Monday, November 30, 2009

# Posted 10:54 PM by Ariel David Adesnik  

THREE CHEERS FOR MICHAEL MOORE! Moore has penned an open letter to President Obama, begging him not to send more troops to Afghanistan. And just in time -- with all the talk about Lou Dobbs and the rest, the heartland was beginning to forget that the left bows to no one in its willingness to anoint an ignorant loudmouth as its beloved champion. Here's some of my favorite passages from Moore's letter:
Choose carefully, Mr. President. Your corporate backers are going to abandon you as soon as it is clear you are a one-term president and that the nation will be safely back in the hands of the usual idiots who do their bidding. That could be Wednesday morning.

We the people still love you. We the people still have a sliver of hope. But we the people can't take it anymore. We can't take your caving in, over and over, when we elected you by a big, wide margin of millions to get in there and get the job done. What part of "landslide victory" don't you understand?...

What would Martin Luther King, Jr. do? What would your grandmother do? Not send more poor people to kill other poor people who pose no threat to them, that's what they'd do.
Cue the violins. And if you think that Michael should be argued with instead of teased, read Jazz's post.

Cross-posted at Conventional Folly
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# Posted 10:14 PM by Ariel David Adesnik  

Some conservatives are arguing that President Obama's weakness and indecision forecast American failure--and that, if we're going to fail, we should just get out now...

Some Republicans are understandably dismayed at the prospect of supporting a war they worry this president is incapable of prosecuting with sufficient vigor or conviction. They argue that keeping faith with the troops requires rejecting any halfhearted approach. They are right that Americans who wish to support our troops in the field should not accept policies that deprive them of the means to win. But a turn by Republicans to rhetorical opposition to the war would only absolve the Obama administration of its Afghan duty. The better course is to push the administration to take responsibility for the outcome in Afghanistan by continuing to support a fully resourced war effort, while criticizing and opposing any decisions that undermine the troops' chance of success...

A model for Republicans is the behavior of Senator John McCain from 2003 to 2007. McCain consistently questioned, challenged, and criticized President Bush's strategy and tactics in Iraq, but he never wavered in his determination to do everything possible to succeed there.
No need for me to repeat how much I admire McCain. But if things get worse in Afghanistan as election day gets closer, will the GOP be tempted to take advantage?

Not impossible, but I think most Republicans feel that they were ultimately vindicated on Iraq, so backstopping the "war of necessity" is a much easier call.

Cross-posted at Conventional Folly
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# Posted 10:09 PM by Ariel David Adesnik  

THE MAYOR OF WASILLA: I told you I was Going Rogue and going to write about it.

The story of Sarah Palin's political life begins in Wasilla. Last fall, adversaries mocked her as a one-year governor and two-term mayor of a small town in Alaska. But what did being mayor of Wasilla mean to Palin? How it did shape her politics? Reading a political memoir, you don't expect to get much more than one side of any given story. But I want to know how Gov. Palin understands Wasilla.

For Palin, her time as mayor is a demonstration of her leadership abilities and the value of conservative principles. She writes on page 78,
As a result of our common sense conservative efforts, Wasilla became a booming, bustling town--the fastest growing area in the state, and an independent financial auditor (Mikunda, Cottrell & Co.) reported that Wasilla was "the envy of Alaskan cities."
I'd be curious to know more. The book's focus is on author, so it's hard to get a sense of how Wasilla really changed in those years.

Now, which efforts represent Palin's ideas about common sense conservatism? Above all, cutting taxes. She writes on page 78,
I cut taxes -- lots of them. I eliminated small business inventory taxes, I got rid of personal property taxes, I gave the boot to burdensome things like business license renewal fees, and I cut the real property tax mil levy every year I was in office.
Palin is very clear that what she did for the economy is get the government out of its way. That meant fewer taxes and an effort to cut the budget.

