Weekly Links: NYC, Neoconservatism, Secret Intelligence, John Bolton, Teh Panty Bomber, Tea Parties, Chessmasters, & Paul Krugman

In any given week, I collect so many links to good articles on which I'd like to opine, I'm unable to get to all of them. Thus, these weekly link dumps. If you're looking for something good to read, read one or all of these, listed in no particular order of priority.

(these aren't all political)

In NYC, old real estate families are getting back in the biz after the bubble burst on the new comers. (h/t Scott L.)

Father/dean of neoconservatism, Norman Podhoretz, answers questions about his ideology and why Jews tend to be liberal, among other things. (h/t Matt L. or Scott L.)

The Binyam Mohamed trial last week in London resulted in the release of secret American intel given to their British sources. According to high ranking British sources whom I personally questioned, the real concern is over the day to day sharing of intelligence between the middle management types. This will inevitably affect the long term development of intelligence.

My favorite ex-diplomat, John Bolton, makes the case for a military strike against Iran to preempt their development of a nuke.

Michael Mukasey, former US Attorney General, breaks down, point by point, why the administration's handling of the "panty bomber" did not have to be handled the way it was--Miranda rights, etc.

Glenn Reynolds reports on what he saw and heard at the Tea Party convention.

Russian opposition leader, Garry Kasparov, updates and warns us about current US policy towards Russia & Iran.

Finally, Paul Krugman makes an interesting argument on the one hand, if the Euro is to succeed, for greater EU political union and on the other hand, against the hubris of adopting an single currency. (h/t Taylor B.)

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

WWMS: What Would Milton Say?

If only Friedman were still alive and could pen a column for the Wall Street Journal on the Modern Great Depression (note: this is a parodic title). As it is, the only "influential" economist whose columns we can read are former Enron adviser, Paul Krugman's. And we already know what he's going to say: Blame Bush.

Fortunately and in an altogether different sort of way, we can also suss out what Milton Friedman might have said, were he alive. I'll leave it to his still-living colleague, Peter Robinson:

The day after Milton Friedman died in November 2006, The Wall Street Journal published an article about monetary policy that Friedman had written. Unable to recall when the article had first appeared, I asked the editor. "Today," he said. "Milton adapted it just a couple of weeks ago from a research paper he was working on."

This took a moment to sink in. Friedman, by universal consent one of the two or three most consequential economists of the 20th century, had still been performing original economic research then describing his findings for ordinary readers--at the age of 94.

What would Milton have said if he were still with us today? Friedman spent his final three decades at the Hoover Institution--my office was just two doors down the hall from his--and earlier this week I sat down with two of my Hoover colleagues, economists Thomas MaCurdy and Jay Bhattacharya, both close students of Milton, to decide what questions we would have asked him--and how he might have replied.

Would Milton have seen this crisis coming?

Of course. The moment the housing bubble burst Milton would have recognized that we were in for trouble. Why? Because as banks limited their lending, the money supply contracted. And whereas Milton believed that changes in the money supply affect only the price level over the long term, he recognized that over the short-term changes in the money supply can produce dramatic effects in the real economy.

"What would Milton have told you caused the recession in the early 1980s?" Tom asks. "[Federal ReserveChairman] Paul Volcker's reduction in the rate of growth of the money supply. And what has happened now? Another relativecontraction in the money supply. Milton would have told us we're headed right into a recession."

Whom would Milton have blamed?

For the bubble itself? Probably nobody. From the tulip mania in Holland more than three-and-a-half centuries ago to the dot-com bubble here in the U.S. less than a decade ago, wildly irrational behavior sometimes develops in markets. "Friedman never argued that markets are perfect," says Jay, "only that over the long run they're a lot more efficient than any other method of allocating resources." Sometimes, Milton recognized, bubbles just happen.

Whatever the origin of the bubble, however, Milton would have blamed Congress for making it much, much worse. Congress, after all, created Fannie Mae (nyse: FNM - news - people ) and Freddie Mac (nyse: FRE - news - people ), institutions that spent tens of billions of dollars on subprime instruments. "Congress told Fannie and Freddie to subsidize bad loans for the purposes of social engineering," says Jay. "It was terrible, just terrible."

What would Milton have made of government efforts to address the crisis?

He would have approved of such efforts in Britain--but expressed grave reservations about those here in the U.S.

"Milton would have wanted the authorities to find very, very aggressive ways of expanding the money supply," says Tom. The Bank of England did just that, placing large deposits in banks throughout the British financial system. "What they did in England was quick, clean and direct."

