Bernanke returns

Bernanke's reconfirmation has passed the Senate. Good. The push against him was political scapegoating and pandering, including by a certain Arizona senator who demonstrated that he himself hadn't a clue as to what measures or temperament were needed in the fall of 2008. Not everything Bernanke has said or done is 100 percent to my liking, but he was innovative and astute in responding to the crisis; and as for his putative role in helping creating the crisis, he can take a number, well behind Barney Frank. The push against Bernanke was part of the general populist attack on the Fed, and that movement needs to be audited for intelligence.

Avatar notes

Avatar: Highly recommended. Besides the superlative visuals (we saw it in 3D, albeit not IMAX), the story and characters are well-crafted. The political message is formulaic and at times heavy-handed (as when the colonel says we have to preemptively fight terror with terror, or some such) but not to the point where it significantly detracts from an absorbing experience.

Keith Cowing has been pressing NASA to use the film for outreach, which doesn't seem like a bad idea.

UPDATE 1/26: David Boaz sees the film as a defense of property rights.

UPDATE 1/28: An astute observer asks me why, given that the unobtainium is underground, the company couldn't use such techniques as horizontal drilling to obtain it without destroying the Navi habitat.

The Fed and Its Enemies

In the February issue of Research magazine: "The Fed and Its Enemies," wherein I examine some outlandish ideas about the central bank's history. Excerpt:

Perhaps the wildest accusation against the Fed is that it was involved in Kennedy’s assassination. This idea was promoted by a 1989 book Crossfire: The Conspiracy That Killed Kennedy, by a writer named Jim Marrs, who also has written about conspiracies involving Freemasons, psychics and extraterrestrials. Crossfire was an influence on Oliver Stone’s film JFK.

The alleged Fed conspiracy has to do with Executive Order 11,110, which was signed by Kennedy on June 4, 1963. It delegates to the Treasury secretary the president’s authority to issue silver certificates, paper dollars that were redeemable in silver coins or bullion. Marrs presented this as an effort by Kennedy to replace Federal Reserve notes with silver certificates, thus transferring power from the Fed to the Treasury — and providing a possible motive for the president’s assassination less than half a year later.

However, the executive order was just a technicality. It did not expand the issuance of silver certificates — which actually were being phased out, since rising silver prices had raised concerns that redemptions would drain the Treasury’s silver supply. Indeed, Kennedy also signed a bill giving the Fed authority to issue small-denomination notes to replace the silver certificates, something hard to explain if he were trying to reduce the Fed’s involvement with the money supply.

Someone tell Oliver Stone.

Whole thing here.

Diamond planets

Neptune and Uranus may have diamond icebergs floating in liquid diamond oceans. (Via Instapundit.) I wrote about some earlier work pointing that way a decade ago, but it seems to be looking more plausible. Selling short on DeBeers may still be premature, though.

UPDATE 1/24: And it makes a fine drink.

Frum feed

The FrumForum "In the Forum" Twitter feed, into which my own tweets flow, now has many more contributors. See it here or in a box at the home page of FrumForum.

Recession comparison redux

A number of people have been coming to this blog looking for graphic comparisons of the latest recession with previous ones (something I touched on in a post some months ago). Here's where things stand now, unemployment-wise, and in the current environment of public-sector expansion and policy uncertainty, I don't expect that curve to look much better anytime soon.

Reason's reasons

One sign of a good political magazine is its willingness to say things that are worth saying but which many of its readers don't want to hear. By that standard, Reason, which I've criticized plenty in recent years, comes through well here: "Five Reasons Why Libertarians Shouldn't Hate Government." And a further indicator that the argument is valid lies in the inanity of the mostly negative comments (e.g., "Having a little government is like having a little slavery").

Poorer and more dangerous

Recommended reading: "The Revenge of Mercantilism,' by Reihan Salam in Forbes. Draws some dispiriting conclusions from the Cohen-DeLong book The End of Influence: What Happens When Other Countries Have the Money. Excerpt from Salam:

The supposed anarchy of free-market capitalism is once again being replaced by a more regimented and statist world order. The result will be a poorer and more dangerous world, defined by zero-sum competition, deep distrust, and political elites that will line their pockets at the expense of the powerless and vulnerable.

Dismal and true, at least for now. But pendulums swing, and the current administration's combination of economic incompetence and malfeasance (exemplified by the Chrysler haircut) is recognized by a broadening swath of the population.

Deflation delusion

Tucker Carlson's new Daily Caller features a spurious Fed-bashing opinion piece by James Rickards, lawyer, economist and former general counsel of Long-Term Capital Management. Rickards takes the paleolibertarian deflation-is-wonderful line:

Now imagine your salary stays the same but the price of everything you buy goes down. You still don’t have a raise but you do have a higher standard of living and increased purchasing power. A new car that used to cost $24,000 now costs $16,000 and is much more affordable. That’s the power of deflation; call it the workingman’s bonus.

Trouble is, deflation rarely if ever means you sit back enjoying the falling prices while everything else stays the same. It more likely means your house price is falling, you can't get a loan (who wants to lend against declining collateral?), your employer's revenues are sliding and your job is gone or soon will be. Japan's lost decades, not to mention the Great Depression, should put the lie to any idea that deflation is a good thing. Nor is it meaningful to write, as Rickards does that --

it is a fact that since the creation of the Federal Reserve the dollar has lost 92 percent of its purchasing power. If you had a nickel and three pennies in your hand, that’s what’s left of the dollar since the Fed took charge.

By any reasonable measure, the population is vastly wealthier than it was in 1913, and the only person who would have suffered the effect Rickards describes is someone who's been holding his or her wealth exclusively in non-interest-bearing cash since 1913; presumably an extremely old person who's homeless and uses a mattress in lieu of a bank account. If we'd had deflation during all this time, that theoretical person could have posted some kind of gain (as long as he or she never swapped out of dollars into real assets), but the economy would have long since collapsed.

Past financial troubles

I was on the Gabe Wisdom Show on Jan. 4 to talk about 19th century financial crises, and audio is temporarily available here. In due course, the segment will find a longer-term home here.

Saving Capitalism

Recommended reading: "Saving Capitalism," the January cover story at Research magazine, by Nicole Gelinas. Excerpt:

The popular narrative after the financial system’s 2008 collapse held that capitalism had failed. But capitalism didn’t fail.

The meltdown was a result of 25 years’ worth of government failure to understand its proper role in markets. Since the early 1980s, government hasn’t been a fair regulator but an arbitrary rescuer.

In 2008, the markets finally forced the government’s hand, exposing the whole state-subsidized, too-big-to-fail financial sector, built up over a quarter-century of bailouts, as impossible. Without adequate market discipline — including regulation of exotic financial instruments so that markets could discipline financial firms without causing economic disaster — the nation got the opposite of free markets: wholesale socialization of the financial industry to prevent a replay of the 1930s.

Could free markets have sorted out the mess without extraordinary government action? Only by destroying the remains of the financial system and putting tens of millions of people out of work. The government may have staved off depression, but it severely damaged elements upon which free markets depend, including failure and fairness.

The article is adapted from her book After the Fall: Saving Capitalism from Wall Street and Washington.