But there is one active component to Palin's philosophy of local government: infrastructure. Commenting on her race to unseat incumbent Mayor John Stein, Palin says,
I wanted government to appropriately provide the private sector with infrastructure tools to increase opportunities. Stein supported expanding land-use restrictions and building codes. (Page 70)
Wasilla is also where Palin began to think of herself as a principled reformer determined to take on special interests. Of her time on the city council before running for mayor, Palin writes "I voted according to my principles and let the chips fall where they may." (Page 66) That remark reflected her vote against using city authority to favor the garbage trucking firm owned by the council's "de facto leader", Nick Carney.

Wasilla is also the place where Palin first realized that being a reformer means being the target and victim of nefarious forces. In 2008, Palin was accused of spearheading an effort to ban books at the Wasilla library. She says that's a false accusation -- apparently ginned up by Nick Carney and his wife -- because they resented Palin's victory at the polls. Palin also says that opponents spread rumors that her daughter smoked marijuana. Her oldest daughter at the time was in kindergarten.

In short, Palin's Wasilla is the story of how selfish men wanted to grow the government, mostly to serve their private interests, but Palin but a put a stop to that. Am I convinced? I don't know the first thing about Wasilla aside from what's in this book so it's hard for me to say. If you like Sarah Palin, you'll probably trust her account. If you don't like her, you won't.

I sort of like Palin precisely because of the extreme condescension and vindictiveness of the attacks she faced first as a candidate, now as an author. But when Palin says something, is my instinct to give her the benefit of the doubt? Not yet. Her account of Wasilla is suspiciously black and white, with its heroic young mayor taking on the town's underhanded cabal of special interests.

On a related note, this means Palin never describes herself as facing hard decisions, where there were strong arguments on both sides, the stakes were high, and good people disagreed. Instead, it was always about right vs. wrong. It takes some courage to do what's right, but the temptations to do wrong seemed pretty minimal.

Cross-posted at Conventional Folly
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# Posted 10:06 PM by Ariel David Adesnik  

EVEN THE NY TIMES IS BEATING UP ON OBAMA: In case you missed this editorial on the Arab-Israeli peace process, condescending titled "Diplomacy 101":
The president’s promising peace initiative has unraveled...

The Israelis have refused to stop all building. The Palestinians say that they won’t talk to the Israelis until they do, and President Mahmoud Abbas is so despondent he has threatened to quit. Arab states are refusing to do anything.

Mr. Obama’s own credibility is so diminished (his approval rating in Israel is 4 percent) that serious negotiations may be farther off than ever. Peacemaking takes strategic skill. But we see no sign that President Obama and [special envoy George] Mitchell were thinking more than one move down the board.
Those who want to defend Obama would probably have to pivot away from the facts on the ground and find a way to blame Bush. Hey, it's still his first year in office, people! Still, it's looking like amateur hour.

Cross-posted at Conventional Folly
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# Posted 10:02 PM by Ariel David Adesnik  

ABU MUQAWAMA QUITS DAILY BLOGGING: Andrew Exum, aka Abu Muqawama, has announced that he will be dramatically scaling back his blogging. Exum is a very serious analyst of military issues and his daily presence will be missed. From the comments on his post, you can get a sense of how much he is respected.

So why is Exum quitting? He writes:
Blogging forces me into more or less split-second reactions to complicated policy events before I have had the opportunity to research and weigh opposing views. In addition, the AD/HD nature of this medium -- as well as its format -- has harmed both my research abilities as well as my ability to write in the long form. Blogging, like any medium, is one you get better at with practice. As I have become a better blogger, my long-form writing skills have atrophied.
A valid position, although I feel very differently myself. I don't see a trade off. I see a chance to develop my abilities to express myself through different media.

To be fair, I have a fraction of Exum's audience and post less often, so he faces a different set of challenges. However, my audience and my output both peaked while I was writing my dissertation a few years ago, and I saw no trade-off then, either. In fact, I really appreciated the chance to comment on the news of the week since my academic research focused on events from a generation ago.

Also, I'm curious about Exum's comment that blogging forces him to provide instant reactions. I think it's quite valuable to test your rapid judgment ability and see how it lines up with your conclusions later on. What's the worst that can happen? People know you've changed your mind?

Bottom line, I only care about these secondary points because I have so much respect for Exum's work and hope he continues contributing to the public debate.

