Infrastructure Protection - Extended Discussion

In a previous post, I discussed free market vs regulatory approaches to protecting critical infrastructure. A classmate of mine rebutted with the following:

I agree with your point about the inability for government regulation to be able to keep up with the pace of change. It seems difficult for government just to coordinate on the overlapping jurisdictions between federal, state, local, and tribal. I agree with your point that the market solution requires an adequate understanding of risk and then disclosure of the risk. For publicly traded companies, there is the concept of the independent financial audit. Yet after the failures of independent financial audit with Enron and other spectacular financial failures -- the quality of independent financial audit under Sarbanes-Oxley was called into question. These audit failures were after years of development of accounting principles and overview of various accounting committees. I am not questioning the value of such oversight, just that the market is not as efficient as hoped. If financial risk can be hidden (which is possibly more detectable with a money trial), I can only assume that threat risk can be manipulated. 

With any of our choices, we are trying to promote awareness and behavior. I am never sure which of our choices is most likely for a person to act for the behavior of the greater good instead of their own self interest. The economist Milton Friedman ascribed unanimity as "the political principle that underlies the market mechanism....There is only one social responsibility of business-- to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." (Friedman 1970, p. 6). If I apply Friedman's concepts, it would seem that businesses would mitigate risks with an economic impact of severe consequence and high probability. Risks of lower consequences and probabilities could be an unnecessary expenditure of shareholder wealth. Yet, social responsibility might require the mitigation of far more risk than just high consequence and probability, especially for others that are impacted by degradation of the service. With the development of the risk management framework, there is a high dependence on adequate classification of risk for severity and probability. I am not not sure how far market forces alone drive us to a common understanding of risk, a willingness to disclose risk, and then adequately prepare for risk. I feel that we miss the point about resiliency when we don't look at the economic environment as a whole. 

I responded:

I agree that there are network effects that cause businesses to sub-optimize their risk reduction strategy relative to the general social good. The relief for that effect is transparency and competition. Why? Because customers can also take part in the risk reduction. Going back to my example, I found that Time-Warner Cable (TWC) did not think it worthwhile to have power back up for their telephone service. This was contrary to their assertions when they sold me the service. First of all, laws enforcing transparency would have helped me make a different/better decision. Second, as a consumer, I am now making plans to shift my local telephone service back to twisted pair from AT&T. If that system suffers an outage, but not TWC, I still have communications back up. I can Skype for telephone, if necessary, and my cell system is also a back up. By truly understanding my own risks, I build the redundancy myself. My complaint about much of the provisioning of critical infrastructure is that we are overly dependent on a regulated utlity model. The lack of choice, combined with slow response times of government bureaucracy, combine to limit end user participation in risk reduction. Ultimately, there is no utopia, no perfect solution, but competition and transparency come as close as we can get. 

I also liked seeing that I wasn't the only member of the federal work force familiar with Friedman.

Reference: Friedman, Milton. (September 13, 1970). "The Social Responsibility of Business is to Increase its Profits." The New York Times Magazine. New York, NY.

California Looking for New Ways to Steal Worker's Money

Well, that's not what Jerry Brown and legislative Democrats claim their bill would do, but how can we doubt that wouldn't be the effect.  Here is what they are claiming, as reported in the SacBee:

The goal is to create a savings program in which workers who have no access to a pension can count on a guaranteed rate of return for contributing about 3 percent of their salary.

Sounds laudable? But who will control the money? Who will guarantee the rate of return?  According to the article, private insurers would, because:

Money would be pooled in a state-administered fund that would be professionally and conservatively managed and invested. 

So why should anyway be nervous. All those billions will be tucked away safely in the care of the state. The governor wants to make sure that the money is safely managed by his cronies appointees.

Before committing himself to the concept, Brown sought and received the requirements placed in SB 923 – that lawmakers take a final vote before implementation and that a board overseeing the program be increased from seven to nine members, five of whom would be gubernatorial appointees or officials of his administration. 

That reassures me. And the record of CalPers in managing pension benefits for state employees has been so sterling, with 99% of private funds outperforming it, I don't see why private businesses are having misgivings.

My immediate suspicion when I read this news is that the state intends to commingle these funds with the state pension monies.  The Appeal-Democrat reports that Kevin De Léon, the main sponsor of the bill, has previously gone on record for calling for all private sector workers to be folded into CalPers. Might this be step one, and the next step taken under the disguise of "efficiency?" Of course it will. The state Democrats are determined to drive every private business out of the state. I wonder who they think will pay the taxes to pay for their hare-brained schemes.

Weekend Music Chill

I'm reprising one of the few newer bands that I really like, The Black Keys.  This video shows them in concert performing Lonely Boy.




One more band with a lot of energy is the White Stripes. Here they are with The Hardest Button to Button.

Odds and Ends and Programming Note

First off, I am sorry that I have chosen to not post of late.  I am taking an online class in information assurance and infrastructure protection.  The material is new to me and requires more work than some previous classes I have taken.  I thought I might catch up on some of the

First off, my article on Romney not making the case provoked reaction that the polls aren't to be trusted.  Fellow tea party friends said the same thing privately in email, so this wasn't just for public consumption.  I am not so sure.  I think the election is winnable, but believe that Romney still has work to do.  Apparently Romney supporters in Ohio think the same thing, don't trust the polls that is.

