Thoughts on Freedom

Freddie and Fannie were two Americans most Australians never knew existed until recently. Freddie and Fannie are two large US institutions that perform the function primarily of selling mortgage insurance against US housing mortgages. They do other things (see Wiki)

Fred and Fannie are very highly leveraged. In fact it ought to be a criminal offense for anyone to be leveraged at 140:1 (debt to common stock) :-). They could only get to be so large because there was always an implicit US government guarantee supporting this caper. Invaribly, when moral hazard comes into the picture, it usually ends in tears. The reason it’s ending in tears is the state of the US housing market has essentially rendered these two insolvent. Insolvency could mean US$5 trillion which would be the big enchilada of all time.

Enter Bill Ackman a well-known Hedge Fund manager who’s come up with what seems to be a truly brilliant proposal to save the US taxpayer a lot of money, keep these two institutions solvent and finally allow the US government to remove its implicit guarantee. The proposal, if it goes through, would probably cost the US government nothing and allow the two newly well-capitalized institutions to continue doing what they do, which is to insure mortgages in a far more conservative real estate market environment.

Ackman’s plan is as follows:

1. Wipe out the common shareholder, as there was never an implicit guarantee to protect capital.

2. Offer the junior debt holders a warrant against the much riskier debt. It could well be argued the riskier debt never carried an implicit guarantee (such as junior debt).

(This is where it really gets interesting. The senior debt holders…)

3. Break up the senior debt into two components. 85% -90% would remain as is (senior debt) while the 10%-15% would be taken as equity. The equity component would carry a US government buy-back (put) for 3 years at the face value. This means that any holder could go and redeem the equity component from the US government at 100 cents in the dollar.

This achieves several things. It allows Freddie and Fannie to stay in business with well-capitalized balance sheets.  New equity would reduce leverage to about 10:1 and essentially recapitalize the two institutions allowing them to stay in business writing new loan insurance in a more conservative environment. More importantly it would allow the government to remove the implicit guarantee for all time.

Once the market understood the US government is there for three years guaranteeing the equity portion the price of the equity coupon would probably rise above the face value and allow the US government to avoid having to fork over any money at all.

The overall effect is that it could stabilize the US housing market.

It’s a very elegant scheme.

One other thing:

A few Australian journalists were suggesting we introduce a similar deal in our market when our rates tightened. The potential default in the US of 50% of US GDP should shut them up for ever.

I have been reading an excellent article from the Wall St Journal, “Anti-Americanism Is Mostly Hype,” By Foaud Ajami, who is a Bradley Prize recipient, and teaches at the School of Advanced International Studies at Johns Hopkins University. He is the author of “The Foreigner’s Gift” (Free Press, 2006).

This article reminds me of the time just after Labor gained office in Queensland for the first time in a generation and Wayne Goss was premier. One of his less memorable statements was to the effect that the southerners liked us now. I wasn’t aware until then that anyone cared whether they liked us or not, but of course lefties just have to be loved, (or at least approved of.)

 But of course I digress: -

 So America is unloved in Istanbul and Cairo and Karachi: It is an annual ritual, the June release of the Pew global attitudes survey and the laments over the erosion of America’s standing in foreign lands.

 We were once loved in Anatolia, but now a mere 12% of Turks have a “favorable view” of the U.S. Only 22% of Egyptians think well of us. Pakistan is crucial to the war on terror, but we can only count on the goodwill of 19% of Pakistanis. Read more »

I found the idea expressed in this review somewhat intriging. An extract;

These two dimensions come together to provide a simple 2×2 matrix: high grid and high group is hierarchy; low grid and low group is individualism; high group and low grid is egalitarianism; low group and high grid is fatalism. This simple model turns out to be a powerful tool for understanding social relations, and for making sense of how people see the world. We may like to believe that we choose and shape our own beliefs—but Douglas, drawing on the work of Emile Durkheim and others—suggested that it is much easier to understand societies by turning that assumption on its head: societies and institutions think through us much more than the other way around.

Within a hierarchical culture, the world is seen as controllable so long as the right structures are in place. Most governments tend towards hierarchy. It is the natural worldview of civil servants, political leaders and of most of the consultants working in and around big business and governments. To every problem there is a solution—so long as it is firmly enough implemented by a sufficiently powerful leader or elite.

