A pound? Half a pound? A few ounces? Or would you not eat any chocolate at all, once I made the announcement? After all, you’re going to have free chocolate for the next three years—seems silly to gorge on chocolate today, when you can have as much as you’d like tomorrow, or next week, or whenever you want over the next three years.
So free chocolate for the next three years? Great! . . . uh, only not right now, thanks very much: I’m kinda full.
But then what if I said to you, “Chocolate is free now—but I’m definitely going to raise the price in the near term. In a month, chocolate might be free—or then again, it might cost $1,000 an ounce. So get some while you can, because tomorrow, you never know!”
Well, obviously, to such an uncertain outlook, you’d go out and buy some chocolate now—because tomorrow, it might well be unaffordable.
In fact, it seems quite obvious that if you don’t know when I’m going to raise the price of chocolate, you’ll probably wind up buying—and eating—more chocolate than if it was free. A paradox? Sure—but true.
In point of fact, if the chocolate is free, you might not eat any chocolate at all. Every time you make the decision as to what to eat, you might well find yourself repeating the same mantra: “Chocolate is free—I can have it any time I want. So I won’t have any now.”
This is the problem Ben Bernanke and the Federal Reserve currently have—and it’s their own stupid fault: They have promised to maintain interest rates at effectively 0% until at least the end of 2014—they have in fact announced this zero interest-rate policy (ZIRP) as the hallmark of their strategy to reignite the economy—
—but then they’re surprised when businesses aren’t borrowing more. They’re surprised when lending is in fact contracting. They’re surprised when the American economy doesn’t start borrowing—and thus growing—like crazy.
So the American economy obviously doesn’t benefit from ZIRP. In fact, it stagnates because of ZIRP.
These facts are from the CIA—and they are undisputed:
• Infant mortality rate in the United States: 6.06 per 1,000 live births.
• Infant mortality rate in France: 3.29 per 1,000 live births.
• Average life expectancy in the United States: 78.37 years (75.92 for men, 80.93 for women).
• Average life expectancy in France: 81.19 years (78.20 for men, 84.54 for women).
• Total expenditure on health care in the United States: 16.2% of GDP (2009).
• Total expenditure on health care in France: 3.5% of GDP (2009).
• Expenditure on health care in the United States per capita: $7,517 per year (2009).
• Expenditure on health care in France per capita: $1,148 per year (2009).
So . . . to make it clear: France has a Socialist-Commie health care system, while the United States has “the best health care system in the world”—
—and yet the French live longer, have an infant mortality rate roughly half the United States’, and yet still manage to spend less than Americans on health care.
A lot less—in fact, the Socialist-Commie Frogs spend less than a quarter of what the United States does, as a proportion of GDP.
And when you break it down per person per year? The French spend less than one-sixth what the United States spends—yet live longer, and have a lower infant mortality rate
These are the facts—and they are undisputed.
So! One of two things is going on: Either the French—as a people—are simply better than Americans; made of finer stuff; simply superior physical specimens.
A true story: A fifty-ish woman I know was diagnosed with breast cancer. Dutifully, she and her husband contacted their insurance company to start the process of paying for her medical bills.
But lo and behold, the insurance company started dragging its feet—then tried to claim the woman’s breast cancer was a “pre-existing condition”.
That she had breasts in fact was a “pre-existing condition”—a “pre-existing condition” she had had since she was fourteen.
But the cancer? That was brand new.
The woman and her husband started the usual, insurance company-designated complaint process—which they quickly realized was a deliberate rigamarole, designed to get them spinning their wheels without receiving any money from the insurance company.
So they did the smart thing: They contacted lawyers. Not “a” lawyer, but a team of lawyers—four in fact, including a partner in a name law firm in her city.
This squad of lawyers had a morning meeting with the insurance company people.
In less than a single business day, the insurance company started paying up. In the two years since this little “episode”, as the cancer stricken woman calls it, she and her husband haven’t had a single problem with their insurance company.
This is America today.
The insurance company didn’t act im-morally so much as a-morally: They made the cold-hearted calculation that it wasn’t worth their while to pay off the woman’s justifiable claim—until she showed up with a squad of lawyers. Then the insurance company made another cold-hearted calculation: That it was cheaper to pay off her legitimate claim than to fight her lawyers.
So they paid: Not because they were contractually obliged to—as they were—or because it was the right thing to do—as it was. No: They paid off her claims because it was cheaper than trying to wriggle out of their obligation.
As most people know, Wikipedia will go offline on Wednesday—in protest over the Stop Online Piracy Act (SOPA) and the Protect Intellectual Property Act (PIPA). The Financial Times has a brief but fairly comprehensive overview of what’s going on here.
A lot of people online—myself included—are against both SOPA and PIPA. And for one, I fully support what Wikipedia is trying to do: Shut itself down—the sixth most visited website on the planet—and thereby get those 234 million daily users to read its statement opposing SOPA and PIPA.
Knowing the editorial judiciousness of Jimmy Wales and the Wikipedia team, I have no doubt that, one, their opposition has been carefully thought through; and two, this unprecedented step of shutting down the site is extraordinarily serious—and thus emphasizes how seriously Wales and his team take the measures in SOPA and PIPA.
In other words, Wales and his team aren’t fucking around—this is a big deal.