As if to reinforce the point about the importance of the election to our future freedom, the Obama administration is trying to seize control of cyberspace after it scuttled efforts at cybersecurity infrastructure protection legislation moving through the Senate. The WSJ is spot on with this editorial lambasting Obama's dictatorial tendencies.

According to leaked versions of the draft, the executive order would impose security standards for 16 critical industries. The adoption of these "voluntary" (ironic quotes intended) and probably costly measures could be a condition for private companies to win federal contracts. A DHS-led cybersecurity council will decide who's "critical." Twitter and Facebook could easily end up on the list along with electricity providers or financial services firms.The Obama push is a case of the medicine being worse than the disease. DHS bureaucrats are no match for the dynamic and fast-changing world of technology. Any static standards they draw up will be an invitation for teen hackers or Chinese government cyber rogues to get around them.

The issue is directly related to the course I am taking. The professor asked our opinion about the general approach that should be taken to infrastructure protection; I made the case for minimal governmental intrusion, of course. We'll see if I pass.  A little of what I wrote on the infrastructure is at the bottom of this post.

The referee problems in the NFL are a real headache, in my view, because they are tarnishing the brand name of the sport.  Part of the entertainment value derives from the belief in the fair outcome on the field according to set rules.  This appeals to our sense of fairness.  One of our key criticisms of everything Obama does is that he appears to rig the rules to favor particular individuals or favored groups.  Examples include San Francisco getting an inordinate number of exemptions from the ACA, green energy loans to favored donors, unions getting a good deal in the automobile bailout but teacher's pension funds in Indians getting the shaft, to name three that by themselves should prevent the President's re-election.  It baffles me that the public is so nonchalant about his obvious abuses of power.

The President is required by law to submit a report to the Congress on how sequestration cuts to defense will be implemented.  He finally did so two weeks ago.  But I have it on good authority that no real detailed planning has been performed regarding the cuts to defense.  I am of two minds about the defense cuts.  They sound scary until one realizes they are spread out over ten years and if the Congress ever passes a budget that a future President signs, the cuts are done.  However, they might be applied indiscriminately in ways that harm future readiness.  McCain has been highly critical of the President for failing to act on the issue, but the real issue is in the details, not yet revealed.

The supermassive black hole of incompetence of Obama's administration is again revealed in the Drudge headline that al Qaeda was behind the attack in Benghazi, as admitted to by Sec'y of State Clinton.  But clearly if al-Qaeda hadn't been enraged by that infernal video . . .  What a bunch of incompetent fools.  al-Qaeda humiliates the U.S. on 9/11 no less, killing an American ambassador, no less, and Obama's foreign policy approval rating sits in the mid-40s?

I thought it would be great to live in a district with a competitive Congressional race.  I was wrong.  Every time I turn on the TV its either one of two very boring ads: Scott Peterson, pension bum who cost the taxpayers billions or Brian Bilbray, 20 year career politician and lobbyist.  Really, that is the sum intellectual content of the ads.

From my paper about infrastructure protection approaches.

A personal example of a catastrophic failure is illustrative. On September 8, 2011 a widespread power outage left 5 million residents in the southwest U.S. without power (Gustafson). The Federal Energy Regulatory Commission reported on the key root causes as follows:

The loss of a single 500 kilovolt (kV) transmission line initiated the event, but

was not the sole cause of the widespread outages. The system is designed, and should

operated, to withstand the loss of a single line, even one as large as 500 kV. The affected line—Arizona Public Service’s (APS) Hassayampa-N. Gila 500 kV line (H-NG)—is a segment of the Southwest Power Link (SWPL), a major transmission corridor that transports power in an east-west direction, from generators in Arizona, through the service territory of Imperial Irrigation District (IID), into the San Diego area. It had tripped on multiple occasions, as recently as July 7, 2011, without causing cascading outages.

. . .

The flow redistributions, voltage deviations, and resulting overloads had a ripple effect, as transformers, transmission lines, and generating units tripped offline, initiating automatic load shedding throughout the region in a relatively short time span. Just seconds before the blackout, Path 44 carried all flows into the San Diego area as well as parts of Arizona and Mexico. Eventually, the excessive loading on Path 44 initiated an intertie separation scheme at SONGS, designed to separate SDG&E from SCE. The SONGS separation scheme separated SDG&E from Path 44, led to the loss of the SONGS nuclear units, and eventually resulted in the complete blackout of San Diego and Comisión Federal de Electricidad’s (CFE) Baja California Control Area. During the 11 minutes of the event, the WECC Reliability Coordinator (WECC RC) issued no directives and only limited mitigating actions were taken by the Transmission Operators (TOPs) of the affected areas. (FERC)

In this case, we have a single system, the electrical transmission grid that has is characterized by relatively few nodes producing electricity. The economic model is that of regulated utility; but regulation was inadequate to the task of preventing the ensuing chaos.

My personal experience of the event was that there were of course cascading effects. My home phone service failed because TimeWarner Cable's system lacked local electrical generation back up for its transmission system, according to operators with whom I discussed the incident later. My neighbors had twisted pair telephone from AT&T, which remained operating and allowed me to call my parents-in-law to ascertain their well being. Some cellular services continued to work as well, although with difficulty as it appeared that traffic congestion on the cellular networks caused problems. Our local supermarket gave away frozen food that was going to spoil. My neighbor across the street owns a restaurant and he transported as much valuable food from the restaurant to his home freezer powered by a portable diesel generator. It made me believe that the regulatory model for the electrical system is partially to blame, because it discourages multiple, small microgeneration to be attached to the grid.

