth.”
One of the problems with this description is that the word “redistribution” assumes that something has been distributed to begin with. It hasn’t. Something was earned, not distributed. Therefore, the government can’t redistribute something that wasn’t distributed in the first place. Someone made the money, and now the government is seeking to take it. That’s more like legalized theft, not some soft-soapy and obfuscating “redistribution.”
I don’t understand why McCain is choosing adopt language that resides on Karl Marx’s home turf. It’s the right thing to do to tie Obama to Marx’s socialist economic philosophy, but no need to let him off the hook lightly by giving him the benefit of a misleading choice of words.
One of the problems with this description is that the word “redistribution” assumes that something has been distributed to begin with. It hasn’t. Something was earned, not distributed. Therefore, the government can’t redistribute something that wasn’t distributed in the first place. Someone made the money, and now the government is seeking to take it. That’s more like legalized theft, not some soft-soapy and obfuscating “redistribution.”
I don’t understand why McCain is choosing adopt language that resides on Karl Marx’s home turf. It’s the right thing to do to tie Obama to Marx’s socialist economic philosophy, but no need to let him off the hook lightly by giving him the benefit of a misleading choice of words.
Sunday, October 26, 2008
Conversation With an Obama Volunteer
I wish this account were an “Only in The People’s Republic of Palo Alto” story, but it probably isn’t. It happened this Sunday afternoon, nine days before the election. I was walking up University Avenue and encountered three young ladies on a street-corner. Normally I don’t engage political activists, but this time I made a rare exception. I’m not completely sure why, but it may have had something to do with the fact that these three young ladies were dressed like my favorite Olympians – the women’s beach volleyball teams. Not quite as tall, and at the very most half my age. This is my best recollection of the 5 minute encounter:
Obama Volunteer (OV): Want to help Obama become President? Any questions we can answer?
Anton Wahlman (AW): I do have a question. Can you explain how Obama differs from Jimmy Carter on one or several issues?
OV: Carter who?
AW: Jimmy. Our country’s 39th President.
OV: Oh, I have no idea. We were all born in 1990!
AW: But surely you have studied history?
OV: We sure have. That was back when America was oppressing the African-Americans, right?
AW: Probably not, but what I had in mind were things such as unemployment rate, interest rates and inflation.
OV: The unemployment rate has never been higher than now; haven’t you seen the news about the crisis on Wall Street?
AW: The last reported figure was 6.1%. 30 years ago it was close to 10%. Is Obama going to do anything different from Jimmy Carter?
OV: Carter was probably very old. Obama is just so cool. He will make it so entertaining. What else did you ask again?
AW: Interest rates and inflation.
OV: I’m not sure either of those is that important. They may have been important before, but this election is about change. Besides, I’ve never heard of an inflation problem.
AW: Well, we haven’t had much inflation in the last 25 years, but it went well above 10% some 30 years ago.
OV: So what does that have to do with the change Obama is proposing?
AW: The point is that if he is going to spend all the money he is promising, and if he isn’t going to raise taxes on 95% of the people, and the other 5% move their money abroad, he eventually has to print the money. And that means record inflation.
OV: Not under Obama it won’t. That’s what change is all about.
AW: That defies gravity. Are you saying that the world will levitate once Obama is sworn in on January 20?
OV: Inflation is more in the head of people if they talk about it on TV. I think Obama is so smart that if he prints a trillion dollars, he just won’t tell anyone. So inflation won’t show up. That’s the new politics will have in the future. Don’t you see I’ve got “Change” painted around my belly-button?
AW: Amazing. So what about interest rates? Under Carter I seem to recall they hit 18% or more.
OV: Who uses them?
AW: Uses what?
OV: Those interest rates.
AW: Well, let’s see – the biggest credit purchase tends to be buying a house.
OV: Dude, we live in the Stanford dorms.
OV #2: And if you need money, mom and dad will send us some. I think we should just abolish interest rates anyway. Besides, weren’t they the cause of the financial crisis?
OV #3: Our political science Professor pointed out that interest rates are only a tool to exploit the poor and the African-Americans. They should just do away with them. So that Carter stuff you’re talking about, it wouldn’t apply. Anything else we can answer?
AW: I think I just got my confirmation. But wait! I just wanted to ask about what you think of foreign policy after 9/11, whether Obama will make sure no terrorists walk across the border from Mexico?
OV: 9/11, that’s such a long time ago. Is it relevant anymore?
AW: 9/11 was in 2001, seven years ago.
OV: Exactly. I was starting Junior High around that time. Getting away from 9/11 is part of change.
AW: So are you drawing any conclusions of what happened on 9/11?
OV: I dunno. I guess we were a bit late to install reinforced cockpits.
AW: That’s it? What about Islamic extremism? Do you think they want to kill us, or not?
OV: They won’t now! Obama is basically President of the whole world. Everyone loves him.
AW: Alright, have a nice day girls. One day, you too will grow up. In the meantime, read some history, take Economics 101 and perhaps even 201.
Obama Volunteer (OV): Want to help Obama become President? Any questions we can answer?
Anton Wahlman (AW): I do have a question. Can you explain how Obama differs from Jimmy Carter on one or several issues?
OV: Carter who?
AW: Jimmy. Our country’s 39th President.
OV: Oh, I have no idea. We were all born in 1990!
AW: But surely you have studied history?
OV: We sure have. That was back when America was oppressing the African-Americans, right?
AW: Probably not, but what I had in mind were things such as unemployment rate, interest rates and inflation.
