Hey! Randy

Archive for July, 2012

The Fed at 50

Posted by heyrandy on July 27, 2012

Fifty Years of Managed Money, Elgin Groseclose, 1965

2013 will be 100 years since Congress passed the Federal Reserve Act.  The Federal Reserve (the Fed) has professionally managed our money ever since. The author give the history of the first fifty years of the Fed. Given what the author says, Congress should have stayed home.

The author’s contention is the Fed has done nothing to help the country. The Fed’s policies have steadily devalued the American dollar. The Fed has been the source of funding for all the bad programs this country has produced. The Fed is evil.

The Fed’s proponents pitched the idea to the American public and its congress as a panacea. It would regulate the money supply so there would be no booms or busts. All would be steady. The Fed failed. The Fed did worse than fail. It caused most of the problems. Instead of a panacea we got a toxic nostrum.

The Fed claims that it is independent of politics. This is a lie. The author shows that the Fed was a political tool since its creation.

There were only a few voices who spoke against the Fed’s creation. Many politicians fell for the sales pitch. Most of the politicians just went along. So did President Wilson. He was clueless about economic matters. Most Presidents are. They just believe what they were told.

The Fed is coming under attach. There have always been Fed critics, but recently there are many more. The Fed is getting a lot of publicity, all bad and all deserved. Fed critics are no longer considered members of the tinfoil-hat set.

This is a good book to read if you are just getting started in Fed studies. It is especially valuable in tracking the course of public opinion about the Fed. The Fed has come a long way since “the Fed what?” was the average American’s knowledge of the Fed. This book is amazing in that it was published. There was very little thought given to the Fed in 1964. That has sure changed. Get this book along with The Creature from Jekyll Island and you will be able to give the Fed a proper birthday party next year.

Posted in Book reviews | Tagged: | Leave a Comment »

I Saw It

Posted by heyrandy on July 26, 2012

Yesterday morning at work we had a communications meeting. Usually these things are a lot of dull graphs showing the trends of things most of us do not care about nor could influence if we did. Still, it is time in an air-conditioned conference room with comfortable chairs.

Today was a little different. We had a video before we saw the charts and graphs. It was only a few minutes long, but it was packed with the banal. The video was a pitch for someone’s success-you-can-obtain books. We were all trapped. The video began with a computer-generated image of a human head with the brain visible. The image was on the screen when we all entered the room. There were the usual jokes about this being “your brain while working here.” Once the meeting began the image began to rotate around the spinal axis. You can do this when there is no neck. I would liked it better if the image rotated around its nose. The message of the video was “your brain is your most valuable  tool, so be positive.” Now you know as much as I do, but you escaped the meeting.

There was no voice to the video, just text and music. The text was in sentence fragments. I guess this builds suspense. It built tedium. The video was not well received: there was total silence when it ended. This is good, since it made the meeting shorter (we were getting close to pre-lunch slowdown.)

The only thing I found interesting in the video was its claim that both baseball pitcher and batters do better if they have a positive attitude. Team A’s pitchers with great attitudes verses Team B’s batters with great attitudes must mean that both groups do better. And opposing gears can turn in the same direction. I am sure the books explain this antimony.

I do not know if this video was the boss’s idea or if he was merely obeying the You Will Show This edict. Whatever the reason, the video did not improve the charts and graphs. I’m positive!

Posted in business | Tagged: , , | Leave a Comment »

Do Better

Posted by heyrandy on July 24, 2012

Dedication and Leadership, Douglas Hyde, 1966

It tells us something that this book has been continually reprinted since it first appeared. Hyde has a lot to say. He is blunt. That is good. The book is based upon a series of lectures he gave to a Roman Catholic leadership conference. Hyde tells us that the lectures were to examine why the Catholic church was weak in areas where the Communists were strong.

Hyde had been a Communist. He was editor of the official communist newspaper of Britain. In 1948 he resigned, and he and his family joined the Roman Catholic Church. It is this background that enables Hyde to show the differences between the Communists and the Christians and why the Communists are so much better at working toward their end.

Hyde points out that the Communists are always a small group, but they have much more influence than their size would suggest. This is not a small point. Revolutions are not movements of the masses. It is usually only a few people who carry off the revolt. Most people just watch.

Hyde tells us that Christians can learn a lot from the Communists’ methods. There is not any conflict between the Christianity and Communism in most areas of method. The big difference is in effectiveness.

Communists are committed to their cause. The superficial followers do not rise to positions of responsibility in the Communist Party. The sacrifices are great, the hardships unending, and the rewards meager. Hyde says that the Party can get this level of commitment because it asks for it. The Church does not. In getting the big commitment, the Party also gets the many small commitments. If Hyde teaches us nothing else but this, he has done the Church a great service. It is on this point that the book begins to show its true colors. The book is indicts the Church.