In an egalitarian worldview, problems usually arise from too much hierarchy and inequality, and not enough bonding and solidarity. More discussion with more people is an unmitigated good, and any measures which widen inequalities are to be resisted. In an individualistic worldview, the answer to problems is more freedom—let people determine their own choices and things will come right. Dissent is to be celebrated; rebels are heroes, and the world is made, and remade, by the imagination and energy of individuals. The fatalistic worldview is most common among people with little power or experience of power.

http://www.prospect-magazine.co.uk/article_details.php?id=9600

Proponents of a private health care market often promoting compulsory private health insurance as some form of free market solution. It would only be a free market solution if you were free to go without insurance. Given an end to public health care I would not willingly take our private health insurance. It is a rip off and I’d rather pay my own way. I’m also unconvinced that making us pay for private health care via compulsory health insurance is hugely different from making us pay for public health care via compulsory taxation. The choice between compulsory private insurance and compulsory public insurance is only a marginal improvement.

The Rudd government has been criticised for lifting the threshold at which the tax system essentially compels private health insurance via the medicare surcharge. However if anybody really needs health insurance it is not high income earners. My family has been paying private health insurance for years but we still always use the public system and we always fib so that we get admitted as public patients. We do occassionally use private services (including a rather expensive private heart specialist) however these are still costs we could pay for ourselves. Rudd should not have just lifted the threshold at which the medicare surcharge applies, he should have abolished it outright.

If we must mandate a method of payment for healthcare under a system with less public sector provision then we should use some methodology similar to HECS. And yes I know that I’m guilty of repetition having essentially said this all before. 

In this podcast Craig Emerson outlines his political philosophy in a speech to the Sydney Institute on 13th June.

There is nothing revolutionary in the substance of what Craig Emerson says, but it is nice to hear a minister in government offer such a thoughtful commentary on the nature of government. And in particular to hear one say something intelligent about self interest and to talk about the importance of opportunity without banging on endlessly about “equal” opportunity.

Some response commentary here.

In these circumstances, last night’s speech to the Sydney Institute by the Minister for Small Business and Independent Contractors, Craig Emerson, outlining a vision for prosperity and fairness in a market democracy, is a breath of fresh air. Dr Emerson’s comments give some comfort that there is someone in the Labor Party who is prepared to argue for an intelligent way forward. This is no doubt due in part to Dr Emerson’s time spent working as an economic adviser to former finance minister Peter Walsh, who famously knew the difference between the truly disadvantaged and “rent-seeking spivs” and “hairy-legged Stalinists”.

I don’t agree with every detail of the speech however if Craig Emerson as epitomized in this speech was actually represenative of the entire ALP then I’d almost feel confident that the levers of government were in safe hands.

Despite angry farmer protests and a raft of Senate amendments, Australia’s 60-year-old monopoly system of selling bulk wheat overseas has ended.

The lower house on Monday accepted the opposition-controlled Senate amendments, bringing in to law the new wheat marketing arrangements.

Full article here.

The most disappointing thing about this reform is that we didn’t use the initiative to get a better deal during bilateral trade negotiations with the USA.

Apparently the Rudd government doesn’t think that some nice people should have to pay the same taxes as the rest of us. And the reason is simple because these nice people are also really good people. I’m all for taxing people less (even nice people) but this does kind of smell a little like dead fish.

The federal government has taken steps to address a controversial change to the fringe benefits tax (FBT) which would have seen charity workers lose up to $100 a fortnight.

Under changes introduced by the former Howard government, special rules exempting salary sacrifice packages from FBT would have been scrapped.

Families Minister Jenny Macklin on Thursday night said the government would move amendments in the Senate next week to reverse the changes.

Backroom Girl calls a spade a spade and looks at how the numbers stack up to allow welfare workers to receive a bigger personal slice of the government welfare pie. As she infers this is indeed rank hypocrisy.

“We will also invoke the provisions of the Liquid Fuel Emergency Act if required.”

That would allow the Federal Government to declare a national liquid fuel supply emergency, allowing the Minister for Resources and Energy, Martin Ferguson, to control the production, transfer and stock levels of crude oil and other liquid fuel.