OV: The unemployment rate has never been higher than now; haven’t you seen the news about the crisis on Wall Street?
AW: The last reported figure was 6.1%. 30 years ago it was close to 10%. Is Obama going to do anything different from Jimmy Carter?
OV: Carter was probably very old. Obama is just so cool. He will make it so entertaining. What else did you ask again?
AW: Interest rates and inflation.
OV: I’m not sure either of those is that important. They may have been important before, but this election is about change. Besides, I’ve never heard of an inflation problem.
AW: Well, we haven’t had much inflation in the last 25 years, but it went well above 10% some 30 years ago.
OV: So what does that have to do with the change Obama is proposing?
AW: The point is that if he is going to spend all the money he is promising, and if he isn’t going to raise taxes on 95% of the people, and the other 5% move their money abroad, he eventually has to print the money. And that means record inflation.
OV: Not under Obama it won’t. That’s what change is all about.
AW: That defies gravity. Are you saying that the world will levitate once Obama is sworn in on January 20?
OV: Inflation is more in the head of people if they talk about it on TV. I think Obama is so smart that if he prints a trillion dollars, he just won’t tell anyone. So inflation won’t show up. That’s the new politics will have in the future. Don’t you see I’ve got “Change” painted around my belly-button?
AW: Amazing. So what about interest rates? Under Carter I seem to recall they hit 18% or more.
OV: Who uses them?
AW: Uses what?
OV: Those interest rates.
AW: Well, let’s see – the biggest credit purchase tends to be buying a house.
OV: Dude, we live in the Stanford dorms.
OV #2: And if you need money, mom and dad will send us some. I think we should just abolish interest rates anyway. Besides, weren’t they the cause of the financial crisis?
OV #3: Our political science Professor pointed out that interest rates are only a tool to exploit the poor and the African-Americans. They should just do away with them. So that Carter stuff you’re talking about, it wouldn’t apply. Anything else we can answer?
AW: I think I just got my confirmation. But wait! I just wanted to ask about what you think of foreign policy after 9/11, whether Obama will make sure no terrorists walk across the border from Mexico?
OV: 9/11, that’s such a long time ago. Is it relevant anymore?
AW: 9/11 was in 2001, seven years ago.
OV: Exactly. I was starting Junior High around that time. Getting away from 9/11 is part of change.
AW: So are you drawing any conclusions of what happened on 9/11?
OV: I dunno. I guess we were a bit late to install reinforced cockpits.
AW: That’s it? What about Islamic extremism? Do you think they want to kill us, or not?
OV: They won’t now! Obama is basically President of the whole world. Everyone loves him.
AW: Alright, have a nice day girls. One day, you too will grow up. In the meantime, read some history, take Economics 101 and perhaps even 201.
Who Is John Galt? We'll Soon Find Out
For those of you who wonder how our country will play out after November 4, look no further than Ayn Rand's 1957 novel Atlas Shrugged. In that book, anti-business policies in the form of higher taxes and more regulation caused the major captains of industry to go on strike, shutting down wealth-creation as we know it. That's the essence of Atlas Shrugged, and that is – at least directionally – what we may face if such policies are enacted in coming months and years.
Actually, "shutting down" isn't the only option for investors and businesspeople anymore. Back in the 1950s, when Ayn Rand authored Atlas Shrugged, the US constituted an extremely large share of the world economy. In 1951, the average American ate 50 percent more than the average European. Americans controlled two-thirds of the world's production, owned 80 percent of the world's electrical goods, and produced more than 40 percent of its electricity, 60 percent of its oil and 66 percent of its steel. America's 5 percent of the world's population had more wealth than the other 95 percent, and Americans made almost all of what they consumed: Over 99.9% of new cars sold in the U.S. in 1954 were U.S. brands. By the end of the 1950s, GM was a bigger economic entity than Belgium, and Los Angeles had more cars than did Asia.
There were very few other advanced, functioning economies. The US captains of industry had no ships to sail, no destinations to go. In this respect, the world has changed radically not only over the last 50 years, but perhaps the most dramatically in the last 15: The rise of the Asian economies from India to China, Eastern Europe and Russia, as well as Dubai as the Hong-Kong of The Middle East. Over 3 billion people now have cell phones – half the world's population. Cell phone penetration is Moscow is 176% -- the average Moscowite has 1.76 cell phones.
For this reason, unlike the industrial shutdown in Atlas Shrugged, we could simply see a giant emigration of capital, businesses and eventually people. This has started already, with individual investors and investment funds winding down US-domiciled investments in preparation for international transfers if the US becomes filled with anti-business, anti-rich and anti-Wall Street policies. Most Silicon Valley companies have already been locating an increasing percentage of their workforces abroad.
16 years later, Ross Perot would have called this "The Giant Sucking Sound." In Western Europe in the 1950s, they called it "The Brain Drain." People from all over the world, looking to get ahead, were moving their money, their businesses, and themselves, to The Shining City On A Hill – the place where the business climate was better. We saw it in our universities, we saw it in Silicon Valley, and we saw it on Wall Street. Well, I hope you captured those memories on your home video camera, because the new anti-business climate in America will make them only a memory.
Some Republicans used to make a big deal as late as 2007 about our immigration problem. Now they will have to focus on describing our emigration problem. In 2008, the emigration of our capital started, and it belonged to John Galt.