Here in the U.S., by contrast, Treasury Secretary Henry Paulson's original bailout plan, under which the Treasury would have spent hundreds of billions of dollars purchasing subprime and other instruments from major banks, went at the problem backwards. "The government should take responsibility for the money supply, but not for setting prices," says Jay. "The problem with subprime assets is that nobody knows what they're worth. Friedman would have told you that bringing the government in wouldn't have helped that."

With his new plan, under which the Treasury has now taken equity stakes worth $125 billion in nine big banks, Paulson has finally begun to make sense. "Direct injections of capital into banks--Milton would have approved of that," Tom says. "But why did it take so long? Why did we have to wait for the Bank of England to set the example?"

What would Milton have seen as the principal danger to the economy that the crisis now poses?

The very same equity stakes mentioned above. It is one matter for the government to make deposits in banks, as the Fed regularly does, Milton would have held, but another for the government to purchase equity, as Paulson has just done.

"Look, if the government wraps up its equity positions and gets out of the banks quickly, then okay," says Tom. "The danger is that the government will stick around and start managing the banks, setting loan policies, establishing salary limits for the top executives and stuff like that. Friedman would have been really clear on this. Banks should be run by bankers, not politicians."

Would Milton have seen the crisis as a setback for capitalism?

Only in the short term.

"If this election goes the way it looks as though it's going to go," says Tom, "then the political system is about to get a major overcorrection to the left. And that means the American people are about to get an extreme illustration of just how badly government intervention screws stuff up."

"If Milton were here," Tom says, "he'd tell us to remember what happened during the Clinton administration. After just two years, the Republicans ended up in control of both houses of Congress."

As much as anything else about Friedman, I appreciate his eternal optimism. This is a characteristic he shared with Ronald Reagan and William F. Buckley Jr.

And why were they optimistic? Because they shared a faith in the goodness and greatness of America.

(thanks to Branden B.)


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More On Krugman, NYT, & Nobel

From the Weekly Standard:

Paul Krugman, a professor at Princeton University and an Op-Ed page columnist for The New York Times, was awarded the Nobel Memorial Prize in Economic Sciences on Monday.
-- The New York Times, Oct. 13
THE NEW YORK TIMES

Krugman Awarded Economics Nobel Prize
In Unprecedented Times Sweep of Honors

By R. Selig Postlethwaite

Stockholm —The Nobel prizes have yielded some strange bedfellows in the century since Alfred Nobel’s invention of dynamite, but scholars here in the Swedish capital agree that there has never been anything like this year’s list of honorees: All of them are New York Times Op-Ed page columnists.

This virtual grand slam home run of the world’s most prestigious award was made possible by the announcement last night that Op-Ed columnist Paul Krugman had won the Economics prize for, in the words of the Nobel Committee, “having shown the effects of economies of scale on trade patterns and the unrelenting lies and thuggery of the miscreants and goons in the criminal conspiracy that is the Bush White House.”

Krugman now joins New York Times colleagues Thomas Friedman (Peace), Frank Rich (Physics), Gail Collins (Chemistry), Maureen Dowd (Literature) and Bob Herbert (Medicine) as newly-minted Nobel laureates for 2008. According to the Nobel Foundation web site, this is the first time in the award’s history that journalists have won all six prizes; but that is not surprising, according to Foundation president Axel Hjergstrand, since “the mission of journalists is to afflict the comfortable and comfort the afflicted.”

Last week Maureen Dowd was awarded the Literature prize for her “unrelentingly sophomoric puns, schoolyard nicknames, and laser-like instinct for the superficial” while Gail Collins snared the Chemistry honors for “the explosive effect achieved by her combination of banality and short-term memory.”

Late last month the Nobel Committee bestowed its Physics prize on Frank Rich for “his pioneering work in demonstrating the parallels between American foreign policy and selected episodes of T.J. Hooker, as well as the relationship between U.S. transportation policy and the old Jerry Van Dyke sitcom, My Mother the Car.” The Medicine award went to Bob Herbert for what the committee called the “soothing sensation of his awkward prose, as well as the demonstrated therapeutic effect of the laughter his columns frequently inspire.”

Among colleagues and Nobel observers, there is widespread agreement that the Peace Prize for two-time Pulitzer Prize-winning columnist Thomas Friedman is long overdue, especially since, in the Norwegian Nobel committee’s citation, Friedman’s “lifetime of service to conventional wisdom, gross simplification, and mass hysteria has benefited countless executive retreats, Aspen Institute panels, and roundtable discussions on Charlie Rose.”