…

Opposition Leader Brendan Nelson said he strongly supported the Government’s actions.

Full article here.

… and it wasn’t the bit about renewables.

Last week I attempted to show the effect of the low income tax offset (LITO) by creating an amended income tax table. Unfortunately I made a mess of the numbers by mixing the tax table for 2008-09 with the LITO numbers for 2007-08. I have fixed my errors and the revised table is shown below.

As indicated last week this only incorporates the effects of LITO and not the various other rebate schemes such as the Seniour Australians Tax Offset (SATO) or Family Tax Benefits (FTB-A and FTB-B).

For PAYG tax payers only half of the LITO rebate flows directly into their paypacket. The rest comes by the way of a refund after submitting a tax return at the end of the year. This would seem to be a mechanism for making people feel somewhat optimistic in relation to submitting a tax return. Perhaps a way to train young taxpayers to play the game.

I can’t help feeling that the point of all these rebate schemes is to make the tax system more obscure and to help people feel like they are special because there is a rebate scheme for their particular circumstances. If you’re old they give you a rebate (SATO), if you’re young they give you a rebate (LITO) and if you’re in between young and old and raising a family they give you a rebate (FTB).

Leading the way were Del Martin, 87, and Phyllis Lyon, 83, who exchanged vows and rings in San Francisco’s ornate City Hall within minutes of the legal change last night. Mayor Gavin Newsom, who officiated, drew a ripple of laughter from the guests by warning the couple: “The contract of marriage is most solemn. It is not be entered into lightly, but thoughtfully and seriously.” The pair have been together for 55 years.

The legal change, which makes California the second US state after Massachusetts to sanction gay marriages, came into effect after the state’s Supreme Court struck down a ban on homosexual marriage last month.

Full article: http://www.timesonline.co.uk/tol/news/world/us_and_americas/article4155510.ece

From the 1951 film Home Town Story, now apparently only famous for a minor role by Marilyn Monroe. Link via Craig Newmark.

Wikipedia now shows the new income tax rates for 2008-09. The table shown in the article is the usual table used to show the neat simplicity of progressive income tax. For higher income bands you pay higher rates of tax. 

The article also mentions the Low Income Tax Offset (LITO). LITO is a rather simple overlay calculation which can actually be expressed by simply modifying the tax table. However instead of modifying the tax table they retain the overlay calculation called LITO for reasons only really fully known to our political masters.

Over the fold I have a table showing the tax scales before and after applying the LITO. I made this table just for fun. Working out how tax rules effect tax outcomes is fun. Of course overlaying Family Tax Benefits Part A and Family Tax Benefits Part B depends on multiple variables besides personal income so I can’t show that in such a simple table. I don’t think I could handle that much fun right at the moment. And once we start to include the effects caused by the other “benefits” of the tax/welfare system the simplicity tends to dissipate somewhat (even as the level of fun continues to increase). Read more »

Over the past two months I’ve been waging a campaign at Melbourne University’s Baillieu library by requesting that the staff order libertarian books. So far they have kindly consented to purchasing the following books: A Foreign Policy of Freedom, by Ron Paul; The Revolution: A Manifesto, by Ron Paul; and Neither Liberty nor Safety: Fear, Ideology and the Growth of Government, by Robert Higgs.

My library campaign is an attempt to educate Australian academics. I draw inspiration from John Quiggin’s inadvertent confession of ignorance:

Ideological supporters of the free market dislike the idea of public provision and funding of services though they have proved unable to come up with workable alternatives.

When Professor Quiggin says libertarians have “proved unable to come up with workable alternatives”, he basically overlooks the vast libertarian literature. There are literally hundreds of books and journal articles containing workable libertarian ideas on almost every imaginable topic — ranging from the War on Drugs to the War on Terror to the War on Poverty.

Read more »

One of the reasons I’m not so keen on this new push for a bill of rights:

Paid maternity leave is a basic human right, Sex Discrimination Commissioner Elizabeth Broderick says.

A national scheme was long overdue and a pressing issue for the two-thirds of working women not able to access paid leave, she said.