Actually, "shutting down" isn't the only option for investors and businesspeople anymore. Back in the 1950s, when Ayn Rand authored Atlas Shrugged, the US constituted an extremely large share of the world economy. In 1951, the average American ate 50 percent more than the average European. Americans controlled two-thirds of the world's production, owned 80 percent of the world's electrical goods, and produced more than 40 percent of its electricity, 60 percent of its oil and 66 percent of its steel. America's 5 percent of the world's population had more wealth than the other 95 percent, and Americans made almost all of what they consumed: Over 99.9% of new cars sold in the U.S. in 1954 were U.S. brands. By the end of the 1950s, GM was a bigger economic entity than Belgium, and Los Angeles had more cars than did Asia.
There were very few other advanced, functioning economies. The US captains of industry had no ships to sail, no destinations to go. In this respect, the world has changed radically not only over the last 50 years, but perhaps the most dramatically in the last 15: The rise of the Asian economies from India to China, Eastern Europe and Russia, as well as Dubai as the Hong-Kong of The Middle East. Over 3 billion people now have cell phones – half the world's population. Cell phone penetration is Moscow is 176% -- the average Moscowite has 1.76 cell phones.
For this reason, unlike the industrial shutdown in Atlas Shrugged, we could simply see a giant emigration of capital, businesses and eventually people. This has started already, with individual investors and investment funds winding down US-domiciled investments in preparation for international transfers if the US becomes filled with anti-business, anti-rich and anti-Wall Street policies. Most Silicon Valley companies have already been locating an increasing percentage of their workforces abroad.
16 years later, Ross Perot would have called this "The Giant Sucking Sound." In Western Europe in the 1950s, they called it "The Brain Drain." People from all over the world, looking to get ahead, were moving their money, their businesses, and themselves, to The Shining City On A Hill – the place where the business climate was better. We saw it in our universities, we saw it in Silicon Valley, and we saw it on Wall Street. Well, I hope you captured those memories on your home video camera, because the new anti-business climate in America will make them only a memory.
Some Republicans used to make a big deal as late as 2007 about our immigration problem. Now they will have to focus on describing our emigration problem. In 2008, the emigration of our capital started, and it belonged to John Galt.
Why is McCain Playing Defense on This Market?
His other forward-leaning arguments aside, McCain has been playing defense on the recent decline in the stock market. His defensive posture, insofar as he doesn't have much of a posture at all on the stock market, can subconsciously be interpreted to mean that he feels a bit guilty about it, and therefore avoids the issue. It's become the millstone around his neck.
This is the wrong tactic for McCain! The argument he should be making is that one contributing reason for the market's decline this year is that the market participants dislike Obama's plans for taxes, spending and regulation. Imagine the political narrative if at least half of Americans had come to believe that this is a reason for the market decline?
The merits of the market causality argument can be debated until the end of time. Obama supporters would disagree that his tax, spending and regulation plans are contributors to the market decline. Free-market people will claim that the argument is basically axiomatic in its logic. The point here, however, is not with the fundamentals of that market causality argument – even though I think it is indeed axiomatic in its logic – but rather one of political tactic. By failing to make the argument, McCain is essentially ceding this election season's most valuable real estate to Obama because of a lack of resistance on this crucial issue. This is probably majority of the reason why McCain fell behind in the polls starting in mid-September.
McCain's failure to blame some part of the stock market decline on the market's fear of an Obama Presidency is an even bigger omission than McCain's failure to rebut Obama's linking him to George Bush: I never once heard McCain rebut Obama on this issue – such as in the TV debates – by reminding people that the only one in this election who has ever run against George Bush is actually John McCain, in the 2000 Republican primary. McCain conspicuously fails to rebut Obama by reminding the American people that he sat across the table from George Bush on live TV and basically called him a scumbag. Nobody else has done this.
At this point, McCain's failure to link Obama as one contributing factor to the market decline, will likely cause McCain to lose this election. That is, unless he starts to make this argument his central one for the last 10 days.
This is the wrong tactic for McCain! The argument he should be making is that one contributing reason for the market's decline this year is that the market participants dislike Obama's plans for taxes, spending and regulation. Imagine the political narrative if at least half of Americans had come to believe that this is a reason for the market decline?
The merits of the market causality argument can be debated until the end of time. Obama supporters would disagree that his tax, spending and regulation plans are contributors to the market decline. Free-market people will claim that the argument is basically axiomatic in its logic. The point here, however, is not with the fundamentals of that market causality argument – even though I think it is indeed axiomatic in its logic – but rather one of political tactic. By failing to make the argument, McCain is essentially ceding this election season's most valuable real estate to Obama because of a lack of resistance on this crucial issue. This is probably majority of the reason why McCain fell behind in the polls starting in mid-September.
McCain's failure to blame some part of the stock market decline on the market's fear of an Obama Presidency is an even bigger omission than McCain's failure to rebut Obama's linking him to George Bush: I never once heard McCain rebut Obama on this issue – such as in the TV debates – by reminding people that the only one in this election who has ever run against George Bush is actually John McCain, in the 2000 Republican primary. McCain conspicuously fails to rebut Obama by reminding the American people that he sat across the table from George Bush on live TV and basically called him a scumbag. Nobody else has done this.
At this point, McCain's failure to link Obama as one contributing factor to the market decline, will likely cause McCain to lose this election. That is, unless he starts to make this argument his central one for the last 10 days.
