Dana Blankenhorn

Are Most People Stupid?

One of the worst things about this time in the birth of a new generational thesis is the way some advocates come to fear the people.

I will admit up-front that I am very much in favor of the Democratic ticket. All of it. I believe Republicans have gone completely ga-ga, not only in how they are governing but in how they are campaigning.

With that out of the way let's go dump on some liberals.

I will take as my example Tristero over at Hullaballoo (although the criticism can apply to anyone there, even Digby, as well as way too many HuffPo and Daily Kos posters).

Here's an example of what I'm talking about:

By any reality-based standard, this election should be a rout [UPDATE; and it isn't, on any level]. The Republicans fielded a buffoon and a sociopath while Democrats chose genuine leaders. Racism explains a lot of it. Media bias explains a lot of it. But it is also the case that Democrats are hellbent on avoiding mentioning anything that could possibly be thought "unclean" when the Republicans have demonstrated that no sewer is so foul they won't stoop to disgorge its stinking mess into the public discourse.

Notice what is at work here. Not only does he dehumanize all Republican leaders, but claims they're going to get away with it. And the only reason for that must be that most people are sheep, that they're stupid, that they are easily led by their fears, that they won't stand up for themselves.

To which I say bullshit.

The Bailout

This is a financial transaction.

We have money. The banks need time.

We give them time by buying assets at a price and then re-selling them to the market once we know their real value.

We should be able to make money on this.

Some principles:

1. We put a trader in charge of the money. Someone with experience making serious money. Congress picks him (or her).
2. We don't pay 100 cents on the dollar for junk. We pay what we think the junk is worth. Take it or leave it.
3. If we wind up losing money on a deal, even after a reasonable time has passed, the difference becomes a charge against earnings of the seller, not the government.

Follow these principles and we can do business. Ignore them and we're just throwing money at the same creeps who got us into this mess.

Forget about turning this into a Christmas tree for anyone. Stick to cases. Make sure the treasury is protected, and we can do a deal. If the executive branch refuses to give these guarantees, walk away.

No bailout. A profit for the people.

That should be Congress' price.

Doctor Alford Explains It All

As important as Gilbert Cuthbertson's belief in "Myth, Value, and Power" were to my time at Rice, I suspect Dr. John Alford's latest research may be to that of my son.

Dr. Alford, working with other researchers, had 46 people who claimed staunch political leanings subjected to scary stimuli -- pictures, sounds, etc.

The conservatives were much more easily scared than the liberals.

Now by conservative and liberal we're not talking about the ephemeral definitions these words have in current American discourse? What would Goldwater say about bailing out the big banks? (I think Ron Paul knows.)

What we're talking about is an attitude, a social conservatism that aims first at protecting existing institutions and structures, and only later (if at all) about anything else. And this is the thread which ties the Bush family's politics, and that of the last 40 years together. It's an absolute determination to protect entrenched interests, based mainly on tactics of fear.

Where is Warren Buffett?

Think of this as Volume 11, Number 38 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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In all the reporting on the unwinding of Big Shitpile one question is almost never asked.

Where is Warren Buffett?

So far Buffett's Berkshire Hathaway has made just two moves:

1. It got out of the business of insuring bank deposits over $100,000.
2. Its Mid-American Energy unit bought a competing energy company, Constellation Energy.

This may be the most frightening news you see all week. The world's premier value investor does not see value, even at current levels. Buffett has not been in discussions about buying Morgan Stanley, Goldman Sachs, AIG, or any other troubled company.

It's not like he doesn't know the business. Berkshire Hathaway owns GEICO, originally the GE Insurance Company, built by the father of the doofus who created Overstock.Com. He knows housing, too.

But he is not stepping in. Yet. He is calmly watching his own company's value drop modestly (12.5% so far this year), and he has not been an innocent lamb, either. Executives with his General Reinsurance unit are in the process of being sentenced to prison for misleading investors about AIG.

Despite all this, Warren Buffett's is the only gilt-edge name we have in American business, the only man whose credibility exceeds that of his fortune (and the fortune is $50 billion) by many miles.

Why should Warren Buffett step in, and how, and when? History offers an answer. When we hit bottom.

N Stands For Nationalization

I have read the word "bailout" used to describe the government's purchase of AIG. It has been called a "takeover."

The word I have not read is the only truth here. AIG, the world's largest insurance company, has just been nationalized.

Why hasn't the n word been uttered in all the reporting on this event? Because it's a political word, a word we use for people we detest, like Hugo Chavez. It's a loaded word, a word conservatives use to attack anyone who dares disagree as socialist or communist.

But now, within the space of a week, the so-called most conservative government evah has nationalized the housing industry and the insurance industry. While some conservatives are starting to object, the fact is they brought this on themselves. They created the conditions which made nationalization necessary, forgetting what they claim to be one of their chief truths, that markets have no morality.

There is no such thing as economic justice. Anyone peddling that is peddling a lie.  If you want justice, you need government.

Money is Trust

Back before my daughter was born I planned a great history of money. I spent one summer up in New York City researching it.

But I was never able to get past one simple statement.

Money is trust.

Money is the belief that what you are given will be returned to you in equal measure. Everything else -- gold, commodities, oil  -- are intermediaries.

The reason you regulate financial markets is to assure trust will not be broken. Markets must run up to the ragged edge of regulation to be efficient. Rules must be in place to keep people from passing off junk as money.