The electrical power ecosystem, characterized by a single provider in each geographic area, suffered a catastrophic failure without graceful degradation. However, the unregulated voice infrastructure had more success in handling the failure because competing technologies were available.  

Romney - Not Making The Case Yet

Which is not to say that Obama should be re-elected.  I closely watch the polls, but they are still probably bunk this far out from the election.  Some polls show Obama pulling away, others show a very tight race, which should bode well for Romney.  Significantly, no one is showing Romney pulling away.  National polls matter only in the overall trend of the race anyway, and the trend is flat. The swing states are where the election will be won and lost and here are Obama's numbers according to Purple Strategies polling data on Friday as reported on RCP:

48% - Ohio
47% - Florida
46% - Virginia
48% - Colorado
48% - North Carolina

I care little about Romney's numbers in these states; this polling shows that every one of these states are winnable if he makes the case between now and election day.  With Obama unable to crack 50%, and uncertainties over voter turnout, this the good news.  The bad news is that it is still tight.  What is lacking on Romney's part has been the presentation of a coherent set of policies, or at least a broad outline, that will convince the American people that he knows where he wants to take us.

What is left between now and November 7 are the debates, and events.  It is possible that an unknown event could throw Obama off course, but if he can survive the debacle in Benghazi, I'm not sure what it would take for the public to turn on him in significant numbers.  In the debates, Romney needs to go on the attack, but also to blunt Obama's criticism that Romney is pushing George Bush's policies on the economy.  The problem for Romney is that absent a clearly articulated vision, he can't defend against the charge.  Fortunately, there is an easy answer.  He picked Paul Ryan as his running mate, he needs to launch a vigorous and full throated debate over the future of medicare and why Ryan's plan will save it for future generations of seniors.  As voters have become more educated, I believe this will win enough votes from seniors to defeat Obama; because his lack of leadership can be tested.  All Romney has to then ask is "Why have you failed to produce a plan for Medicare in your four years in office, other than gutting its funding to support your so called health care reform, which didn't really reform anything?"

I look forward to that debate.  Romney has shown he can go for the jugular in debates against fellow Republicans; will he do so against Obama?

Weekend Music

Another song I can't get out of my head, along with some fun video from South Park.




And here is another Beck fave: Two Turntables and a Microphone.

Leaking Stuxnet

The Supermassive blackhole of incompetence that is the Obama administration has unleashed potential serious repercussions because of administration leaks that U.S. was behind the Stuxnet virus.  First, a little background.  The Stuxnet virus is an extremely sophisticated malware payload that targeted Iranian enrichment centrifuges.  What is little known, is that the there appears to be a "man in the loop" to direct the damage that the virus causes.  The virus was first spread through the use of infected USB thumb drives.  (Safety tip: there are multiple reasons you should never use these devices, ever.)  Then the virus spreads to other computers on the infected network and calls home.  It is looking for the signature of a software package used to program a Programable Logic Controller (PLC).  The virus is clearly sending information to a home computer and receiving updated instructions from a "man in the loop."  In this case the the individual controlling the virus went looking for software designed specifically to control the Siemens PLCs to control uranium enrichment centrifuges. You can view a simplified explanation of the process without reference to Iran or Siemens at Symantec.

The man in the loop is a big problem for the U.S., along with the leak that the U.S. was involved in the attack.  From the WaPo:

A damaging cyberattack against Iran’s nuclear program was the work of U.S. and Israeli experts and proceeded under the secret orders of President Obama, who was eager to slow that nation’s apparent progress toward building an atomic bomb without launching a traditional military attack, say current and former U.S. officials.

Is there any doubt that the political purpose of the leak was to enhance the administrations cred with regards to being tough on Iran?  This is the worst administration for politically motivated leaks I have ever seen.  What might be the consequences?

The subject of cyberwarfare is a little murky now, but I have no doubt that the general laws of warfare apply to cyberspace as well.  The Stuxnet attack seemed targeted to a military capability of Iran, avoiding civilian collateral damage.  By itself, the scrupulousness of the attack would make me believe that it was a U.S. product.  However, by leaking our involvement, the administration has left us open to a reprisal by the Iranians, against which we might have little recourse under international law.  International law provides for a proportional response to an attack by a foreign power; especially if that attack lacks sanction under any reasonable rubric of self defense or U.N. resolution.  If Iran respond with a cyber attack of their own, we have no recourse, not even through deniability, because the Iranians can claim proportional response.

Further, the disclosure puts U.S. personnel at risk who were involved in the construction of Stuxnet.  As a legal matter, the keys stolen from a Taiwanese firm that allowed the USB to hijack portions of the Windows operating system, were stolen illegally.  The admission makes the U.S. government a de facto partner or perpetrator of a criminal act that we have signed treaties to prevent.  Conceivably, a lawsuit to prise open information regarding the construction of the virus could follow.

To be clear, I support covert means to derail the Iranian nuke program.  But, the leakers should be punished, except that they have probably been sanctioned the President himself, for selfish political gain.  Damn the country, he needs re-election.  