Sunday, October 12, 2008
The Difference Between 1993 and 2009
At the center of Senator Obama's tax policy argument is that by raising taxes on the top 5% of income earners, we are only returning to President Clinton's 1993 tax increases. Let's for a moment leave aside that Obama really is looking to raise taxes on social security (above incomes of $103,000) and on everyone's capital gains, regardless of income. Rather, the Obama argument goes that because we had a relative economic boom following the 1993 tax increase, it's perfectly safe to raise taxes in 2009 as well.
Wrong. There is a major difference between 1993 and 2009 that Obama and McCain alike are both failing to articulate. In 1993, the U.S. was one of the world's lowest-tax countries, with Europe mostly at much higher rates, and most of the Asian economies too underdeveloped to be alternatives for investments and businesses. Eastern Europe was under a cloud of uncertainty and instability following the rapid demise of The Soviet Union on Christmas Day 1991. The 1993 tax increase left the U.S. as the leading free-market economy, albeit at a smaller margin than before.
As we enter 2009, the U.S. position in the world is extremely different than it was 16 years earlier. We are no longer the low-tax beacon of the major industrialized world. Numerous countries in Western Europe, Eastern Europe, Asia and elsewhere now have lower capital gains taxes than the U.S. The same goes for top marginal income tax rates, where Albania is at 10%, Estonia 13% and Russia 17%, just to mention a few. Here in the U.S., the current top rate is 36% for Federal, and if you live in NYC or California, you probably pay very close to 50% all-in. Our 15% long-term capital gains tax can't compete with the 0% rates in many other countries, but don't forget that many capital gains taxes aren't long-term, at which point you will pay 36% or higher.
The effect of the current high-tax policies is becoming an increasing disaster. There has been no employment growth in places such as Silicon Valley in the last decade, because U.S. companies are choosing to locate more employees in lower-tax areas such as China, India and Eastern Europe. Have you noticed the lack of IPOs in the U.S. this year? For the first time in 30 years, there were no venture-backed IPOs. This has a significant impact to the standard of living here at home.
In this context, it is strange to listen to Senator McCain saying repeatedly that he wants to "Keep taxes low." Well, if taxes aren't low, why does he want to keep them? We have some of the world's highest capital gains and income taxes, so we are hemorrhaging investments and human capital to those places where they are not taxed as much.
So what is the 2009 recipe to strengthen the U.S. economy? Clearly McCain is wrong about "keeping taxes low" because they are already way too high. As for Obama, he proposes an outright train wreck in terms of forcing investors, businesses and high-wage earners abroad. Rather, we should once and for all abolish the capital gains tax – whether for short-term gains, or long-term. We should also become competitive with the fastest-growing economies in the world by cutting the top Federal rate to below Albania's 10% rate. Given that some U.S. states and local governments have combined rates of around 10%, it would be appropriate to abolish our Federal income tax altogether. This would stop the hemorrhaging of investments, businesses and talented individuals leaving our country.
What about the budget deficit, you say? Wouldn't abolishing the income tax and capital gains taxes reduce tax revenue? Of course it would. So the answer is to cut government spending correspondingly. The Federal budget now exceeds $3 trillion, or $10,000 per U.S. citizen, of which the Department of Defense is little over 20%. Big ticket items are Medicare, Medicaid and Social Security, for starters. Medicare and Medicaid in particular, are hugely inefficient and unnecessarily bureaucratic ways to induce people to over-consume health care services, and should be abolished in favor of lower taxes that would lead to a booming economy. The list goes on, but the Federal budget can be cut from over $3 billion to around $2 billion immediately, followed by another cut down to $1 trillion over time as Social Security payments dwindle in favor of a private 401(k)-style private system. The government can also raise funds by selling property, including land. After all, various agencies of the U.S. government is by far the largest property owner in the country, and could fill several years worth of budget gaps by auctioning off vast amounts of lands and buildings no longer necessary when we cut off the bureaucracy and the socialist apparatus currently consuming our tax dollars.
Wrong. There is a major difference between 1993 and 2009 that Obama and McCain alike are both failing to articulate. In 1993, the U.S. was one of the world's lowest-tax countries, with Europe mostly at much higher rates, and most of the Asian economies too underdeveloped to be alternatives for investments and businesses. Eastern Europe was under a cloud of uncertainty and instability following the rapid demise of The Soviet Union on Christmas Day 1991. The 1993 tax increase left the U.S. as the leading free-market economy, albeit at a smaller margin than before.
As we enter 2009, the U.S. position in the world is extremely different than it was 16 years earlier. We are no longer the low-tax beacon of the major industrialized world. Numerous countries in Western Europe, Eastern Europe, Asia and elsewhere now have lower capital gains taxes than the U.S. The same goes for top marginal income tax rates, where Albania is at 10%, Estonia 13% and Russia 17%, just to mention a few. Here in the U.S., the current top rate is 36% for Federal, and if you live in NYC or California, you probably pay very close to 50% all-in. Our 15% long-term capital gains tax can't compete with the 0% rates in many other countries, but don't forget that many capital gains taxes aren't long-term, at which point you will pay 36% or higher.
The effect of the current high-tax policies is becoming an increasing disaster. There has been no employment growth in places such as Silicon Valley in the last decade, because U.S. companies are choosing to locate more employees in lower-tax areas such as China, India and Eastern Europe. Have you noticed the lack of IPOs in the U.S. this year? For the first time in 30 years, there were no venture-backed IPOs. This has a significant impact to the standard of living here at home.
In this context, it is strange to listen to Senator McCain saying repeatedly that he wants to "Keep taxes low." Well, if taxes aren't low, why does he want to keep them? We have some of the world's highest capital gains and income taxes, so we are hemorrhaging investments and human capital to those places where they are not taxed as much.