Here's the rub: I don't care for Paul Krugman or his view of the world as found in his NYT columns. I'd like to be able to separate his work on economics from his much publicized opinions, but I don't think it's impossible.

Whatever one thinks of the Nobel Prize (apart from the tax free $1.4million, I think it's worthless), this type of thing imbues those opinions with an added gravitas which they do not merit. Because they are crap (his columns, I mean).


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Roger Kimball On Krugman's Nobel

This is great:

Think of all the preposterous Nobel Prize winners. Tony Morrison, Pearl S. Buck, Elfriede Jelinek, the Communist José Saramago–sure there are some goodies in the bunch, but what an unreliable guage of literary talent! Literary quality has almost nothing to do with the Prize. The operative criterion is politics, or, rather, political correctness, galvanized by literary noises. Horace Engdahl, the permanent secretary of the Prize, as much as acknowledged this a few weeks ago when he announced a couple of weeks ago that “the US is too isolated” and doesn’t “participate in the big dialogue of literature.”

Unlike Sweden, Horace?

As I said when asked about Mr. Engdahl’s statement, his performance reminded me of the story Uganda’s bravado under Idi Amin: Like the Untied States, they had an Apollo space program, only the rockets were made of balsa wood. Engdahl’s statement, I said,

strikes me as a kind of publicity stunt for a prize that in recent years has demonstrated its fatuousness and political complexion with one political laureate after the next punctuated now and then by a VS Naipaul just to lend a patina of credibility.

And let’s not forget the Nobel Peace, which permanently discredited itself when it awarded the palm to the Palestinian and pedophile Yasser Arafat in 1994.

But today we have yet another illustration of Marx’s revision of Hegel’s version of the progress of history: things happen as it were twice: first as tragedy (Arafat) then as farce–witness this year’s Nobel Laureate for economics: Paul Krugman.

Yes, that Paul Krugman, laughing stock (well, one of them) of The New York Times’s editorial: the anti-capitalist, anti-American town crier whose hysterical maunderings about the economy and American society were embarrassing before they went entirely off the reservation and became merely part of the ambient left-wing static emanating from The New York Times. Krugman is not just a left-wing academic economist. He is a hard-left activist whose only claim on our attention is as a bellwether of a certain species of anti-American demagoguery.

Well, one must laugh to keep from crying. Meanwhile, Krugman will be $1.4 million richer–unless, of course, Barack Obama should be elected and start nosing around that “windfall” profit. That is not–not by a long shot–enough to make me wish for an Obama presidency, but it would be a pleasing consolation prize.

Let's quit pretending that the Nobel Prize is something that it isn't. It may once have been prestigious and worthwhile, but not any more.


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Paul Krugman & His Nobel (UPDATED)

So Paul Krugman won a Nobel Prize. So what? So did global warming alarmist/profiteer Al Gore. And terrorist Yasser Arafat. The Nobel Prize really no longer confers anything in the way of prestige.

Instead of reading all the articles singing his praises, read this article by Michael Lynch at Reason on why Krugman may be a good economist, but a lousy columnist.

As the Western media exposed our Saudi Arabian allies as double-dealing despots, attention turned to the obvious question: Can the United States live without Saudi Arabian oil, which, at 1.6 million barrels a day, accounts for 14 percent of our imports? The answers are mixed. The Wall Street Journal's Susan Lee says sure we can, since other countries will simply sell more oil. Newsweek reached a similar conclusion. "Not a chance," says Hudson Institute economist Irwin Stelzer, in The Weekly Standard.

The most useless contribution to the oil debate, albeit not directly addressing the narrow question of Saudi Arabia, comes from The New York Times' top economic pontificator, Paul Krugman. "Intelligent policies could break [the oil price surge and bust cycle]," says Krugman, a chaired professor of economics at Princeton.

Krugman spent much of his recent column explaining two obvious points. First, that producer cartels face difficulties in maintaining artificially low production levels. Second, he helpfully pointed out that as prices for a commodity drop people consume more of the commodity. What upsets Krugman about low prices for oil? He fears low prices are destabilizing for Saudi Arabia and, worse yet, causing people to purchase sport-utility vehicles.

Considering the stakes, it is shocking to find that the man who says "all we need is leadership" to break the "oil-hog cycle," has but one policy suggestion: increase mileage standards on SUVs to the equivalent of automobiles. Currently, SUVs are classified as light trucks for mileage standards and, on average, have to get 20.7 miles per gallon. Cars must meet a standard of 27.5 mpg.

