Thursday, January 28, 2010

A tale of two addresses

The website wordle.net lets you use a page of text to make a "word cloud," in which words appear larger or smaller depending on how often they appear in the text. I decided to make word clouds out of Barack Obama's State of the Union Address last night, and of Ronald Reagan's Address from 1982. Both of these addresses occurred after the first year of each presidency, and both addresses took place during a recession.

Obama's word cloud:

Reagan's word cloud:
The differences between the two addresses are immediately obvious when seen in this format. The top three words in Reagan's address were "federal," "government," and "programs." It turns out that Reagan was talking about the need to reduce the size of government programs, and to distribute some of the federal responsibilities to the states in order to let them fine-tune various programs to their particular local needs.

By contrast, the largest words in Obama's word cloud are "people," "Americans," and "year" - rather generic words which don't illuminate any particular theme in the speech. The irony of course is that Obama has been trying to increase the size and number of government programs, as well as the power of the federal government, and he intends to continue doing so. Apparently he's decided that, in order to advance his agenda, it's best not to refer to federal government programs as "federal government programs."

Tuesday, January 26, 2010

Catharsis

I was initially loathe to report on the reaction that I'm about to describe, but it makes perfect sense to me now.

(Avatar Spoiler Alert #2!)

My favorite scene in Avatar was when the humans destroyed Hometree. I was actually giddy when the Marines coolly unleashed their arsenal at the roots, and I might have started cheering out loud when the tree started to fall, except that there were other people in the theater with the opposite sentiment who might not have appreciated my outburst. (It's a funny thing about recent James Cameron films - the highlight of Titanic was the sinking!)

Obviously I have nothing against a fictional race of tree-dwellers (Yes, I identified with the Indians with Dances with Wolves) so this response is coming from somewhere else. I think the tree-killing scene reminds me of something I wish we had done somewhere around the September 12, 2001 time-frame. Sure, it was satisfying to watch Saddam's statue topple in Baghdad a year and a half later, but it came nowhere close to Old school payback for this:



I think that one of the tragic truths of life is that people keep score, and they know who's winning and who's losing. Pacifists today may rant about the evils of Hiroshima and Dresden, but in the end there was absolutely no doubt about who won and who lost World War II. I don't think it's any coincidence that Japan and Germany - once the two deadliest nations on Earth - haven't harmed a fly in the last 65 years. By contrast, Al Qaeda and its sympathizers haven't suffered any dramatic back-breaking defeats. Sure, it hurts them to have free and democratic governments replacing anarchy and dictatorships, and it doesn't help them when a Predator drone takes out a carload of bad guys, but it doesn't cripple them.

(Before someone comments that Hometree rallied the planet to a victory, let me point out the historical truth that the side who uses the biggest weapons tends to win. A more realistic ending to Avatar - assuming we accept the ludicrous callousness of the humans in this story - would have the Earthlings returning to Pandora with a boatload of no-nonsense nukes and radiation-proof mining equipment.)

I think we're a long way from winning the war that we're currently fighting. We're so far in fact, that half of the people reading this post don't even know that we're in a real global war in the first place. I hope we can win with our relatively low-keyed strategy of planting and supporting democratic governments in Middle Eastern Muslim countries. I fear that it's going to take a great deal more than that, and that we're going to learn this the hard way.

Monday, January 25, 2010

Avatar review

Spoiler alert! I'm giving away the entire plot in the next four lines, so be warned.

1) Start with the movie Dances with Wolves.

2) Replace the American West with Pandora, buffalo with fiber-optic trees, and red-skinned natives with blue-skinned natives.

3) Make the characters less interesting.

4) Let the naked spear-throwing natives defeat the space-faring, metal-clad, nuclear-armed humans with the help of some flying lizards.

VoilĂ !

Friday, January 22, 2010

Deep Doo Doo

Meanwhile on the economic front, the inevitable collapse is gathering steam. Unemployment insurance programs have run out of funds in 25 states, meaning they've had to resort to borrowing from the federal government to make up the difference. Eight more states are on the verge of joining them.