So what is the 2009 recipe to strengthen the U.S. economy? Clearly McCain is wrong about "keeping taxes low" because they are already way too high. As for Obama, he proposes an outright train wreck in terms of forcing investors, businesses and high-wage earners abroad. Rather, we should once and for all abolish the capital gains tax – whether for short-term gains, or long-term. We should also become competitive with the fastest-growing economies in the world by cutting the top Federal rate to below Albania's 10% rate. Given that some U.S. states and local governments have combined rates of around 10%, it would be appropriate to abolish our Federal income tax altogether. This would stop the hemorrhaging of investments, businesses and talented individuals leaving our country.
What about the budget deficit, you say? Wouldn't abolishing the income tax and capital gains taxes reduce tax revenue? Of course it would. So the answer is to cut government spending correspondingly. The Federal budget now exceeds $3 trillion, or $10,000 per U.S. citizen, of which the Department of Defense is little over 20%. Big ticket items are Medicare, Medicaid and Social Security, for starters. Medicare and Medicaid in particular, are hugely inefficient and unnecessarily bureaucratic ways to induce people to over-consume health care services, and should be abolished in favor of lower taxes that would lead to a booming economy. The list goes on, but the Federal budget can be cut from over $3 billion to around $2 billion immediately, followed by another cut down to $1 trillion over time as Social Security payments dwindle in favor of a private 401(k)-style private system. The government can also raise funds by selling property, including land. After all, various agencies of the U.S. government is by far the largest property owner in the country, and could fill several years worth of budget gaps by auctioning off vast amounts of lands and buildings no longer necessary when we cut off the bureaucracy and the socialist apparatus currently consuming our tax dollars.
Thursday, September 18, 2008
The Financial Crisis Explained
1. Why did the financial meltdown happen?
2. Who is to blame for it?
3. What, if anything, can be done to fix it?
I know many of you don't have the patience to read more than the absolute minimum, so I start by giving some of the briefest answers possible:
1. Cause? The price of housing - and therefore mortgages - was too high, which in combination with high leverage (such as >30:1) caused those institutions who bet on the wrong direction of the market to go bankrupt in an accelerated fashion.
2. Blame? Most of the blame is simply in the hands of those who were too optimistic on the housing/mortgage market. Those who shorted those markets made lots of money.
3. Solution? Basically nothing. Asset bubbles happen every few years (remember the Internet boom 1999-2000?) and they will happen again. Prices must simply be allowed to adjust down.
Here is more detail:
Why did the financial meltdown happen? In and around 1997, the US Congress – supported by President Clinton – did two things. One was the real estate capital gains tax cut, which eliminated the capital gains tax on primary home real estate held over two years up to $250,000 for a single filer and $500,000 for a married couple. This may be the biggest tax cut ever, and it made real estate the most favored investment class. Small wonder, then, that real estate prices rose in an unprecedented manner for approximately ten years in a row. At some point, however, as in any bubble rising, it went too far. It became easy to see at some point after year 2000 when in many places it had become cheaper to rent than to own, pointing to over-inflated prices.
Around the same time, Congress was persuaded to pressure the mortgage industry to provide loans to those it claimed it had been unjustly denied loans in the past – the poor, blacks, et.al. The mortgage companies were basically told to make loans with lower standards than in the past…or else. If they played ball, unlimited funds would be available from Freddie Mac (FRE) and Fannie Mae (FNM). If they didn't play ball… well, John Edwards is a great trial lawyer going after those evil big corporations.
At the center of what turned into a highly unsound feeding frenzy were Freddie Mac and Fannie Mae, ostensibly private companies but ones where the leadership were politically appointed. Basically, these two institutions were run by political hacks from both parties, feeding the mortgage industry with billions of dollars earmarked for loans to those who previously didn't qualify for home ownership.
Around 2003, Fannie/Freddie admitted that their financial statement couldn't be relied upon, and it's not clear that they ever put them in order since. There were several proposals from The White House in recent years to change this system drastically, but efforts to do so were rebuffed by Congress and in particular Chris Dodd and Barney Frank. As long as home prices kept rising, these highly unsound practices didn't bother most people. In fact, the companies who originated the mortgages managed to sell them to Wall Street firms such as Bear Stearns and Lehman Brothers (LEH), who were looking to obtain higher yields on their proprietary trading portfolios. Leveraging up over 30:1, this became very profitable for those firms, until the bubble burst. Remember, at 30:1 leverage, you are bankrupt at as soon as losses exceed 3%.
Who is to blame? If by blame you mean losing money, obviously everyone who were long real estate after the peak in or around 2005 are to blame. But losing money isn't illegal; it happens in the market every single day – for every buyer, there is a seller, but the market only goes in one direction. Per definition, after the fact, every trade has a winner and a loser. What about doing something illegal? If there is something illegal here, I haven't seen it. Lots of stupidity and the usual bubble mania, but those things aren't illegal.
Certainly Congress is at fault for having created the monster organizations Freddie Mac and Fannie Mae. Neither one should have been created to begin with, because the government has no legitimate role in conducting commerce. It is equivalent to the government starting airline companies for the purpose selling subsidized airline tickets. In addition, the pressures Congress put on the mortgage organizations to make loans to those who didn't deserve them were extremely complicit in this debacle. Some of the investment banks shot themselves in the foot by taking on bad mortgage paper and leveraging up, leading to their demise.