In case you wanted the basic explanation:

 

About that 47% - UPDATE

Mitt Romney is now facing trouble for saying that Obama support is at 47% and that somehow this is correlated to the percent of those who pay no federal income taxes. I watched the hastily arranged press conference where he sought to defend himself on the issue, and I was not that impressed. I want Romney to win the election, because Obama is a super black hole of incompetence; but his response isn't getting it done.

Here is the speech I wanted to hear.

The 47% of Americans who don't pay federal income taxes are suffering under this administration, nonetheless, and they pay other kinds of taxes, as well. Many of them are paying medicare taxes for a system that is going broke under the President's neglect. His tax cheating Treasury Secretary's response to Paul Ryan's plan to save Medicare, was to say exactly nothing, except to say we don't like yours. Mr. Obama's lack of leadership in this area is appalling. These folks often pay social security taxes as well. Again, the President's party has not a single idea to deal with the coming insolvency of this system. They portray our party as curmudgeons, when it is their stonewalling of reform that has these programs on the fast track to bankruptcy. These folks also pay tax on gasoline, and as the price of gas has skyrocketed so has the gasoline sales tax they pay. They are paying for the administrations hostility to drilling for oil and gas as well, denying them the good jobs a broad recovery would bring. They are paying more for food as the administration's policies, in conjunction with the Federal Reserve's, drive up the prices of the necessities of life.

Most importantly, many of those who aren't paying federal income taxes would love the chance to make enough money to be able to do so. But their opportunities to earn more money have been wrecked because this Obama economy has crushed the creation of millions of new jobs. I believe, and our party believes, that those Americans on food stamps, welfare and unemployment would gladly trade all that in for a decent job. It is the tragedy of this administration that they cannot. I hope to convince many of Obama's current supporters that we can do better, that we must do better if the nation is to restore its hope, its confidence and its place in the world. Thank you and God Bless America.

UPDATE

Anonymous adds the following spot on commentary.

Totally agree. Still, something is wrong. Nothing being done on the fiscal cliff, Sebelius is not in jail, we were attacked again on 9/11, employment is still 8+, Obama is partying in Vegas and on Letterman and it's Romney's campaign in trouble? What alternative universe am I in?

Not so Happy Constitution Day

Happy Constitution Day, citizens. Enjoy it will while we have it. See yesterday's post.

From last year's post:

It's a good day to reflect on the structure of our constitution. Specifically, the fact that the document was intended to constrain the federal government through a number of mechanisms. First, Congress was only granted enumerated powers. Note the amplification of the Tenth Amendment:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

It was never intended that the sweep of federal power would be unlimited. Progressives have attacked this notion for well over a century.

First They Came for the Coptic Christians

If this photograph from the LA Times doesn't send chills down your spine as a freedom loving American, I don't know what will. Nakoula Bassely Nakoula is going "downtown to answer a few questions," for the crime of criticizing Islam. The authorities claim its to talk about possible parole violations, but everyone knows the real truth. Fortunately, this is being well publicized and dissected by far sharper minds than mine. A few tidbits follow. From Glenn Reynolds.

And sorry, claims that this was just a routine probation matter don’t pass the laugh test. They’re just pure hackery.

By sending — literally — brownshirted enforcers to engage in — literally — a midnight knock at the door of a man for the non-crime of embarrassing the President of the United States and his administration, President Obama violated that oath. You can try to pretty this up (It’s just about possible probation violations! Sure.), or make excuses or draw distinctions, but that’s what’s happened. It is a betrayal of his duties as President, and a disgrace.

Eugene Volokh on why this will lead to more American deaths.

Say that the murders in Libya lead us to pass a law banning some kinds of speech that Muslims find offensive or blasphemous, or reinterpreting our First Amendment rules to make it possible to punish such speech under some existing law.

What then will extremist Muslims see? They killed several Americans (maybe itself a plus from their view). In exchange, they’ve gotten America to submit to their will. And on top of that, they’ve gotten back at blasphemers, and deter future blasphemy. A triple victory.

Would this (a) satisfy them that now America is trying to prevent blasphemy, so there’s no reason to kill over the next offensive incident, or (b) make them want more such victories? My money would be on (b).

And this is especially so since there’ll be plenty of other excuses for such killings in the future. It’s not like Muslim extremists have a clearly defined, unvarying, and limited range of speech they are willing to kill over (e.g., desecrating Korans and nothing but). Past history has already proved that; consider the bombings and murders triggered by the publication of the Satanic Verses.

Fellow SLOB Temple of Mut's headline is also spot on: Supermassive Blackhole of Obama Incompetence Sucks in First Amendment Today, the last vestige of dignity, reason and sanity left the Obama administration, as authorities swarmed down on independent film-maker, Nakoula Basseley Nakoula, whose cinematic achievement is falsely being accused of spawning the horrendous outbreak of terror activities targeting Western embassies and interests. Say goodbye to the First Amendment, as it has just been sucked into the Supermassive Blackhole of Obama Incompetence!

Martin Niemoller famously said:

"When Hitler attacked the Jews
I was not a Jew, therefore I was not concerned.
And when Hitler attacked the Catholics,
I was not a Catholic, and therefore, I was not concerned.
And when Hitler attacked the unions and the industrialists,
I was not a member of the unions and I was not concerned.
Then Hitler attacked me and the Protestant church --
and there was nobody left to be concerned."