The Republican Party has spent the last 40 years telling Americans that regulation is always bad, that government is always bad, that the public sector is nothing but a drain on the private sector. That is a lie. And it amazes me to listen, today, as Lehman has gone bankrupt and AIG circles the drain, knuckleheads including John McCain repeat this nonsense as though it came down from Mt. Sinai.

American financial history is marked by booms and busts, and until the New Deal these busts were total. In 1837, in 1857, in 1873, in 1893 and in 1907 panic ensued when trust broke down. The Federal Reserve was created in the wake of the 1907 meltdown, but it was unable to stop the leveraging of stocks on margin which created the 1929 Crash. And thus we had the SEC, deposit insurance, all the rest of it.

The Economic Solution

Regulation and transparency.

The Big Shitpile was created by greedy bankers leveraging themselves up to 40 times -- 1 dollar in capital lifting 40 dollars in bonds.

That was wrong. It should not have been allowed. When leverage gets that high it's impossible to get out of the position when the market turns around. Markets always turn around.

I saw this in the very first big story I ever did, a 1978 examination of a GNMA pyramid by a man then working for the University of Houston. UH had a huge construction boom going on, and the money was sitting around. This clown built a pyramid of bonds with it -- buy a bond, get a loan on the bond, buy another bond. This worked fine so long as interest rates were going down (raising the value of the bonds, and delivering great gains on the pyramid), but when they shot up he couldn't get out, and millions of dollars disappeared.

This was the same sort of deal, writ large.

New Kings of Wall Street

Here is a story you won't see first on CNBC.

There is a new king of Wall Street. Charles Schwab & Co.

The value of Schwab stock is practically unchanged since the start of the year. (I don't own any but I do keep my money there.) In the present environment this is an immense achievement.

Schwab himself finally retired recently at age 70, for the second time. Hopefully the new guy, Walter Bettinger, whose former retirement planning outfit was acquired by Schwab in 1995, has learned the lessons and will stick to his knitting.

The reason you won't hear about this on CNBC is precisely why Schwab is so strong. As with Seinfeld, this is a story about nothing.

Schwab doesn't play with its customers' money. It offers a selection of mutual funds, mostly index funds, and invests customer cash conservatively. It offers advice, but that advice is simply to diversify. It doesn't make extra money if you take its advice, and it doesn't make more if you don't.

I like to call Schwab my "bookie" and that's a pretty good description of the business model. Schwab doesn't have a horse in the race. Schwab gets its vig no matter who wins.

Faith

Think of this as Volume 11, Number 37 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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This is the hardest moment in the creation of any new political thesis. You build it, you argue about it, but then you have to put it on choppy waters, into the center of the storm, and you have to believe you're right.

This is such a time for the Internet Thesis.

The Internet Thesis holds that the values of this medium -- not the values of the TV medium -- are what will drive our politics. Consensus, not conflict. Openness, not secrecy. These values have been made manifest in the person and politics of Barack Obama, and the old thesis is fighting back with everything it has.

Why not? They have nothing to lose, and everything to lose. They're going to use TV, use conflict, pull out all the Rovian stops, until the voters stop them. And we have nothing to respond with except faith that this thesis, with its online organization, with its consensual cool, with its deep pool of facts behind it, can somehow prevail.

If you believe in this thesis, then work for it. Or have the simple decency to Shut The Fuck Up. If he loses, hammer him then. But don't hammer him now, because in criticizing him you're only doing the other side's work.

The one point made by Netroots advocates for five years now is that you can't trust the Republicans to act like ladies and gentlemen, that they're dirty fighters, and that you've got to be willing to mud-wrestle them. Kerry failed, they said, because he didn't do that. (I believe he failed because people age more slowly now so the knees still jerked.)

Instead of getting John Kerry, we got to see the whole structure of Bushism collapse upon itself. Katrina, the Big Shitpile, the Iraq casualty lists, all of it. People no longer believe in the Bush Thesis. So why assume that anything McCain does can somehow lead that thesis to triumph?

While Obama has become more forceful he's not going into the mud. He has allowed Republicans to inflate the Palin balloon and assumed that it will deflate as the press pokes holes in it. He has not engaged in a mud-wrestling contest even after Republicans accused him of doing just that in order to get him off his game.

Barack Obama is a steady man. Patience and steel, Andrew Sullivan calls it. But with the polls looking bleak some, like Margaret Carlson, say that what makes for a good President may make for a bad candidate, so he should hit McCain harder, harder, and harder.

Hippie Chick Fantasy

The appeal of Sarah Palin is that she is, in fact, George W. Bush in a skirt.

She is just as much a fantasist as our current President. She is just as corrupt, and lies just as shamelessly, because she believes every lie she tells.

That's what makes her loved.

I have said here many times that, if the Republican Party could re-nominate George W. Bush for President, it would. He remains far more popular within the party than their actual candidate, John McCain, who in nominating Palin has come close to creating a literal McCain-Bush ticket.

Those who are now gleefully condemning the pick, and wondering how it has raised McCain's poll numbers, don't get it.

For conservatives, as for liberals a generation ago, fantasy has become reality. It is a hallmark of a generational election that this happens inside the incumbent party. Everything argues against what you believe, so you believe in it all the more. You create your own fantasy world in which what you believe is always true, and anyone who questions always false, and you may even be willing to die for that belief.

Isn't that what Confederates did for their fantasy? Isn't that what Populists did for their fantasy? Isn't that why Republicans went down to with Hoover even after he sent Douglas McArthur out to crush the Bonus Army?

More important, isn't that ultimately what was inside the anti-war movement of a generation ago, its secret sauce? Abandon reality. Embrace fantasy. The world will conform to what you pretend it to be.