Cross-posted at Conventional Folly
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Thursday, November 26, 2009

# Posted 3:08 PM by Ariel David Adesnik  

SMEAR MAYONNAISE ON CONSERVATIVES! Matt Labash of the Weekly Standard writes about his effort to have a zero-carbon footprint.

It literally involved smearing mayonnaise on his face. Go read!

Cross-posted at Conventional Folly
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# Posted 3:07 PM by Ariel David Adesnik  

OBAMA ON BREAST CANCER: David Gregory pointed to this Presidential declaration from July:
PRES. BARACK OBAMA: We are--we've been under the illusion that the more health care we get, the healthier we become. And it turns out that every study shows that the question is are you getting the right care, are you getting the best care, the high quality care; rather than are you having a whole bunch of tests ordered that are unnecessary, getting a bunch of treatments that are unnecessary, staying in hospitals longer than maybe necessary? All of which drives up your costs, but doesn't make you better.
Yet all of the liberals Gregory spoke to last Sunday were at extreme pains to insist that the new research will not involve any reduction in the number of mammograms. Suddenly, science and evidence didn't seem very attractive. What gives? I thought conservatives were the ones who put ideology ahead of science.

Cross-posted at Conventional Folly
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# Posted 3:03 PM by Ariel David Adesnik  

I'M GOING ROGUE! (AND MAKE WAR ON FISH): I'd like to think I am one of very, very few customers who bought both Going Rogue and Eating Animals as part of the same order from Amazon.

What could be more inconsistent than buying an anti-factory farming polemic and the autobiography of a woman who asserts that every animal has place -- right next to your mashed potatoes? What will Amazon now recommend for me? Books on cognitive dissonance?

Anyhow, some initial thoughts on both books:

I don't expect politicians to write fair and balanced books. But there is a difference between an interesting book and a set self-congratulatory of talking points, like Hillary's auto-bio. I don't mind a partisan book, as long as it makes a good argument.

So what have I found in the first sixty pages of Palin's memoir? So far, it's mostly about the peculiarities of Alaska from the perspective of the Lower 48. That's reasonably interesting. In terms of arguments, there isn't much yet. But there is plenty of self-congratulation. That's annoying.

When it comes to Eating Animals, I have to begin with a disclosure: I was good friends with the author in high school and college, although I've barely seen him since. Early on, Foer admits that he knew what he expected to find when he started researching the meat industry. It would be ugly. So let me respond with my own confession: I know what I expected to think of an entire book that dwells on the moral implications of eating animals. It will be fatuous. It will lecture the reader on animal suffering while downplaying human tragedy.

So far, I feel sort of vindicated. On page 33, Foer tells us,

As I came to see, war is precisely the right word to describe our relationship to fish--it captures the technologies and techniques brought to bear against them, and the spirit of domination.
Foer has an extraordinary sense of humor, but I don't sense any of it here. Best I can tell, he's dead serious. I hope that later in the book he asks whether a morally serious person can talk about a war on fish without trivializing actual wars, like the ones in Darfur, Afghanistan and Iraq.

I confess, I'm not too optimistic. On page 35, we learn that "Technologies of war have literally and systematically been applied to fishing." So? A Pentagon research agency basically invented the internet. Will high-minded liberals now boycott the blogosphere?

Cross-posted at Conventional Folly
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# Posted 3:01 PM by Ariel David Adesnik  

BLOGGER RESIGNS FROM PENTAGON DETAINEE POST: I first got to know Phil Carter as a blogger, rather than an attorney, a Iraq war veteran or the director of the Obama campaign's outreach to veterans. Until this week, he served as Deputy Assistant Secretary of Defense for Detainee Policy. Or as the NY Times put it: Official charged with closing Guantanamo quits.

The Times hints that Carter's departure had to do with the failure meet the Gitmo closure deadline:
Mr. Carter’s departure comes as the administration has acknowledged that it will not be able to close the prison by Jan. 22, the self-imposed deadline Mr. Obama announced immediately after taking office.
Glenn Greenwald argues that Carter may have resigned because Carter is a civil libertarian and Obama has gone back on most of promises regarding detainees. And why would I ever disagree with Glenn Greenwald?