What's the solution now? Sadly, the milk has already been spilled, because some people who didn't deserve mortgages already received them, and others bought homes at prices too high. There is simply no painless solution to this fundamental situation; prices must be allowed to fall. Those who are heavily exposed – indeed leveraged – to overvalued financial instruments, will have to take losses and some may go bankrupt.
One final word of caution and moderation: We had a 10-year real estate boom in which more wealth was created than in any previous boom or bubble. In the last 18 months, we have given back some of those gains, but far from all. Booms and busts do happen, but as with the Internet boom a few years earlier, on balance more wealth was created than destroyed as the bubble burst and some of the gains given back. It's happened before, and it will happen again – just like Summer turns to Fall, Fall turns to Winter… bubbles and business cycles are part of economic – and therefore human – nature.
2. Who is to blame for it?
3. What, if anything, can be done to fix it?
I know many of you don't have the patience to read more than the absolute minimum, so I start by giving some of the briefest answers possible:
1. Cause? The price of housing - and therefore mortgages - was too high, which in combination with high leverage (such as >30:1) caused those institutions who bet on the wrong direction of the market to go bankrupt in an accelerated fashion.
2. Blame? Most of the blame is simply in the hands of those who were too optimistic on the housing/mortgage market. Those who shorted those markets made lots of money.
3. Solution? Basically nothing. Asset bubbles happen every few years (remember the Internet boom 1999-2000?) and they will happen again. Prices must simply be allowed to adjust down.
Here is more detail:
Why did the financial meltdown happen? In and around 1997, the US Congress – supported by President Clinton – did two things. One was the real estate capital gains tax cut, which eliminated the capital gains tax on primary home real estate held over two years up to $250,000 for a single filer and $500,000 for a married couple. This may be the biggest tax cut ever, and it made real estate the most favored investment class. Small wonder, then, that real estate prices rose in an unprecedented manner for approximately ten years in a row. At some point, however, as in any bubble rising, it went too far. It became easy to see at some point after year 2000 when in many places it had become cheaper to rent than to own, pointing to over-inflated prices.
Around the same time, Congress was persuaded to pressure the mortgage industry to provide loans to those it claimed it had been unjustly denied loans in the past – the poor, blacks, et.al. The mortgage companies were basically told to make loans with lower standards than in the past…or else. If they played ball, unlimited funds would be available from Freddie Mac (FRE) and Fannie Mae (FNM). If they didn't play ball… well, John Edwards is a great trial lawyer going after those evil big corporations.
At the center of what turned into a highly unsound feeding frenzy were Freddie Mac and Fannie Mae, ostensibly private companies but ones where the leadership were politically appointed. Basically, these two institutions were run by political hacks from both parties, feeding the mortgage industry with billions of dollars earmarked for loans to those who previously didn't qualify for home ownership.
Around 2003, Fannie/Freddie admitted that their financial statement couldn't be relied upon, and it's not clear that they ever put them in order since. There were several proposals from The White House in recent years to change this system drastically, but efforts to do so were rebuffed by Congress and in particular Chris Dodd and Barney Frank. As long as home prices kept rising, these highly unsound practices didn't bother most people. In fact, the companies who originated the mortgages managed to sell them to Wall Street firms such as Bear Stearns and Lehman Brothers (LEH), who were looking to obtain higher yields on their proprietary trading portfolios. Leveraging up over 30:1, this became very profitable for those firms, until the bubble burst. Remember, at 30:1 leverage, you are bankrupt at as soon as losses exceed 3%.
Who is to blame? If by blame you mean losing money, obviously everyone who were long real estate after the peak in or around 2005 are to blame. But losing money isn't illegal; it happens in the market every single day – for every buyer, there is a seller, but the market only goes in one direction. Per definition, after the fact, every trade has a winner and a loser. What about doing something illegal? If there is something illegal here, I haven't seen it. Lots of stupidity and the usual bubble mania, but those things aren't illegal.
Certainly Congress is at fault for having created the monster organizations Freddie Mac and Fannie Mae. Neither one should have been created to begin with, because the government has no legitimate role in conducting commerce. It is equivalent to the government starting airline companies for the purpose selling subsidized airline tickets. In addition, the pressures Congress put on the mortgage organizations to make loans to those who didn't deserve them were extremely complicit in this debacle. Some of the investment banks shot themselves in the foot by taking on bad mortgage paper and leveraging up, leading to their demise.
What's the solution now? Sadly, the milk has already been spilled, because some people who didn't deserve mortgages already received them, and others bought homes at prices too high. There is simply no painless solution to this fundamental situation; prices must be allowed to fall. Those who are heavily exposed – indeed leveraged – to overvalued financial instruments, will have to take losses and some may go bankrupt.
One final word of caution and moderation: We had a 10-year real estate boom in which more wealth was created than in any previous boom or bubble. In the last 18 months, we have given back some of those gains, but far from all. Booms and busts do happen, but as with the Internet boom a few years earlier, on balance more wealth was created than destroyed as the bubble burst and some of the gains given back. It's happened before, and it will happen again – just like Summer turns to Fall, Fall turns to Winter… bubbles and business cycles are part of economic – and therefore human – nature.
Sunday, September 14, 2008
Why Hillary Voters Switch To Palin
In recent days, the argument has been made by the angry left that the women who voted for Hillary will not consider voting for Sarah Palin because their policy positions are mostly in opposition to each other. Left-wing feminists have said things such as “Palin has only a chromosome in common with Hillary” and equivalent.
