The Long View 2009-03-27: The Government of Exotic Space
John J. Reilly continues to offer up bon mots. Here is John sounding a bit like Patrick McKenzie on cryptocurrencies:
The space in which the financial system functions is not physical but mathematical. The various markets are an ensemble of virtual spaces, some of which have grown larger and more elusive in the last 20 years. Lovecraftian disturbances can form in these regions and strike the real world, as the recent assault by Cthulhu on the world's financial centers has demonstrated.
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Here's a rule of thumb for the new regulatory regime: you can no more dump arbitrarily large amounts of risk into the financial system than you can dump arbitrarily large amounts of mercury into Lake Ontario.
And this comment on misunderstanding 18th century governments:
This brings to mind an aspect of the original intent of the federal constitution which is often overlooked. We must recall that 18th-century governments were amazingly bossy, to a degree that would have been intolerable a hundred years later. Business competition, employment relationships, religious establishment, even clothes and personal deportment were governed by law. It was a world a dense with rights and privileges, personal and public, whose holders were vexatiously keen on enforcement. The United States was born in a condition of maximal government rather than small government. The situation differed from 20th-century totalitarianism in that the later density was an expression of arbitrary political will, while the earlier density was traditional and, dare we say it, organic.
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The political evolution of the United States has largely been the tale of the growth of the competence of the federal government relative to the states, simultaneous with the loosening of constraints on personal behavior by local authoritarianism.
There were good and bad things about this process. The moral of the story is that persons in need of a libertarian template are mistaken to look to the Founding Fathers.
The Government of Exotic Space
Very few people, I'm happy to say, asked my opinion of the wrap-up to the Battlestar Galactica series that aired last Friday.
Having seen the original Battlestar series when it aired in 1978, I was resistant to seeing the most recent one, which began to appear in 2004. In time, I found I could take the series in small doses. I still say the series as a whole suffered from the narrative bloat that began to infect ambitious television drama after the Twin Peaks incident.
The climax of the series was clever enough: everybody gets to Earth, even if they have to do it by renaming a planet, and the Story Begins Again. There were a couple of problems with the final episodes, though. The show made a big deal out of the leave-taking of the decrepit Galactica to free the little semi-cylon girl, to good dramatic effect. A particularly touching moment was when the old doctor tried to volunteer for the suicide mission, and the admiral gently rejected him because he was too valuable to the fleet. But a few hours later in story-time, after the girl had been rescued, the Galactica and the fleet are back together anyway, in orbit over the Earth of 150,000 years ago. The goodbyes were all a waste. Moreover, so were the doctor's skills. The fleet had determined to adopt a primitive mode of life on the new world, to break civilization's cyclical violence of man versus machine. In that case, the doctor is just an old guy with hypertension who is unlikely to live more than a few weeks on the African veldt.
And here is a really geeky nit to pick: Lucy the Austalopithecene, the common ancestor of all human beings today, is identified with the little girl who was rescued. [Actually, it was later pointed out to me that I was inattentive: the little girl was identified as Mitochondrial Eve] Fair enough, but Lucy was not by any stretch of the imagination a human being and did not live 150,000 years ago, which in any case is still far too early for homo sapiens. [Mitochondrial Eve did live about 150,000 years ago, but not, one suspects, happily.]
I do look forward to the prequel movie, however.
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The space in which the financial system functions is not physical but mathematical. The various markets are an ensemble of virtual spaces, some of which have grown larger and more elusive in the last 20 years. Lovecraftian disturbances can form in these regions and strike the real world, as the recent assault by Cthulhu on the world's financial centers has demonstrated. Secretary of the Treasury Timothy Geithner has, at long last, proposed to extend a measure of public order to these exotic regions where malevolent entities breed unchecked:
In testimony before the House Financial Services Committee Thursday, Mr. Geithner focused on measures to limit systemic risks. That includes creating an "independent" agency to monitor major institutions or payment systems whose failure could present a destabilizing effect on the economy. There would also be tougher rules over hedge funds, private-equity firms, and venture-capital companies over a certain size, which would be required to register with the Securities and Exchange Commission. Large hedge funds could be regulated even much more intensively.