But I couldn’t help wondering: The U.S. government must also recognize that this isn’t a temperamental teenager throwing hissy-fit—Wikipedia is seriously respected in the online community. Wikipedia’s shut-down is a big black eye to SOPA and PIPA—and to the people who are pushing it, especially Barack Obama’s White House.
So what if the U.S. government were to decide to take over Wikipedia? Prevent it from going offline? With the excuse that they’re taking it over and keeping it online “for the good of the American people”?
Let’s face it, Wikipedia is incredibly important to the Internet. Most of us go to Wikipedia first, if a quick Google search doesn’t get us the info that we need. And whenever we want to get the skinny on something complicated, Wikipedia is often the only place we go to.
Thus we are all particularly dependent on Wikipedia: It shapes our knowledge base much more profoundly than we either realize, or would probably like to admit. The fact that it doesn’t advertise, and depends instead on donations alone, gives it even more credibility, and to our eyes makes it that much more trustworthy.
But Wikipedia is an incredibly small, incredibly fragile operation. It’s yearly budget is less than $20 million per year—nothing, when compared to, say, the bailout of Citi.
Just as it declared Citi, BofA, Goldman and JPMorgan “Systemically Important Financial Institutions”, what’s to stop the U.S. government from declaring Wikipedia a “Systemically Important Website”?
And rather than throwing money at them, what’s to stop the government from revoking Wikipedia’s non-profit status? Declaring it a for-profit—and then using the IRS, say, to take it over? Or better yet, prevent it from shutting down by delaring it “Educationally Essential Website”—and putting it under the aegis of the Education Department? Take it over “for the good of the country”? And then maybe start shading and editing the various Wikipedia entries in order to give a “more balanced version of events”?
“Paranoid”, you say? Well, it’s not paranoia if they’re really coming after you.
Famously, Senator Joe Lieberman brought out security, terrorism, and all the other bugaboos when he argued for the U.S. government to have the ability to shut down the Internet—infamously concluding with the line that, “China, the government, can disconnect its Internet—we need to have that here too.”
State control of the Internet: That’s what Sen. Lieberman meant when he said, We need to have that here too. There’s really no other way to interpret what he said.
What if Lieberman or someone of his delicate sensibilities were to say something like, “Wikipedia is a Systemically Important Website. So we need to be able to take it over—for the protection of the American people and to stop them from being ‘misinformed’.”
Don’t think it can happen? Paranoid, am I?
Then why are Jimmy Wales and his team at Wikipedia shutting themselves down for a day? For kicks?
When I was about 15 or 16, I read Solzhenitsyn’s The Gulag Archipelago. The book is a history of the Soviet concentration camp system between 1918 and 1956, based on the testimony of actual prison inmates, of which Solzhenitsyn was one—and it had a profound effect on me, both politically and as a future writer.
But most of all, it taught me something crucial: What is legal is not necessarily the same as what is just.
Because you see, the Gulag system of forced-labor and concentration camps was completely legal: Proper laws had been properly passed, which allowed innocent people to be shipped off to their doom in a properly legal process. Even before the Nazis came up with the Wannsee Protocol, Lenin and his Soviets had perfected the idea of using the law to rape justice and the rights of human beings.
We today look at such abuses of the law as perversions typical of authoritarian and totalitarian regimes—
—but what about in a democracy? What about in our democracy? What about in America?
Recently, the United States’ Congress duly and democratically passed the National Defense Authorization Act (NDAA), which President Obama duly and democratically signed into law.
The NDAA makes it legal for the executive branch to unilaterally declare anyone, including an American citizen, a terrorist suspect. And on merely the strength of this suspicion—not an act, not even a plan, but merely on a suspicion—an accused person can be “detained” indefinitely.
Nine weeks after its bankruptcy, the general public still hasn’t quite realized the implications of the MF Global scandal.
Once he looks down, then he’ll begin to fall.
My own sense is, this is the first tremor of the earthquake that’s coming to the global financial system. And how the central banks and financial regulators treated the “Systemically Important Financial Institutions” that had exposure to MF Global—to the detriment of the ordinary, blameless customer who got royally ripped off in its bankruptcy—is both the template of how the next financial crisis will be handled, and an accelerator that will make the next crisis happen that much sooner.
So first off, what happened with MF Global?
Simple: It went bankrupt—because it made bad bets on European sovereign debt, by way of leveraging positions 100-to-1. Yeah, I know: Stupid. Anyway, they went bankrupt—which in and of itself is no big deal. It’s not as if it’s the first time in history that a brokerage firm has gone bust. But to me, the big deal in this case was the way the bankruptcy was handled.
Now there are several extremely serious aspects to the MF Global case: Specifically, how their customers were shut out of their brokerage accounts for over a week following the bankruptcy, which made it impossible for those customers to sell out of their positions, and thus caused them to lose serious money; and of course how MF Global was more adept than Mandrake the Magician at making money disappear—about $1 billion, in fact, which still hasn’t turned up. These are quite serious issues which merit prolonged discussion, investigation, prosecution, and ultimately jailtime.
But for now, I want to discuss one narrow aspect of the MF Global bankruptcy: How authorities (mis)handled the bankruptcy—either willfully or out of incompetence—which allowed customer’s money to be stolen so as to make JPMorgan whole.
From this one issue, it seems clear to me that we can infer what will happen when the next financial crisis hits in the nearterm future.