This theory would be correct if all women voted for Hillary because of her policy positions to begin with. I doubt that is the case. Hillary's policy positions were 99% identical to Obama’s – and for that matter John Edwards'. Some people voted for Hillary because they disliked Obama’s personality. Other voted for Hillary because they really liked Bill Clinton. But others also voted for Hillary simply because she is a woman. It is that latter group which could very easily fall into Palin’s lap. Clearly, far from all Hillary voters will do so, but it probably doesn’t take more than 5%-10% to swing this election in McCain’s favor.
So there you have it: Some women voted for Hillary because she is a woman. Therefore, it should be no mystery that Palin is picking up many of them.
Talking To Our Enemies
(originally published June 2008)
64 years ago this morning, the largest military operation in history was unleashed from the British Isles onto Normandy, France. As the sun rose on Omaha Beach, ten thousand vessels carrying over a million soldiers approached the German-controlled and fortified beaches. Within two days, these brave men had established a defensible beach-head, marking the beginning of the end of the Nazi regime. The war in Europe would end eleven months later, only days after Hitler's suicide. D-Day was a majestic triumph for Generals Eisenhower, Montgomery and Patton - as well as the political leadership of Winston Churchill and F.D. Roosevelt. Unprecedented in history, most of Europe has since seen a lack of traditional military conflict for over 63 years.
Only months after D-Day, the US fought a fully-fledged naval battle against Japan outside the Philippines. It remains the last such battle fought, and will likely remain so for the rest of history. Technology has made it impossible to launch not only large invasions in secret (such as D-Day), but also to have a naval battle that's basically not over before it's even started.
What does this mean? It means that information technology and the dispersion of destructive power have made wars particularly expensive. Sure, you can always win a war, but they may not be worth launching, even if you win. Witness the high cost to the US of removing one of our contemporary Hitlers, in the form of the Butcher of Bagdhad, Saddam Hussein.
This leads to the present problem of how to depose today's most destructive and dangerous regimes, who threaten the survival of the free world. Regimes in North Korea, Iran, Cuba and Venezuela engage in some combinations of enslavement of their populations and aggression against their neighbors and other countries. Left unchecked, these regimes are on paths to kill millions of people, perhaps many here at home.
Military options against these countries carry high risks and costs. North Korea could wipe out South Korea and perhaps other countries with conventional weapons alone. Nuclear weapons could kill 10 million New Yorkers in one second. Iran may be as little as a year or two from developing those weapons as well. It is starting to look like these situations resemble the cold war, when the US had no military power to take out the Evil Soviet Empire: Mutually Assured Destruction (MAD).
So how did we take down the Evil Soviet Empire? Apart from the fact that it collapsed under its own Obama-nomics weight, we - or rather, Ronald Reagan - engaged in a very public diplomacy to embody our moral superiority over the enemy. Speaking of Obama, it now looks like this is the one limited area where he is actually taking a book from the Reagan playbook, and suggesting we talk to these dicators without preconditions. This is opposed by the Clintons as well as McCain and many others.
The recipe for potential success here is for the current and future US Presidents to realize - just like Reagan did - that we have moved into the TV mass media age, and that it is time to stop hiding. Instead, the US President should fly immediately to Iran and insist on a debate with the leadership - live broadcast on TV for everyone to see.
The point here is that we are now talking to these regimes, but only at lower levels of government, through back-channels and behind closed doors. This is useless. Our enemies can lie, continue to make preposterous claims and break any promises made. It does not help their own peoples to get the courage to depose their oppressors. Obama may have proposed the idea in principle, but McCain may be better in pulling it off, in the form of his most-beloved town-hall debate format. Now, if he only could support the idea to begin with...
This tactic may work in Iran, where there is TV and people have some knowledge of the rest of the world. It would probably not work in North Korea, where until earlier this year a cell phone call carried the death penalty via hanging in public. There is no TV.
No, when it comes to North Korea, a very different form of US Presidential diplomacy is needed. Specifically, the kind employed by an ex-President. And I'm not talking about Jimmy "The Naïve" Carter, who screwed up the North Korean situation to begin with, in 1994. No, rather I'm talking about Bill Clinton.
Former President Clinton needs to take Mr Party Boy leader of North Korea - Kim Jong Mentally Ill - to a weekend in Las Vegas, focusing on the more expensive late-night establishments. Think Eliot Spitzer's preferences, $5,000 an hour. Lots of them. I say, spend $100 million on the weekend. A long weekend.
Then, at the end of that long weekend, Bill Clinton needs to whisper in Kim's ear: "Look, either of the following two things will happen now: We will take a risk and remove your country and its residents from the face of the Earth. Cheney will press the button himself. Or we have option #2 for you."
Kim: "What's option #2?"
Clinton: "That this weekend will never end. We have made available an island in the South Pacific, where we have built a copy of The Playboy Mansion. Hef himself has made sure to guarantee a rotating staff of 500 of his finest friends and acquaintances. I have the pictures and videos of all 500 on this iPod Touch right here, so you can see for yourself right now. We will ensure you will live out your dreams for the rest of your life. All we require is that you never leave the island or have any outgoing communication to the rest of the world. Deal?"
Kim: "Beats a nuclear bomb falling down on my head. Where do I sign up?"
Clinton: "Just follow my lovely friend Monica into that oval room. She will help you use the pencil. Here is a cigar, too."
Conclusion: Deadly world crisis averted.
Alrighty, so it may happen slightly differently, or he may be more suicidal than interested in a good time. But it's worth trying, no?