The plan also calls for more restrictions on the operations of money-market mutual funds and tighter controls on the over-the-counter derivatives market, pushing for the standardized use of this market through a centralized clearinghouse.
No doubt there will be ways in which these proposals can be improved, but at least they are something to the purpose. Persons who argue that such measures constitute an unprecedented extension of government authority are like people who would complain if a new continent connected to Florida arose in the Atlantic and the federal government sent in magistrates to police its settlement. Here's a rule of thumb for the new regulatory regime: you can no more dump arbitrarily large amounts of risk into the financial system than you can dump arbitrarily large amounts of mercury into Lake Ontario.
Frankly, we don't want financial institutions to be doing credit-default swaps and securitizing debt anymore than we want them running Ponzi schemes. The danger is not that the new regulator will stifle these activities, but that, because of political influence, it might allow too much of them to continue.
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Fans of the CW series Supernatural will be pleased to know that "Ghostfacers" is not just the name of a parody reality-television series that appeared in an episode of Supernatural, but of a parody reality-television series with its own website.
No, I'm not paid to do viral marketing. I'm just very gullible.
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But what about the resistance to the Obama Administration's unexampled enormities? That was the question Hugh Hewitt put to Mark Steyn:
HH: Let’s talk a little politics. I was emceeing a dinner on Monday night in D.C. Bobby Jindal spoke, Mike Pence was very enthusiastically received, John Boehner, the conservatives are sort of rising in Washington, D.C. And then today, Mark Levin’s brand new book [Liberty and Tyranny: A Conservative Manifesto] is number one on Amazon.com. Do you see a sort of a consolidation and a reenergizing of the conservative movement, as Karl Rove sees, in this deficit and spending issue, Mark Steyn?
MS: Yeah, I think you can say that. I mean, there’s certainly a big movement here that feels the last thing we need at the moment is bigger government and more taxes. And it’s interesting to me that these tea parties, for example, that the media have not covered, if you put 20 ACORN activists on a bus and send them around the Connecticut addresses of AIG vice presidents, 45 camera crews will follow those 20 ACORN activists. But thousands and thousands of people turn out for these tea parties, and they’re not being covered. There’s a real grass roots movement that’s sort of getting here, and it just needs a kind of manifesto to coalesce around, I think ten basic points of why we don’t want to go in this horrible European socialist direction Obama’s taking us.
Citizen Steyn manfully spouts the party line. However, yesterday I saw him being interviewed on the Glenn Beck show. The "host" of any such show is, of course, a stage persona, so I hope I am not being uncharitable to point out that the persona for this host seems to have been crafted by people who think that Rush Limbaugh's persona is too cerebral. Steyn did not actually say, "Shut up, you gibbering idiot," but I sense he is not entirely pleased with the quality of the personnel of the new populism.
Movement Conservatism has put itself in a position where it must argue, not just that deficit spending leads to self-dealing among the political class and that dirigiste planning often produces suboptimal results, but that any macroeconomic policy must fail. That is a very bad bet.
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And then there are the sovereignty resolutions to which Glenn Reynolds has alerted us. Apparently, about half the states have passed resolutions of one sort or another to the effect that the federal government has overstepped its bounds and should stick to its constitutional knitting.
This brings to mind an aspect of the original intent of the federal constitution which is often overlooked. We must recall that 18th-century governments were amazingly bossy, to a degree that would have been intolerable a hundred years later. Business competition, employment relationships, religious establishment, even clothes and personal deportment were governed by law. It was a world a dense with rights and privileges, personal and public, whose holders were vexatiously keen on enforcement. The United States was born in a condition of maximal government rather than small government. The situation differed from 20th-century totalitarianism in that the later density was an expression of arbitrary political will, while the earlier density was traditional and, dare we say it, organic.
In any case, it was a condition that the original 13 colonies had no interest in disturbing. The federal constitution, and the Bill of Rights, were drafted with a view to preserving the plenitude of government authority within each state. The political evolution of the United States has largely been the tale of the growth of the competence of the federal government relative to the states, simultaneous with the loosening of constraints on personal behavior by local authoritarianism.
There were good and bad things about this process. The moral of the story is that persons in need of a libertarian template are mistaken to look to the Founding Fathers.
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