So what of his solution? Is a government-mandated increase in mileage for SUVs the answer to our Middle East oil problem?

Not even close. Here's how the issue breaks down, according to Howard Gruenspecht, who specializes in Energy and Natural Resources for the think tank Resources for the Future. The United States consumes roughly 20 million barrels of oil each day, almost 9 million in the form of gasoline. Currently, Americans own 200 million vehicles--125 million cars, and 75 million light trucks, which meet the lower mileage standards. Recently, Americans have been purchasing roughly 16 million vehicles a year, half of them classified as light trucks, including SUVs. So over time, light trucks and SUVs constitute an increasing presence on the road.

It is immediately obvious that there are two significant time lags inherent in any effort to increase fuel economy: The time it takes the regulations to phase in and the time it takes Americans to purchase new cars and trucks. If the administration made the regulatory change tomorrow, and made it effective in five years, it would be over a decade before half of the truck miles driven come from vehicles that meet the new standards.

What sort of savings does this give us? Not much. The effected cars' fuel efficiency is increased by a third, which provides a 25 percent reduction in fuel use for those vehicles. In a decade, half of the light truck vehicle miles traveled would be affected, resulting in a 12.5 percent reduction of fuel use by light trucks. In all likelihood, by then light trucks will account for a little more half of all fuel use, so the total reduction in fuel use is between 6 and 7 percent. So a decade out, Krugman's big idea promises to save a mere 600,000 barrels of oil a day, less than 3 percent of current domestic consumption.

It gets worse. Krugman proposes to "close the loophole that exempts S.U.V.'s from mileage standards." Yet SUVs constitute only half of the light truck category that qualifies for lower standards. (It also includes pickups and small and large vans.) Therefore, Krugman's brainchild, read literally, would save Americans from purchasing roughly 300,000 barrels a day a decade out.

That might be worth doing. 300,000 barrels is, after all, a bunch of oil. But one ought to judge a proposal against the relative merits of others designed to achieve similar goals. Krugman concludes his piece by advising the Bush administration to "drop its fixation on drilling in the arctic--which would produce too little oil, too late to make any difference." So how much oil will the proposed Arctic National Wildlife Refuge site produce? According to the Energy Information Administration, a decade after development, ANWR could produce between 600,000 and 900,000 barrels of oil a day.

It may not be much, but it's as much as three times more than Krugman's plan for energy stability. Perhaps he should examine his own "fixations."

Drill here, drill now.

Holman Jenkins in the WSJ's Political diary yesterday about Krugman (h/t Scott L.):

Princeton economist Paul Krugman's Nobel yesterday was earned with some clever analysis of international trade. Among other insights, he showed that governments could, if unusually adept and disciplined, profitably game the international trade system with subsidies to capture high-paying manufacturing jobs. Airbus is the archetypal case in point.

Mr. Krugman's other job is his regular column in the New York Times. His economic insights are always interesting -- right up to the point where it all just proves the Bush administration lied about weapons of mass destruction. Yesterday's installment was a model -- a tribute to the incompetence of the Bush administration because the British beat Washington to the idea of addressing the credit crunch by injecting government capital in banks.

Um. A) Did they? B) Who cares? It takes two nanoseconds to recall the Bush administration used equity injections in the bailouts of Fannie and Freddie and AIG. As for British non-ideological competence, the less said about the Northern Rock fiasco the better, not to mention Britain's role in the Iceland meltdown. What really happened is events have outrun every magic bullet, and are outrunning the capital injection bullet too. A bigger oomph in the British plan, adopted elsewhere, is already the sweeping guarantee of bank liabilities and crypto-regulatory forbearance on capital standards, which make new capital partially redundant.

But never mind. Mr. Krugman has solved the fundamental problem of a columnist -- what to write week after week. The answer: The Same Thing. Just write it over and over. Whether the subject is health care, the banking crisis, global warming or whatever, it all just proves the Bush administration lied about weapons of mass destruction.

Priceless.

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Quote of the Day

Douglas Holtz-Eakin, a McCain economist, was recently quoted in the National Journal, responding to former Enron Adviser*, Paul Krugman's criticism of McCain's pro-drilling policy:

If we could get a firm commitment to expanded supply of oil on the market three and a half years from now, that would change spot market prices three and half years from now, that would change futures prices today and that would translate into pressure on prices instantaneously. You know, Mr. Krugman's a good economist; he can go back and read his finance text

*Thank you James Taranto.

h/t: John Fund, Political Diary


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