Nixon turned Red China from foe to friend by going to see Chairman Mao in Peking 1972. Reagan took General Secretary Gorbachev to task in the mid-late 1980s, with several personal TV-broadcast meetings, and stood personally at the Brandenberger Tor gate in Berlin demanding that Gorbachev "open this gate" and "tear down this wall."
Where is Reagan when we need him yet again?
64 years ago this morning, the largest military operation in history was unleashed from the British Isles onto Normandy, France. As the sun rose on Omaha Beach, ten thousand vessels carrying over a million soldiers approached the German-controlled and fortified beaches. Within two days, these brave men had established a defensible beach-head, marking the beginning of the end of the Nazi regime. The war in Europe would end eleven months later, only days after Hitler's suicide. D-Day was a majestic triumph for Generals Eisenhower, Montgomery and Patton - as well as the political leadership of Winston Churchill and F.D. Roosevelt. Unprecedented in history, most of Europe has since seen a lack of traditional military conflict for over 63 years.
Only months after D-Day, the US fought a fully-fledged naval battle against Japan outside the Philippines. It remains the last such battle fought, and will likely remain so for the rest of history. Technology has made it impossible to launch not only large invasions in secret (such as D-Day), but also to have a naval battle that's basically not over before it's even started.
What does this mean? It means that information technology and the dispersion of destructive power have made wars particularly expensive. Sure, you can always win a war, but they may not be worth launching, even if you win. Witness the high cost to the US of removing one of our contemporary Hitlers, in the form of the Butcher of Bagdhad, Saddam Hussein.
This leads to the present problem of how to depose today's most destructive and dangerous regimes, who threaten the survival of the free world. Regimes in North Korea, Iran, Cuba and Venezuela engage in some combinations of enslavement of their populations and aggression against their neighbors and other countries. Left unchecked, these regimes are on paths to kill millions of people, perhaps many here at home.
Military options against these countries carry high risks and costs. North Korea could wipe out South Korea and perhaps other countries with conventional weapons alone. Nuclear weapons could kill 10 million New Yorkers in one second. Iran may be as little as a year or two from developing those weapons as well. It is starting to look like these situations resemble the cold war, when the US had no military power to take out the Evil Soviet Empire: Mutually Assured Destruction (MAD).
So how did we take down the Evil Soviet Empire? Apart from the fact that it collapsed under its own Obama-nomics weight, we - or rather, Ronald Reagan - engaged in a very public diplomacy to embody our moral superiority over the enemy. Speaking of Obama, it now looks like this is the one limited area where he is actually taking a book from the Reagan playbook, and suggesting we talk to these dicators without preconditions. This is opposed by the Clintons as well as McCain and many others.
The recipe for potential success here is for the current and future US Presidents to realize - just like Reagan did - that we have moved into the TV mass media age, and that it is time to stop hiding. Instead, the US President should fly immediately to Iran and insist on a debate with the leadership - live broadcast on TV for everyone to see.
The point here is that we are now talking to these regimes, but only at lower levels of government, through back-channels and behind closed doors. This is useless. Our enemies can lie, continue to make preposterous claims and break any promises made. It does not help their own peoples to get the courage to depose their oppressors. Obama may have proposed the idea in principle, but McCain may be better in pulling it off, in the form of his most-beloved town-hall debate format. Now, if he only could support the idea to begin with...
This tactic may work in Iran, where there is TV and people have some knowledge of the rest of the world. It would probably not work in North Korea, where until earlier this year a cell phone call carried the death penalty via hanging in public. There is no TV.
No, when it comes to North Korea, a very different form of US Presidential diplomacy is needed. Specifically, the kind employed by an ex-President. And I'm not talking about Jimmy "The Naïve" Carter, who screwed up the North Korean situation to begin with, in 1994. No, rather I'm talking about Bill Clinton.
Former President Clinton needs to take Mr Party Boy leader of North Korea - Kim Jong Mentally Ill - to a weekend in Las Vegas, focusing on the more expensive late-night establishments. Think Eliot Spitzer's preferences, $5,000 an hour. Lots of them. I say, spend $100 million on the weekend. A long weekend.
Then, at the end of that long weekend, Bill Clinton needs to whisper in Kim's ear: "Look, either of the following two things will happen now: We will take a risk and remove your country and its residents from the face of the Earth. Cheney will press the button himself. Or we have option #2 for you."
Kim: "What's option #2?"
Clinton: "That this weekend will never end. We have made available an island in the South Pacific, where we have built a copy of The Playboy Mansion. Hef himself has made sure to guarantee a rotating staff of 500 of his finest friends and acquaintances. I have the pictures and videos of all 500 on this iPod Touch right here, so you can see for yourself right now. We will ensure you will live out your dreams for the rest of your life. All we require is that you never leave the island or have any outgoing communication to the rest of the world. Deal?"
Kim: "Beats a nuclear bomb falling down on my head. Where do I sign up?"
Clinton: "Just follow my lovely friend Monica into that oval room. She will help you use the pencil. Here is a cigar, too."
Conclusion: Deadly world crisis averted.
Alrighty, so it may happen slightly differently, or he may be more suicidal than interested in a good time. But it's worth trying, no?
Nixon turned Red China from foe to friend by going to see Chairman Mao in Peking 1972. Reagan took General Secretary Gorbachev to task in the mid-late 1980s, with several personal TV-broadcast meetings, and stood personally at the Brandenberger Tor gate in Berlin demanding that Gorbachev "open this gate" and "tear down this wall."
Where is Reagan when we need him yet again?
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