Blayne Sucks

Once is an anomaly.  Twice is a coincidence.  Three times is a trend.  The US Government has not once, not twice, but three times bailed out a financial company that was facing the consequences of their risky business decisions.  The most recent incarnation of this is AIG, the world’s largest insurance company.  ABC has a great quote in their piece on the AIG bailout that pretty much sums up the core problem in all three of these bailouts:

“They called it insurance, but they were gambling,” said Nobel Prize-winning economist Joseph Stiglitz. “In a market economy, there has to be a sense of accountability. You can’t come running to the government every time you have a problem.”

This is pretty simple cause and effect.  In fitness, this is summarized by the catch phrase “No Pain, No Gain.”  In sports, there’s a common saying that “most games are won or lost before they are played.”  Another common saying, though I have had difficulty finding its origin, is this:

“Capitalism without bankruptcy is like Christianity without hell.”

— Frank Borman

I have seen this modified to “Capitalism without failure is like religion without sin” as well.

The point is that these bailouts are the most fundamental of errors.  Capitalism depends heavily on fair risk and rewards.  If someone takes a business risk that pays out, then those who didn’t take the risk shouldn’t be granted the benefit of regulations limiting the entrepeneurs who did.  If someone takes a business risk that crumples underneath them, then those who didn’t take the risk should be rewarded by not seeing the government swoop in and “save” the now-failing company that did.  The rules of the game shouldn’t change while it is being played.

Now having said that, there may be some circumstances where letting everything go would be worse than some government intervention.  The problem is identifying those circumstances is incredibly hard.  We were told that the Bear Stearns bailout was the mother of all bailouts.  We were told that the $29 bn we spent there would prevent a domino effect.  (Pretty effective, eh?)  Then we were told that the Fannie Mae and Freddie Mac needed the world’s largest bailout.  They said that the $200 bn we spent there essential to our economy.  Now we are being told that AIG is too big to fail.  They are saying that the $85 bn we spend there will save a cornerstone of our economy.  How is this fair to “small” businesses like Lehman Brothers?  What key characteristics were missing in those circumstances?  These arbitrary interventions in the market are bad for all businesses.

Now I’m not an economist.  I don’t claim to be an expert in this area.  I do find it interesting that many of the companies that are failing now are doing so because of prior government intervention in the market.  Fannie and Freddie were a government sponsored duopoly in the market.  AIG was exercising a massive loophole created by the government.  Why aren’t politicians trying to solve these root causes?  Why are they so busy trying to wash away the effects?

Instead, the Bush administration wants to spend another $700 bn on bad debt in an effort to “save” our economy.  Add this to the $314 bn we’ve already spent on bailouts this year and we would break the $1,000,000,000,000 mark.  You can see the trend continuing.  It’s great to know that my tax dollars are violating the most basic principle of economics by purchasing a product known to be bad.  I want my money back.

Edited to add: Looks like the $700 bn deal could be even worse than I originally thought:

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Hat tip: Tim Lee.

As you may have noticed, I have updated the Wordpress theme used on this site.  I have also made a few changes under the hood.  For example, I have enabled user registration and comments.  Users can register using OpenID.  If you haven’t heard of OpenID, it’s basically a way for you to log in to this site without a password.

This means that you can log into BlayneSucks and comment on posts using any of the following popular blogging credentials:

• AOL — openid.aol.com/screenname
• Blogger — blogname.blogspot.com
• Flickr — www.flickr.com/photos/username
• LiveJournal — username.livejournal.com
• Technorati — technorati.com/people/technorati/username
• Yahoo — http://openid.yahoo.com
• WordPress.com — username.wordpress.com

All you have to do is put the URL listed into the OpenID box on the BlayneSucks log in page.  Furthermore, I have enabled Gravatars for users.  A Gravatar is a globally recognized avatar.  Basically, it’s a picture that follows your comments around from blog to blog.  You can sign up at http://en.gravatar.com/.

I hope you enjoy the new site look and feel as well as the ability to comment!

I decided to read Franz Kafka’s The Trial after seeing it used by Dan Solove to describe the no-fly list. I knew very little about the book before reading it.  I knew that it was about a man named Joseph K. who was arrested and then, despite his best efforts, completely unable to understand or control the resulting course of events. I also knew that it was one of the books that has motivated the term “Kafkaesque.” What I didn’t know was that it does all of these things in a “meta” sense as well, which has made the the book extraordinarily rich and entertaining to read.

What do I meant by my use of the word “meta” to describe The Trial? Anyone who has read Gödel, Escher, and Bach would probably understand what I mean if I re-phrased it by saying that The Trial is a Strange Loop. However, for those who haven’t read GEB, I will try to explain in more detail, particularly since this is the most delicious part of the book. The Trial was originally written in German, with which I have some experience, but I am not capable of reading a book at this level in German. Thus, it had to be translated. Every time I read a translated book I feel it tug at me a little: Am I really reading this as it was intended? This tugging adds a level of disorientation, which is really the entire point of The Trial.

Of course, Kafka wasn’t intending that everyone read a translated version of the book. In fact, Kafka may have never intended anyone to read the book. It was published posthumously and perhaps against his wishes. Now, there is perhaps some debate over whether or not there was a moral obligation to publish, but that debate is still going today. Thus, it is, in some sense, a book over which not even the author could exercise complete control.

Since it was published posthumously, it was never finished. There is an obviously incomplete chapter that simply ends. There are unfinished chapter fragments and deleted sections published as appendices in the printed version of the book that I read. In fact, literary scholars aren’t entirely sure about the order the chapters should appear. All of this only adds to the confusion and disorder that is depicted throughout the book.

If you haven’t read any of Kafka’s books, but you’re interested in learning a little bit about why Kafka is such an important author, then I would recommend The Trial as a good starting point. I enjoyed the “meta” aspects of the book, but there are certainly a lot of other themes that are enjoyable, including the role of women in the book, which was the biggest surprise for me. I won’t talk about it here though. You’ll have to discover it for yourself.