Life, Liberty and Property… and paid maternity leave… and cheap childcare… free healthcare and education, obviously… and I reckon everyone should get one free movie pass with their tax return.

It’s funny that the “baby bonus” will now be means tested, at the same time as people are talking up paid maternity leave.  They’re so confident that they’re already haggling over how much they should get:

The Human Rights and Equal Opportunity Commission’s submission to the Productivity Commission inquiry has proposed a scheme which provides 14 weeks paid leave for mothers and two weeks for the other parent.

The other parent?  Do you think they mean the father, or am I being non-PC?

The commission is also proposing that after two years’ operation, the scheme be independently reviewed and a second stage introduced, entitling mothers to a total of up to 48 weeks paid leave.

Only 48 weeks?  Surely they need a couple years - or at least until their child reaches a reasonable childcare age.

‘What is it that encourages ordinarily sensible people to start niche political parties?…What it [ the UK Libertarian Party] will do, like the Libertarian Party has done in the United States, is to tarnish the libertarian brand, allowing the crazier aspects of libertarian thinking to come to the fore, and achieving nothing of any merit…

..The lesson from American politics is that when libertarians create parties, they end up undermining liberty by diverting campaigners’ efforts way from the mainstream. Perversely, the Libertarian Party in the United States has undermined liberty: if it becomes a noticeable minority party, the British equivalent will do the same.’

Alex Singleton in the Daily Telegraph on the folly of setting up libertarian parties.

Worth reading the Samizdata comments thread  for some surprisingly vitriolic comments from ex-LP members.

It’s fun to go to a protest where there are signs that urge people to “SAY NO TO THE NANNY STATE”. A less convincing sign that was displayed at last night’s protest against Victoria’s new 2am lockout was one that pictorially argued that Saddam Hussein = John Brumby, implying that the former Iraqi dictator was, in fact, a better than average Labor premier.

Crappy phone camera shot: crowd gathers at Treasury Gardens at about 5:30pm.

There was a degree of success yesterday before the protest: some forty-seven licencees were granted temporary exemptions to the 2am rule. However, they had to agree to some fairly onerous extra regulations, such as doubling their security, and agreeing not to advertise or promote the fact that they were open for new customers after 2am. This could provide a compromise position for the licencees and government to agree on, but the government has indicated that it wants to push on with the lockout regardless.

Brumby is playing up the effect drunken violence has on ruining lives. Sure, but there doesn’t seem to be much evidence to suggest that a lockout is the correct policy solution. Three people were stabbed in brawls in the city last night. But conspiciously, they were stabbed before midnight - a 2am lockout would have no effect on this incident. It’s hard not to agree with another placard held up last night: “POLICE NOT POLICY”

My IPA colleague, Tim Wilson in the centre of the photo whips up the crowd with his blue megaphone. When he told a reporter that he was from the Institute of Public Affairs, the reporter was pretty confused.

The media has reported about 3000 people turned up to the protest - that seems about right to me, but I’m hardly a protest veteran. Having marched to the Victorian parliament (30 minutes before the organisers actually wanted them to) the speeches when we got there were unfortunately a bit lacklustre. One speaker, a Greens candidate for (I presume) the Gippsland byelection made the strange decision to focus his five minute speech on windfarms and carbon emissions, rather than liquour licences.

Outside the Victorian Parliament.

Members of the Socialist Party were handing out flyers when we turned up that maintained that the key issue with the lockout was war, racism and capitalism. Most of my IPA colleagues were smart enough not to take one - I absentmindedly accepted the flyer because I was distracted looking to get a NO 2AM badge. No dice, unfortunately.

But for the most part, the protest did well to keep on message. I don’t think the vast majority of those who attended were otherwise politically-minded - the idea of a late-night lockout offends a lot of people who hold no strong views on baby bonuses, FuelWatch and infrastructure spending. It would be great if more of these people could become activated in a libertarian direction, but I’m sadly skeptical.

Certainly the Liberal Party missed the opportunity to push an anti-Brumby message - imposing a late-night lockout was, embarrassingly, a key Liberal policy for the last election. Still, the chance to take sides with both partiers (by opposing the lockout) and law-and-order folks (by demanding more police on the streets) against the Labor government was depressingly, and, to my mind foolishly, discarded.