I thought the making of the film Innocence of the Muslims was badly done, in poor taste, mildly offensive and something I would never do. It was not and never should be considered a crime. Nakoula's rights as an American are being abridged by a President adored by the left; the same left that is always making a big stink about free speech. Where are the defenders of free speech on the left now? The DailyKos is in full throated defense of the actions of the administration; they have totally sold out to Obama's would be totalitarianism. The claim is that this was a probation violation because Nakoula can't use a computer or the internet without permission from his probation officer. Do we have any doubt that such provisions are routine and routinely ignored, except when convenient not to? Regardless, it is only the act of mocking the story of Mohammed that has this guy in trouble; how is that not a step towards repression. From moveon.org, crickets on this subject.

If we can't defeat Obama it may take decades to undo the damage.

Weekend Music Chill

This week's music is offered without commentary.

Κύριε δίδαξον ἡμᾶς προσεύχεσθαι.

Letting Mohammed Out of the Closet - Hate and Intolerance from the AP

Dean has a great wrap up of the brouhaha over the maker of the "Innocence of Muslims." I wanted to look at their reporting from a different angle. The AP asserts as fact that the film denigrates Islam. They base this on the report that the film depicts Mohammed as a homosexual and a pedophile. One question. Is the AP rendering judgement that accusations of such predilections are denigrating? What happened to gay pride? Why aren't they celebrating Mohammed being let out of his closet? Why aren't we celebrating the diversity of Islamic culture, because we have learned that its founder was gay? I think the AP needs to rethink their assertions. They are flat out hateful and intolerant.

Meanwhile I saw a post from The American Muslim web site that I sort of agreed with until I thought through the moral equivalence being advanced. Judge for yourself.

Based on what was initially reported, it seemed that a group of extremist Jews produced and distributed a hateful film insulting Islam, Muslims, and the Prophet Muhammad to further their pro-Zionist agenda. This was FALSE, it was extremist Christians Muslim religious extremists drew attention to the film to further their own agenda. Extremist Christians promoted the film and held a “trial of Prophet Muhammad” event to gain publicity for themselves. Egyptian political extremists used the film to stir up the masses to promote their political agenda. The extremist political organization Al Qaeda used the film as further proof of their propaganda effort to say that the U.S. is at war with all Muslims to gain support for their cause. And, all of these extremists succeeded in provoking ignorant or extremist Muslims into carrying out acts of terrorism (hirabah). Update: Al Qaeda, or one of their affiliates actually seems to have been the perpetrator of the attack on the Libyan Embassy

The only figure that I know of in the Torah, the New Testament, or the Qur’an, who would be honored by the actions of any of these extremists is Satan.

These religious and political extremists use religion as a cover to attempt to justify actions that can only be called evil. They want to provoke a reaction, as it feeds into their narratives, or they believe they can use the suffering of others to aid their own political cause. All of the extremists have more in common with each other than they do with the majority of decent people of their faith.

There is some truth to what Sheila Musaji is saying, except for this. How can one draw a moral equivalence between offending someone's religion and suffocating and murdering an innocent person and dragging his body through the streets?

The Most Dangerous Easing Yet

And I don't mean Obama's mideast policy, whatever that is; I can't figure it out. I am talking about the Fed's latest Quantitative Easing (QE3) which was announced today. This is the most dangerous move yet by the Fed, as Bernanke has committed to buying up mortgage debt. From Reuters:

The Federal Reserve said it will expand its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month in a third round of quantitative easing as it seeks to boost growth and reduce unemployment.

Mortgage debt? This seems a straight up political move designed to lift the stock market and prop up the housing market prior to the election. I summarized the futility of zero percent long term interest rates as explained by David Einhorn some time ago. The method by which the Fed pumps liquidity matter little. A quick recap:

• Low interest rates make it harder for retirement eligible to actually retire, they are getting little return for their money.
• Interest rates are a measure of the time value of money. By setting it at zero, there is no urgency about investment decisions.
• Because those who live on fixed savings, have less to spend, they spend less, harming the economic recovery.
• Investment isn't increasing at zero rates, because once rates fall below the rate of inflation, the only consideration is whether the principle can be paid back. If inflation is at 2.5%, then reducing interest rates from 2.5% to 1.5% or even zero percent will have no effect on investment, so there is no offset to the fact that savers have less to spend.
• Zero rates allow otherwise worthless loans to appear to be performing, as the borrower can make nominal payments. But it delays the necessary economic unwinding necessary for real economic recovery.

Even George Will got the memo. In today's WaPo he quotes Esther George of the Fed's regional bank in Kansas City:

Very low interest rates discourage saving, punish retirees living off interest-bearing assets and, George says, “incent people into riskier assets.” These include commodities, farm land (for the first time on record, prices of cropland in George’s district have risen more than 20 percent for two consecutive years) and equities. Fed Chairman Ben Bernanke evidently thinks that driving up the stock market will quicken the animal spirits of the affluent 20 percent who own 93 percent of equities, and this “wealth effect” will spur economic activity, eventually benefiting others. So, the interest rates Barack Obama favors are a form of the trickle-down economics he execrates.