Kevin Drum says he's also disappointed with Obama on civil liberties, but he wouldn't know whether that affected Carter's decision. I haven't spoken to Phil since he started working at the Pentagon, but he's a talented guy and he'll land on his feet.

I should add that Phil himself said he's resigning for personal reasons, and even though that's a cliche, it's true for him.

Cross-posted at Conventional Folly
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# Posted 2:58 PM by Ariel David Adesnik  

BOB REICH AGREES WITH LIZ CHENEY ON NATIONAL SECURITY? I certainly didn't expect to hear this from the liberal super-pundit and former Secretary of Labor. This is from ABC:
REICH: I agree with Liz. I think that -- that in preparation for this trip [to China], as in many others, even the trip to Europe to try to sell Chicago as the Olympics, there needs to be more thought about the appearance of weakness or strength that may come out of the trip.

But I want to go back to, George, your point, because I think the big issue over the next 10 years and the big contest is going to be between authoritarian capitalism, a la China, and democratic capitalism,

a la the United States. And it's not clear to me that authoritarian capitalism is not going to win, that is, it -- there is so much efficiency. The Chinese say, "We're going to build 10 new universities. We're going to build this. We're going to build this." And, boom, it happens.
I'm hope Reich remains an advocate if strength when it comes to other subjects. But I part ways when it comes to his pessimism about free-market capitalism and veneration of the Chinese. It reminds me of all those who praised Japan's unstoppable engine of government-led capitalism. It's hard not to conclude that Reich and those of his ilk simply can't resist the hope that more government control will prove to be the best thing for all of us.

Cross-posted at Conventional Folly
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Wednesday, November 18, 2009

# Posted 5:40 PM by Ariel David Adesnik  

[After months of deliberation in 2006], no one accused George W. Bush of dithering. So why does Barack Obama keep hearing the taunt as he deliberates about Afghanistan -- and why do even some who sympathize with his dilemma find it hard to shake the feeling that this commander in chief lacks resolve?

One part of the answer is easy: Bush was renowned for summoning plenty of resolve, and not enough critical thinking. No one questioned that Bush's heart was in his bid for "victory" in Iraq. Not a few wondered whether he had weighed carefully enough whether dispatching 20,000 more American troops in early 2007 was a reasoned strategy or a reckless gamble...

Obama's prolonged deliberation would be understandable if he were choosing between escalating or ending the war, as Bush was. Yet he narrowed his options many weeks ago -- and still has been unable to come to closure...

In the end, it's not enough for a president to be seen as having thought through a decision to send more troops to war. Enemies, allies and the country also need to be convinced that he believes in it.
Read the whole thing.

Cross-posted at Conventional Folly
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# Posted 5:31 PM by Ariel David Adesnik  

SHERLOCK HOLMES IS ON THE CASE: Andrew Sullivan informs his readers that he is taking a brief pause to pore over Sarah Palin's new book:
Since the Dish has tried to be rigorous and careful in analyzing Palin's unhinged grip on reality from the very beginning - specifically her fantastic story of her fifth pregnancy - we feel it's vital that we grapple with this new data as fairly and as rigorously as possible. That takes time to get right. And it is so complicated we simply cannot focus on anything else...

There is a possibility here of such a huge scandal that we would be crazy not to take our time either to debunk it or move it forward for further examination.

We have only one commitment: to get this right. Please bear with us as we do the best we can.
Perhaps Sullivan & Co. will finally solve the mystery of who Trig's parents really are. My hunch: Ann Coulter and a polar bear.

Cross-posted at Conventional Folly
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# Posted 5:29 PM by Ariel David Adesnik  

THE NETROOTS EAT THEIR OWN: On Monday, Think Progress trashed liberal pundit Mark Shields for allegedly saying, with regard to Obama's patience on Afghanistan,
[It] makes me nostalgic for those days when we had a manly man in the White House who could say, “Let’s kick some tail and ask questions afterwards” you know? That’s what we really need instead of any reflection.
Kevin Drum read TP's post and seconded the motion, albeit with more circumspection and less vitriol. But to his credit, Kevin read the comments on his post and apologized.