The protest was worth it, but it was hardly a massive blow for liberty - the issue now rests with the Victorian Civil and Administrative Tribunal.

Crossposted at www.chrisberg.org.

An interesting post at Slashdot:

StealthyRoid writes

“I’m an anarcho-capitalist, and a huge supporter of property rights, both physical and intellectual.  At the same time, I find the current trend of increasing penalties for minor violations, criminalizing civil IP matters, anti-consumer technologies like DRM, and abuse of the legal system by the *AA’s of the world really disturbing.  You’d think that by now, there’d be a reasonable solution to the problem of protecting intellectual property while at the same time maintaining the rights of consumers and protecting individuals from absurd litigation, but I have yet to find one. So, I pose these questions to the Slashdot community:  1 — Do you acknowledge the legitimacy of intellectual property to begin with? That is, do you believe that intellectual property is a valid construct equivalent to physical property, or do you think it’s illusory? If not, why?  2 — If so, how would you go about protecting the rights of intellectual property holders in a way that doesn’t require unfair usage limitations or resort to predatory abuse of the tort system?”

Naturally, being Slashdot, it has responses such as this:

“As an anarcho-communist, I have to say, I don’t acknowledge property rights…”

But, lefty comments aside, the thread is worth a look - and I’m curious as to how fellow-libertarians reconcile this issue, as I am unsure myself.

Bill Henson is getting a public flogging for the depiction of semi-naked girls in his Sydney exhibition. Rumours abound that he may even face criminal charges. Is this fair?

Larissa Debriski writing in The Age challenges us to ‘find an image of a naked 13-year-old beautiful, moving or thought-provoking’. Here’s another delightful aritcle from the lovely Larissa on why she loves the word ‘cunt‘. Memo to Larissa - if you’re an adult male and you find photos of semi-naked 13 year-olds ‘beautiful’ or ‘thought-provoking’, then you need help.

Michelle Grattan, in the SMH, thinks it’s all a big publicity stunt by Kevin Rudd to win back some votes. Andrew Bolt responds to Michelle here.

Miranda Devine, on the other hand believes that artists, perverts, academics, libertarians, the media, advertising industries and the porn industry have ’successfully eroded the special protection once afforded childhood.’ In no libertarian handbook that i’m aware of does it condone exploiting minors, Miranda.

So who is right? Are Bill Henson’s photos of 13 year-old girls, naked from the waist up, art or kiddie porn?

Whilst art may be in the eye of the beholder, child porn is child porn, even if people like Larissa find it ‘beautiful‘.

The main argument being touted by the ‘ban it’ brigade are that these photos might end up in the hands of kiddie-fiddlers. This is ridiculous. Henson rightly replied that such a person could head down to Bondi Beach and see a lot more child flesh on display if they so wished. Alternatively they could spend a Saturday night at the Manly Hotel and watch not only semi-naked teenage girls but drunk ones too.

The central issue is whether a parent has the right to consent on the behalf of a minor to show nudity. Personally i cannot understand why any parent would give such consent. Is there anything they wouldn’t do for a quick buck? But if both parents and daughter consent, should that be the end of the matter? I personally don’t believe it should. Thirteen year olds cannot and do not think like adults. That’s why they are not granted the vote. They are unaware of the consequences of their nude bodies being Googled around the world.

Until they reach adulthood (say, age 16), their naked bodies should remain in the home.

nb - the photo above is much tamer than the ones causing such heated debate. the word ‘p*rn’ is asterisked to avoid the spam filter melt down. (censorship is the only thing not liberally applied round here.

Update I: Art certainly is in the eye of the beholder

Other opinions from Kim at LP, and Helen Dale looks at some of the legal ramifications for Henson.

We’ve been called geeks, nerds and uncool for as long as i can remember. But after years of being unfashionable and watching lefties get all the hot girls, this is very exciting news, 

‘Low tax-low spend economics is finally threatening to become not just irresistible in terms of rational debate and empirical evidence – which, in fact, it is has been since at least the 1980s – but something far more devastating in electoral terms: it is poised to become cool. It will now be unthinkably unfashionable at dinner parties to defend the notion of the state as the monopoly supplier of virtue and fairness.’

via Samizdata