But of course real unemployment stays stuck at historic high levels. Consuming more and more jelly donuts isn't giving us more energy, its just making us sick. Of course, gold, oil and stocks all moved higher on the announcement. Those assets have in common that they are related to tangible goods whose value stays constant while the value of money falls.

Here is the price of gold as anticipation of the easing built:

The price of gold is the inversely proportional to the real value of money but prices in the expected future value of money as well. Gold is not bullish on the dollar. As the fed has performed other market interventions over the last five years, look what has happened to the price of gold.

Asymmetric Retaliation

Yesterday, I wrote that Islamic jihadists are only capable of killing a few of us; so in today's news, they did. The killing of the American ambassador to Libya is not really because of alleged blasphemy to (((:~{> . (There, I drew an emoticon of the bearded one, is that going to provoke a riot too?) These attacks were long planned. So much for providing aid to overthrowing Qaddafi and continuing aid to Egypt even after the Muslim Brotherhood effectively took power.

What's to be done? On the TV, there was much talk on the left of bringing the perpetrators to justice and on the right of destroying al Qaeda. I don't think either course of action really helps. Killing the perpetrators, while noble, only provides martyrs and is a tricky proposition. Look how long it took to get bin Laden and he was the world's most wanted. No one is in the mood in this country for another war with al Qaeda on any front. And frankly, grotesque and heinous as the killing of Ambassador Stevens was, it is not cause for war by itself.

However, we have the means to retaliate in ways that can be effective in stopping the spread of this sickness. In most of the s***holes where these terrorists abide, they are suffered to live because the governments are unwilling to do much about their presence for political reasons that time does not permit me to analyze. The proper response is to cut off the flow of money to the government and the leaders of the government. In most cases, this means taking action to stop their oil exports. This can be done by blockade, sabotage of pipelines, destruction of shipping ports or any number of other means. My favorite would be to put Hugo Chavez in charge of Libya's oil industry, but that would be TOO obvious a ploy. The economic forces are likely to topple the regime or seriously inconvenience those in power. Further, it would have the salutary short term effect of driving up oil prices. The political clamor to increase drilling in this country and to approve the Keystone XL pipeline would result in more jobs. I could see a President Romney unleashing a jobs explosion if he chose such a path. This sort of thinking could work against the Iranians as well. To date, we have been too timid about short term economic shocks. But gasoline is already at $4 per gallon with little effect on the President's re-election chances. It's time to take on these terrorists and their enablers by denying them the wealth they need to stay in power.

9-11 In Perspective

We had a 9-11 Remembrance Ceremony at work today. It was very moving. It featured the reading of a letter from the Civil War, as well, which was apropros even if from another era. A young lady even fainted. Another, woman sang America the Beautiful at the end.

Still, I was uncomfortable. I am an American. I find the attention paid to this day of tragedy somewhat out of place in a country whose contributions to the triumph of freedom are unrivaled in the history of the world. I wore a white shirt and a purple tie today, with purpose. As citizens of a great land, we are the equals of the ancient Kings of Rome, who founded a dynasty that established the rule of law throughout the known world, albeit if without democracy. I believe our contributions will eventually be judged the greater, if we stay the course with a commitment to liberty. Ultimately, the events of 9-11, however great they loom in popular imagination now; will be judged a trifling. The attackers are not in possession of a rival ideology that can threaten ours, unlike the communists and nazis who preceded them as our enemies. Islamic jihadists can only threaten to kill a few of us; we are the only threat to our own way of life.

It is time to put those events behind us. Perhaps the completion of a new structure on the site of the twin towers will lay to rest the feelings of fear engendered by the attacks. We should not forget, but we should put those events in perspective and get on with the business of remaking the world through our example of freedom and strength. America the Beautiful? Yes, but also America the Liberator.

P.S., I have only visited Manhattan once, but I loved the place. Filled with bustle and purpose, it is in a sense, the capital of America, because it is the center of American business. I recommend the visit to any American.

Note from Today's 9-11 Prayer

Our pastor prayed today on the subject of the 9-11 attacks. One part of his prayer caught my attention:

There will always be those who have chosen a way of life that is incapable of producing the great wealth and benefits of our society. Out of their envy, they seek to tear down that which they can not build themselves. This is part of why we are called not to envy others. For out of that envy springs anger and hatred towards our fellow man.

Amen.

Our attackers claimed to have attacked us in the name of Allah. Most Muslims claim that the attacks were a perversion of their faith. Fair enough. However, I have never heard a reasonable theological argument as to why they believe this is so. Christians would say that such an attack on the innocent could not be performed at God's direction, because, even though God is all powerful; He chooses to be bound by his promises and his word, the Bible, which forbids murder. Further, He is a God of reason; and the attacks on the innocent were unreasonable. I echo the questioning of the current Pope, who asked if Muslims believe that God is capable of ordering murder or even idolatry from his followers, because his will is all powerful. I have yet to see a cogent reply. With so much destruction in the current age done in the name of Islam, I think we are owed an explanation. (I know that horrific deeds were performed in the name of Christianity in past ages. But our answer is that those were contrary to God's law and we repent of them and actively abhor them in this age. I am asking for the philosophical or theological basis for the Muslim claim that the hijackers operated outside of the bounds of their religion.)