Why? The quote was accurate. But if you watch the one-minute clip embedded in TP's post, it is more than obvious that Shields is being sarcastic and mocking conservatives who criticize Obama. Extra credit to Kevin for admitting that he put up his post without even watching the clip.

Now, if you really want to see the netroots at their worst, read the comment thread at the end of the original post on TP. Both the ignorance and the viciousness are disturbing. According to Comment #14:
What we really need is gutless fat *ssed scum like [Shields] getting the beatdown of your life from the families of those who have paid the ultimate price in wars cheered on by your spineless, unaccountable pontificating.

Shields is nothing but another worthless piece of sh*t in a long line of tough guy chickenhawks.
Incidentally, Shields is a Marine Corps veteran. And that comment is just par for the course, not just one ugly comment I picked out to pass judgment on the netroots. To their credit, a handful of commenters insist that Shields was being sarcastic. Others know so little about Shields they call him conservative.

Full disclosure: There's plenty of insanity in the far-right blogosphere as well. But the attack on Shields is so bizarre I thought it deserved a post.

Cross-posted at Conventional Folly
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# Posted 5:25 PM by Ariel David Adesnik  


Republicans need to point out that Obama's economic policies aren't working. But they need to resist appearing to relish bad news for the country on Obama's watch. When rising unemployment numbers come out, there is occasionally an unseemly sense of celebration in the emails that come from various GOP offices. More in sorrow than in joy, more in confirmation than in vindication--that should be the Republican mood as the news of Obama's failures, failures which damage the well-being of Americans and of America, rolls in.
Cross-posted at Conventional Folly
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# Posted 5:19 PM by Ariel David Adesnik  



A "dog warning card" arrived with my mail today. Thanks to a New Jersey branch of the National Association of Letter Carriers, you can see the form online. The form provides invaluable advice, such as "Do not deliver mail if you feel endangered by an animal."

For a better understanding of the threats faced by America's letter carriers, I recommend the following passage from The Postal Employee's Guide to Safety (August 2006 edition), Section IX D:
Animals and Insects
1. General Rules
You are not required to deliver mail when an animal threatens you. Use extra care in making deliveries when dogs or other animals are loose on your route...

Neither antagonize nor attempt to pet dogs. If a dog rushes toward you or takes you by surprise, do not run. Retreat very slowly, facing the dog. Keep your mail satchel between you and the dog as a first line of defense. Be careful not to stumble over objects as
you retreat.

Use dog repellent spray only if you are attacked. Spray it directly at the dog’s eyes, nose, and mouth. Do not use dog repellent indiscriminately or when there is danger of spraying children or adults.

When delivering mail through a door slot, keep your fingers out of the slot; an animal may be on the other side.

Cross-posted at Conventional Folly
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# Posted 5:05 PM by Ariel David Adesnik  

Every time Mr. Obama declares that the United States will not have an “open-ended” military commitment in Afghanistan, he fuels a second concern of the powerful Pakistani military and intelligence establishment, which believes the United States commitment is fleeting.

It is a concern that some of them say justifies Pakistan’s continuing ties to the militants who fight American troops in Afghanistan.

Secretary of State Hillary Rodham Clinton appeared to fuel this concern on Sunday in her comments on the ABC program “This Week,” saying: “We’re not interested in staying in Afghanistan. We have no long-term stake there. We want that to be made very clear.”
I was listening to the program and I was pretty surprised when Hillary said that. It sounded more like an improvisation than a well-prepped talking point. But it illustrates the confusion at the heart of Obama's policy. The White House wants to demonstrate resolve while being sure it has an "off-ramp" for its commitment. When delivering that kind of confused message, even the best talkers will slip up.