This brings home a couple of key points. First, there is a growing debt problem at state and local levels which doesn't get much attention. Indeed, because states are borrowing from the Feds to make up for shortfalls, these debts probably show up as a credit which reduces the total reported national debt number.

The second point is that there's no painless solution to the crisis. Cutting unemployment benefits defeats the whole purpose of the programs, and is politically unpopular. Raising taxes on corporations only forces them to fire more employees and increase the number of people requiring unemployment benefits. Raising income or sales taxes reduces the purchasing power of the employed, which will hurt businesses and cause more layoffs. Finally, if states simply default on their debts to the federal government, which is what I think will ultimately happen, then that will just put more pressure on the Federal Reserve to print money to make up the difference. If I'm not mistaken, that's a recipe for high inflation, which simply reduces the monetary wealth of each and every one of us.

Thursday, January 21, 2010

When it rains, it pours

Today, two days after the Dems lost their super-majority in the Senate by fumbling away Ted Kennedy's old seat, Airhead America Radio filed for its second bankruptcy, and the Supreme Court struck down parts of the anti-Constitutional McCain-Feingold Act that limited political speech. A whole boatload of karmic retribution has come in this week. Add to this the recent Climategate revelations, and 2010 has been a surprisingly positive year for freedom so far.

Tuesday, January 19, 2010

100,000 vote margin in Massachusetts; one key vote in the Senate

In one of the bluest states in the nation, Scott Brown, a Republican, has just been elected to the U.S. Senate seat formerly occupied by Ted Kennedy. This takes away the filibuster-proof majority that the Democrats hold in the U.S. Senate, and threatens the monstrous and unintelligible health care bill that is being secretly pieced together by the Dems in Congress.

2010 is going to be an interesting year.

I voted today

... for an Army National Guardsman who supports liberty, the rule of law, and free-market capitalism.

Thursday, January 14, 2010

Negative Indicators vs. the Bull Rally

For what it's worth, the stock market sentiment indicators that I watch are as optimistic as they've been for at least a couple of years. Normally this forecasts a drop in stock prices, but as I've said before, the current bull market rally has not been reacting normally to sentiment since it began in March of last year.

There are additional longer-term factors which forecast a drop in prices as well. First, the dividend yield of the S&P 500 is still hovering around 2%, and the market would have to fall ~30% to 60% from here in order to return to an historically normal yield. Second, 2010 is a midterm election year, and such years typically underperform the other three years in the four-year presidential election cycle. Finally, I think there's still a long way to go before our national debt issues are resolved and economic growth turns positive in a sustainable way. For instance, monthly state tax revenues are continuing to shrink, and that's a pretty reliable means of measuring taxable economic activity.

Thursday, January 07, 2010

End of a Decade - End of an Era

Imagine if, in 1910, the federal government had decided that everyone needed "access to affordable horseless carriages." What kind of cars would have been produced, and how much would they cost? Would innovation have sped up, or slowed down? This is not necessarily a question about morality, but rather one of economics, incentive and pragmatism.

What about the personal computer in 1980? If Congress had nationalized the PC industry back then, when a bulky 48 Kilobyte computer cost $3,500, what capabilities would the average computer have today, and how much would it cost?

I can think of two government-controlled institutions (or two types of institutions) that most Americans are familiar with at a personal level: The U.S. Postal Service, and the Departments of Motor Vehicles in each of the 50 states. I don't think I'm going out on a limb when I say that neither one of these is a prime example of innovation or efficiency. To the extent that the U.S. Postal Service is efficient, let's not forget that they have to compete today with FedEx and UPS.

Technically speaking, Freddie Mac and Fannie Mae were not initially owned by the government, but their existence came from a similar egalitarian mindset: that everyone should be able to afford a home. Reality has a funny way of catching up to Utopian ideals, and now our economy is on the brink of ruin thanks in large part to the good intentions that spawned these "Government Sponsored Enterprises."

When the Senate and House of Representatives pass their secret 2,000-page health-care bill, it will be analogous to a GM/Ford, IBM/Apple/Dell/Intel business morphing into something more closely resembling the DMV, the post office, or Freddie Mac. Even though history is full of examples of wealthy and powerful nations falling into decline due to forces from within, I still can't quite believe what I'm seeing.