Extra Weekend Music

I stumbled across this tune and just get it out of my ahead. One of the classic voices of country music, June Carter singing "Will the Circle Be Unbroken." Apropos for Sunday, I suppose.

Johnny Cash and June updated the song years later, but I prefer the original. Here is a more update, gospel choir style version.

God and Democrats in Charlotte

There was a great hoopla over the lack of reference to God in the Democratic platform. They felt just embarrassed enough to make a motion to restore it to the platform; but not before further damage was done with voice vote that was nothing short of fantastical, with significant numbers of delegates voting No.

I wouldn't normally comment on something like this, because, though I am a Christian, I believe that I can best reach people by couching my arguments in non-religious terms. However, that the Democrats can barely be bothered with faking a respect for the institutions that underpin the nation's real strength, the culture of its people, is symptomatic of their problems. Jonathan Haidt would agree. They have become completely unmoored from the history and traditions of our nation. Rejecting those traditions is necessary for a cult of statism. Both communism and fascism were hostile to religion for similar reasons. Religion is a powerful counterweight to a culture of omnipresent government power, because it posits a moral relationship between mankind and God that predates government and exists outside of the reach of government. This is why dropping God was more significant than I first believed. It is a sure sign that the Democrat party is becoming more comfortable with adapting the philosophies and methods of religion hating regimes. Such regimes were the worst oppressors the planet has ever known. The treatment of God in the platform is symptomatic of their war on religion; attempting to silence the speech of religious institutions and limit their sphere of influence.

Ryan Gets It Right on Medical Marijuana

From the AP:

Republican vice presidential nominee Paul Ryan says the federal government shouldn't interfere with states that have legalized medical marijuana.

The Wisconsin congressman tells KRDO-TV in Colorado Springs that he personally doesn't approve of medical marijuana laws. But he says that states should have the right to choose whether to legalize the drug for medical purposes.

In response to a reporter's question, Ryan said: "It's up to Coloradans to decide."

I love his answer. Ryan is consistent on principle here. He recognizes that this isn't a federal issue and the same logic that leads to federal jurisdiction and harassment of medical marijuana use leads to arguments for the constitutionality of the ACA. I hope the younger generation that voted so enthusiastically for Obama, partly on the basis of this issue, now notes the aggressive stance the President's attorneys have taken against local pot dispensaries. Why don't I ever the occupiers complain against the Prez over this?

Weekend Music Chill

Harkening back to a day when the Democratic and Republican platforms with regards to Israel and the MidEast were nearly identical, here are two songs that are just a bit before my time; but I really like them, regardless. First, its Skeeter Davis, one of the first country female stars, with End of the World.

And here are The Nashville Teens with Tobacco Road.

Obama's Speech

I only listened to a little bit of Obama's speech. It's a fine speech, if you hadn't lived through the last four years. He makes the case for doing things that he didn't do in his first term and takes credit for achievements his administration actively sought to prevent. For example, reduced dependence on foreign oil came about due to U.S. drilling on private lands and the use of fracking; all while his administration closed off new drilling on public lands and sought new regulation on fracking. The disconnect from reality is stark. He claims he will magically create new manufacturing jobs and raise fuel standards, by the mere stroke of his pen. At what cost to the rest of the economy and by what means is not his concern. His speech is filled with a firm belief that government can solve every problem, despite his protest that it cannot; when the size and scope of government are the actual problems. The regulation he champions has neither helped main street nor tamed Wall Street, but has left all of us with the tab for Too Big To Fail. And government itself, by becoming too big, will fail too, if Obama gets a second term.

He offers a vision of dependency on a government. I believe that we the people aren't interested in a life where government solves our every problem; because they are wise enough to know that isn't possible, courageous enough to take responsibility for their own success and ingenious enough to meet their own challenges. No one is proposing ending the safety net or eliminating all regulation as he suggests, we merely suggest that net has become too heavy to be of much use and that his regulators have been captured by the regulated.

So put aside the fantasy of his speech and ask yourself if he has made America better off with his time in office. Has he kept his promises to bring a new tone to Washington? Has he focused on growing the economy? Have his regulations and laws helped the insurers, hospitals, drug companies and Wall Street or have they helped the middle class? Was the auto bailout accomplished legally? Did he back his cronies with stimulus cash? Did Brian Terry die because of guns his AG let walk to Mexico? Are a greater percentage of Americans working? Judge Obama by his deeds, not by the lofty fantasy he delivered tonight.

US Labor Force Participation Rate data by YCharts

Questions for Carl DeMaio

Most of the savings from pension reform come from changes in retirement pay rules for current employees. Why did the sponsors include 401(k) style pensions?

Illegal street vendors have drawn criticism and rightfully so. However, would you veto a bill that places additional restrictions on legal street vendors who conform to current laws?

City employees might actually benefit from a 401(k) style plan that they control. Your rhetoric suggests that you are locked in battle with city employees. Do you plan to change your tone to help persuade some of them to vote for you now that pension reform has passed?

I am supporting Carl DeMaio for Mayor, and want to ask him these questions, but have gotten no answer from his campaign.

Obama - Not Making the Case

This election should be a landslide against the President, because he has failed to make the case for his own re-election. His argument for re-election boils down to this, the other guy is worser. What his surrogates say about the case is a weak argument indeed.