Cross-posted at Conventional Folly
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Tuesday, November 10, 2009

# Posted 6:02 PM by Ariel David Adesnik  

“Having a ham sandwich on the afternoon of Yom Kippur doesn’t make you less Jewish,” Rabbi Yitzchak Schochet, chairman of the Rabbinical Council of the United Synagogue, said recently.
I feel like this may be a license for mis-behavior. (If you're interested in the context of Rabbi Schochet's remark, click here.)

Cross-posted at Conventional Folly
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# Posted 5:51 PM by Ariel David Adesnik  

OBAMA WILL CRUISE TO 2012 RE-ELECTION: No, that's not a serious prediction. My real point is about Republicans getting too excited about thrashing the Democrats in 2010. Sure, that's what I'd like to see. But remember what happened during Reagan's first term? That precedent has been on my mind, so I was glad to see that Sam Donaldson and Cokie Roberts were thinking along the same lines. Here's their exchange from Sunday morning:

SAM DONALDSON: ...[Reagan's] popularity went down to 37 percent, at one point. But guess what, we came out of that recession. Thanks to Paul Volcker, wringing out inflation the old-fashioned way, by jacking up interest race at the Fed. And it was morning in America again. So, I say to people, anyone who thinks that Barack Obama isn't kind of odds on, for re-election, must not think we're going to come out of this recession. Because of assuming we do, and I think, we are going to by 2012, it will be morning in America again.

COKIE ROBERTS, ABC NEWS: I think that's right... I mean, when you look at the -- since you did that nice Reagan analogy, 1982 was a terrible year for Republicans. They lost 26 seats in the House, and 4 in the Senate. Everybody was saying, ah, see, the Reagan landslide really wasn't what it looked like, and all of that. 1984, a very different story. And what we really had in 1980, with that Reagan election, was a realignment that lasted for a generation. And I basically think that despite what happened on Tuesday, and what I think is likely to happen in 2010, I think we probably did see a realignment in 2008.
I don't really buy into the idea of a realignment in either 1980 or 2008. But that's another story. Just remember how bad things looked for Republicans after the 1982 elections. Remember that after the Democrats take a beating in 2012, and remember how fast things change.

Cross-posted at Conventional Folly
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# Posted 5:49 PM by Ariel David Adesnik  

DONNA BRAZILE PRAISES GOP IDEOLOGY: If you wait 15 years, people will say anything. Sunday morning on ABC, Donna Brazile explained why 2010 won't be another 1994:
Well, first of all, I don't think it's '94, because in '94, we also had some potential disastrous that happened that caused Democrats to lose so many seats. First of all, we had a great deal of retirements in the Congress, we had the bank scandal, the post office scandal... We also had a Republican Party that had ideas. We had a Republican Party that was a lot more viable and had plans to help solve some problems. We don't have that Republican Party today.
I wasn't all that politically active back in 1994 (although I was a big Clinton fan), yet somehow I don't recall any Democrats praising the GOP for the depth of its ideas or for its pragmatic willingness to solve problems. I guess that some Lexis-Nexis work might turn up the odd bit of praise, but what I mostly remember from the late 90s is a kind of vindictiveness that makes today's bickering seem pretty dull and substantive.

Cross-posted at Conventional Folly
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# Posted 5:47 PM by Ariel David Adesnik  

DO CARROTS FEEL PAIN? Natalie Portman is giving up eggs and milk. She writes on HuffPo:
Jonathan Safran Foer's book Eating Animals changed me from a twenty-year vegetarian to a vegan activist. I've always been shy about being critical of others' choices because I hate when people do that to me. I'm often interrogated about being vegetarian (e.g., "What if you find out that carrots feel pain, too? Then what'll you eat?").
With that kind of radical anti-pain attitude, the next thing Portman will oppose is probably abortion. Seriously. I'm still figuring out my own position on pro-life issues, but it sure is strange when Hollywood stars tell you that the one issue they get evangelical about is the mistreatment of animals.

Coincidentally, I was friends with Foer back in high school and college. (Yes, I am name-dropping.) I am a huge fan of his first novel, Everything Is Illuminated. In case you were curious, he is just as funny and clever in person as he is in writing.

You can get the flavor of his latest book from his recent essay in the Wall Street Journal, suggesting we may as well eat our dogs.

It's hard not to be ashamed by the casual, pointless cruelty often inflicted on various animals on the way to our tables. But if you fundamentally believe that we have a right to kill and eat lesser creatures, even by the million, then it's hard to treat their suffering as a priority. I get more worked up about human rights and healthcare reform.

But I haven't read the book yet. So I'll order a copy and see if an old friend can change my mind.

Cross-posted at Conventional Folly
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# Posted 5:44 PM by Ariel David Adesnik  

MOTHER JONES AGREES WITH THE NATIONAL REVIEW! Kevin Drum praises Jonah Goldberg for resisting the impulse to call Nidal Malik Hasan a terrorist. A traitor? A murderer? Sure. But not a terrorist.

The strange thing is that liberals assume they should be against labeling Hasan a terrorist and conservatives assume they should be for it. That makes a certain amount of sense. Liberals fear exaggerated threats. Conservatives fear threats that are ignored.

But wouldn't the Afghanistan doves want Hasan to be a terrorist? Then they can say the real threat is at home, not in Afghanistan. Actyally, nix that. Too complicated. Anyhow, Kevin writes:
Unlike, say, a suicide bomber in Jerusalem, there's hardly even a hint that he was trying to make any kind of political statement. There was no note, no videotape left behind, no explanation while he was shooting, no nothing. What kind of terrorist does that?
Incompetent ones, I guess. If initial reports of Hasan's radicalism turn out to be correct, Kevin may have to revise his opinion.

Cross-posted at Conventional Folly
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Wednesday, November 04, 2009

# Posted 9:29 AM by Ariel David Adesnik  

THE MAN WHO PREDICTED THE FINANCIAL CRISIS, PART III: I'm not an aggressive consumer of financial journalism, so it has to be something of a coincidence that I've come across three separate items that chronicle the dark predictions of three separate men who warned of an impending financial crisis.

The first two are discussed below. The third is Nassim Nicholas Taleb, author of The Black Swan: The Impact of the Highly Improbable. The Black Swan was published in 2007 and written in the preceding years. Here are a few quotes that jumped out at me:
Once again, recall the story of banks hiding explosive risks in their portfolios. It is not a good idea to trust corporations with matters such as rare events because the performance of these executives is not observable on a short-term basis, and they will game the system by showing good performance so they can get their yearly bonus. The Achilles’ heel of capitalism is that if you make corporations compete, it is sometimes the one that is most exposed to the negative Black Swan [extreme event] that will appear to be the most fit for survival. (pp.209)

Financial Institutions have been merging into a smaller number of very large banks. Almost all banks are interrelated. So the financial ecology is swelling into gigantic, incestuous, bureaucratic banks (often Gaussianized in their risk measurement) -- when one falls, they all fall. The increased concentration among banks seems to have the effect of making financial criseis less likely, but when they happen they are more global in scale and hit us very hard. We have moved from a diversified ecology of small banks, with varied lending policies, to a more homogeneous framework of firms that all resemble one another. True, we now have fewer failures, but when they occur ….I shiver at the thought. (pp.225-226)
While apparently talented in terms of financial analysis, Mr. Taleb is awful when it comes to web page design. His home page is confusing and cluttered. He provides a list of prophetic quotes from The Black Swan, but no page numbers -- which I added myself. I also had to correct the typos in his quotations from his own book.

Anyhow, enough aesthetic complaints. The substance is interesting. Will the Cassandras I've blogged about become financial celebrities now that they've been vindicated? Were they vindicated because they were lucky or because they were smart? I have no idea, but given that the value of my pension and my home may depend on this sort of thing, it may be a good idea to figure it all out. Then again, we got to where we are today because all sorts of brilliant people who study this stuff for a living still couldn't figure it out. So what good can I do by dabbling in financial analysis?

(PS I definitely recommend Taleb's book. Neither a mathematician nor an economist, I can't vouch for its contents. But Taleb is both very entertaining and very erudite. On the downside, he is impossibly self-satisfied, profoundly enjoys settling scores with his rivals, and you have to read forty pages before getting to the good stuff.)