• Economy: Democrats: He saved the economy. The facts: Massive unemployment with record non-participation in the work force. I need not say more. But I will since the President gave himself a grade of incomplete on the economy. Reminds me of that happening to my son once. In the GPA calculation, it counted the same as an F.
• Health care: Democrats: Pre-existing conditions covered and everyone gets health care. The facts: Not everyone will be covered. 2000 pages of rules and regulations to destroy health care innovation was the necessary price to cover pre-existing conditions? I think not.
• Auto Bail out: Democrats: We saved Detroit. The facts: Bankruptcy laws flouted, Indiana teachers, and Delphi non-union pensioners get screwed. The auto industry would have survived a normal bankruptcy; a new bankruptcy by GM and Chrysler is now more likely.
• Wars: Democrats: Obama inherited two wars and has been a brilliant commander in chief. The facts: Afghanistan is not going well. We got involved in Libya without Congressional approval. We've decided to whack Americans overseas.
• The Budget: Democrats: Crickets. The facts: The Senate has not passed a budget since Obama took office. Obama's own budget was defeated unanimously, his only bipartisan accomplishment.
• Medicare: Democrats: We are saving medicare. The facts: Medicare is going broke and more quickly than you think. Without some plan like Paul Ryan's, Democrats will run medicare into the ground.

Obama has complained that Romney is not specific and has offered the same old plans of George Bush, which sounds sort of specific. To quote The Economist: "One question, Mr. President . . . just what would you do with another four years?" Still haven't heard a good answer.

National Debt Crossing $16 Trillion

Congratulations kiddos, the national debt clock to the right will likely cross the $16 trillion mark in the next few days. Happy trails. To quote the Joker in the Dark Knight, "It wasn't cheap. You oughta know, you bought it!" Yeah, we the people bought it by constantly re-electing feckless Republicans and Democrats who cared more for their own re-election than for the country. We were happy to vote for politicians who in turn voted for a never ending expansion of the federal government, when the means to pay for it was never going to materialize. Republicans have been guilty as well; but I know this: re-electing Democrats, including Obama, will make the problem larger and bigger and give us less time to deal with it.

Critical Mass and Mob Rule - San Diego

The news that a police officer was struck in the head by a screw driver yesterday, likely thrown by a bicyclist participating in Critical Mass, isn't really surprising to me nor to many others. While the goals of the Critical Mass bike movement appear laudable, raising awareness of the unfriendly nature of the urban street environment to bicycles, the mob nature of the event and flaunting the rule of law inevitably lead to instances of violence. I am sympathetic to the goals of the movement. When I lived in Vallejo, I biked to work every day, but suffered a severe shoulder injury because of the way railroad tracks were placed at the entrance to Mare Island. Another officer I worked with at the time was struck by a car on his bike ride home.

However, the lawlessness of the event and the holier-than-thou attitude of the participants is going to continue to lead to violence. Another incident occurred on June 29:

A stroll on the Mission Beach boardwalk turned ugly for a couple in their 50s Friday night when they got roughed up in a scuffle with some of the 500 bicyclists who once a month celebrate their right to ride by participating in what’s called a “Critical Mass.”

The couple were heading north on Ocean Front Walk after dinner and drinks when the cyclists came speeding up from behind. As one rider narrowly brushed past the wife, she shouted an obscenity and told him to slow down, her husband said Tuesday. The rider returned an obscenity of his own.

Then, the husband said, a second cyclist shoved his wife to the ground face-first, splitting open her chin.

It may be true that the pedestrians could have behaved better, but the violence initiated by the cyclists is irresponsible in the crowded situation. In response to this news article, Joe Cunha writes in a letter to the editor of the UT:

I have watched as many of these bicycle riders harass pedestrians, tourists, taxi drivers and anyone else who happens to be in their way.

I have watched these riders circle and terrorize the drivers and occupants of cars that have tried to get through an intersection while having the right-of-way, and especially if the driver has the audacity to honk their vehicle horn.

I am ashamed of what tourists to our city must think of think of this unlawful and disgraceful display of bicycle gang activity; I am ashamed of our vaunted police department for tolerating this anarchy; and I am especially ashamed of the bicyclists taking part in the ride that think this activity is within their rights.

It appears that the rule of law and its cousin, repsect for the rights of others, are being routinely violated by this movement. It matters to society, because the combination of lawlessness and mob mentality inevitably leads a minority of the participants to engage in threats and violence. If Critical Mass wants to claim they are a protest and be afforded police protection and have streets cordoned off, they should use the normal procedures for such requests. Instead, they violate the rights of others on the cheap. Further, the police are doing nothing about it.

A website critical of CM summarized it well:

Their mantra is that drivers need to “learn to share the road.” To anyone with half a brain this is laughable coming from a mob of people totally unwilling to share the road with anyone – even with pedestrians — who, by the way, are much more eco-friendly than a bike. If you are a cyclist, you are not even in the same league as a pedestrian when it comes to eco-friendly. However, as you will see, hypocrisy and CM go hand in hand.

Cyclists involved believe that it is their right to ‘take over’ the roads to show all the other simple-folk the true light about how evil they are for happening to be in their car the day these guys decide to put on their event. Of course, many of these people will be in cars themselves the next day, or even the day of the event, but once again the hypocrisy is lost on them. It is not uncommon for participants to actually bring their bikes to the event trapped onto their cars or in the backs of trucks!