Cross-posted at Conventional Folly
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# Posted 9:21 AM by Ariel David Adesnik  

THE MAN WHO PREDICTED THE FINANCIAL CRISIS, PART II: In the mid-1990's, Yale economist Robert Shiller predicted the dot-com bubble would burst. In 2005, Shiller predicted the housing bubble would burst. Why?
In the wake of the dot-com crash, which helped make Shiller a public figure, Americans turned their financial attention from stocks to real estate. House prices were rising rapidly, and people had begun to see real estate as a can't-miss investment. Shiller wanted to know what history might say about that, but he realized that data for house prices didn't exist going back more than a few decades. "Clearly," he has written, "no one was carefully evaluating the real estate market and its potential for speculative excess."...

Over the long term, house prices tend to rise at the same rate as household income. If prices increase more slowly than income for a few years, they soon catch up. If they rise more rapidly than income, they eventually come back to earth. In early 2005, Shiller published a second edition of Irrational Exuberance, which added a chart on house prices.

That summer -- which turned out to be the very peak of the housing bubble -- Shiller and [the author] had lunch in New York. He told me that day that over the coming generation, he expected inflation-adjusted house prices to decline by 40 percent. In all likelihood, he said, the bursting of the housing bubble would at some point cause a recession.
The article doesn't mention if Shiller, like John Paulson, put his money where his mouth was, betting heavily on a housing crash. Then again, Shiller is an academic, so betting his reputation is certainly worth something.

As I said below, I'm not an economist and I have no idea whether the Cassandras of the housing bubble were ignored for the wrong reasons or the right ones. But it is striking that those who warned of terrible things to come seem to have thought out their position quite systematically, and were not just venting their personal pessimism.

Cross-posted at Conventional Folly
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# Posted 9:10 AM by Ariel David Adesnik  

THE MAN WHO PREDICTED THE FINANCIAL CRISIS, PART I: The weekend edition of the Wall Street Journal profiled John Paulson, whose firm made $15 billion by systematically betting against the value of American homes. Paulson himself took home $4 billion.

How'd he do it? Research.
Grasping for new ideas, [Paulson researcher Paolo] Pellegrini added a "trend line" that clearly illustrated how much prices had surged lately. He then performed a "regression analysis" to smooth the ups and downs.

The answer was in front of him: Housing prices had climbed a puny 1.4% annually between 1975 and 2000, after inflation. But they had soared over 7% in the following five years, until 2005. The upshot: U.S. home prices would have to drop by almost 40% to return to their historic trend line. Not only had prices climbed like never before, but Mr. Pellegrini's figures showed that each time housing had dropped in the past, it fell through the trend line, suggesting that an eventual drop likely would be brutal.

"This is unbelievable!" Mr. Paulson said the next morning. The chart was Mr. Paulson's Rosetta Stone enabling him to make sense of the housing market. They had to figure out how to profit from it.

By the spring, Mr. Paulson was convinced he had discovered the perfect trade. Insurance on risky home mortgages was trading at dirt-cheap prices. He would buy boatloads of credit-default swaps—or investments that served as insurance on risky mortgage debt. When housing hit the skids and homeowners defaulted on their mortgages, this insurance would rise in value—and Mr. Paulson would make a killing.
And so he did. In hindsight, we logically conclude that Paulson is brilliant. But who was saying that three years ago?

I'm a defense analyst, so I really have no idea if money men should've been paying more attention to Paulson. But regardless of the discipline, a major crisis seems to clear away the underbrush and reveal a proud few who saw what was coming. And regardless of the discipline, it remains extremely hard to tell if those few were lucky or smart.

Cross-posted at Conventional Folly
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# Posted 9:10 AM by Ariel David Adesnik  

A LIBERAL DOLLOP OF IRONY: From the lead column in last week's New Yorker:
The market for news is narrowing down to people who need an ideological fix.
Of course, that comment was directed at Fox and MSNBC, not at those alleged highbrow publications which strike a pose of informed sophistication while delivering the same narrow fix.
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