Communists have clear goals. Their big one is to convert the world to Communism. The have innumerable smaller goals to work toward the grand end. They do this by instilling their ideology into their people. They are effective at this. They use their human resources well.

The Communists spread their ideology through their study groups. In these groups the teachings are broken down into small sections and pitched at a level appropriate for the class members. Hyde says that the dropout rate in Communist training classes is low. This is largely due to the teachers making the material interesting. It also helps that the people want to learn. The theory is translated into practice. It is not empty ideas without action. “How did you apply this week what you learned last week?” is a frequent question posed to the students. Communism affects every area of the student’s life, and the Party demands that it does so.

Hyde gives us an example of leadership developement within the Communist Party. Jim was a most unlikely candidate for leadership training. Nothing about him said “Leader.” Yet the man became very effective because of the step-by-step training that the Party used. New recruits are given something to do. It is usually a thankless job such as selling Party newspapers or pamphlets. There are little sales but some harassment. Still, it binds the new member to the Party. What do new church members do? Usually nothing. The Party constantly stretches each of its members. The Party expects, demands, them to grow. Jim was constantly given new assignments in areas where he was not comfortable. He grew. This tells us something about the leadership of the leadership.

Being the best at what you do is important to the Communists. Hyde notes that it is illogical, but it is true that those who are very good in one area have their opinions listened to by men in another area. If you know what you are talking about in one area, you must know what you are talking about in another area. He is right. So be the best.

Communists are famous for their use of propaganda. Others have followed this technique. Hyde points to the poster wars in an election in Italy. The Communists produced first-rate posters, but were effectively countered by their political opponents who used equally good posters. Much Christian work is second-rate, Hyde says. He is right, again. We have all seen it. Hyde is not saying that Christian need to be deceptive, but why not make the truth attractive? With a little forethought and some more effort much could be done to improve the quality of the Church’s media.  Hyde quotes Booth: “Why should the Devil have all the good music?”

Self-criticism is not too often practiced in the Church. The Communists practice it, fiercely. How did this advance the Party’s goals? What could we have done better? Common questions in the Party’s analysis of its efforts. Hyde gives an example of how the local Party accomplished its outward goal but failed in advancing toward the goal of spreading Communism. In another example Hyde show how the Party succeeded in spreading Communism but failed in its outward goal.

Hyde’s book is well worth the effort. It is simple and straightforward. All can profit from it. He has much to teach us. Let’s learn it.

Posted in Book reviews | Tagged: , | Leave a Comment »

Misplaced Trust

Posted by heyrandy on July 20, 2012

In Banks We Trust, Penny Lernoux, 1984

We take banks for granted. Make a deposit, make a withdrawal. Ho hum. All very  ordinary. Perhaps not. Lernoux takes us on a global tour of banking. It is a wild ride. There is so much corruption in the international banking system one wonders how everyone is not  in jail. Lernoux tells us that too.

Modern banking is built upon an image of stability. Most people consider bankers staid, dull, boring. Behind the bland façade there are some real cowboys. Some of these cowboys were thrown from their horses and hit the ground hard.

Banks are interconnected. They lend money to each other. They form partnerships in large loans. This causes lots of problems. The big problem is self-delusion. The bankers see what they want to see. The criminals know this.

Lernoux begins the tour with an obscure bank in Oklahoma, Penn Square Bank. It was not very large. It was located in a strip mall. It took the big banks for a ride. Penn Square was in the heart of the “oil patch.” It was supposed to know the oil business and those in it. The large New York based banks used Penn Square as a middle man in making loans to the oil men. Penn Square was corrupt and incompetent. The big banks did not do any checking. If they had, they would have found out about Penn Square’s fast dealing.

This error of not checking things was repeated throughout the book. The banks did not even check on themselves. Safety was a minor concern. What mattered was growth. Make loans, lots of them. The managers obeyed. The banks suffered. Even the small, local banks did not do the appropriate checking. Many of the small banks went into partner withe the giant New York banks in loans to third world countries. The small banks assumed that the big boys knew what they were doing.

Lernoux tells us of the international drug dealers using U.S. banks to launder the drug money. Gone are the days when crime profits were carried by people using suitcases with hidden compartments. The amounts of money are just to large to be transferred by anything but a bank. How to get a bank to coöperate? If they don’t do it willingly (many did because the profits for the bank were huge), just buy the bank. Or start one. It is amazingly easy for a foreigner to buy an American bank. It is also very easy to start one.

Most of these banks were located in Florida, especially Miami. Miami was the hub of through which passed most of South American produced drugs and through which most of the drug profits were channeled to other parts of the world. The business was so lucrative that many of the world’s major banks opened branches in Miami so they could get in on the action.

It was not all drug money. The CIA was involved. It uses banks to move money around the world to fund its actions. Some banks did so much Agency business that they were almost themselves Agency operations. If the drug money was dirty, this money was filthy.

The author also tells us of the problems involving the Vatican Bank. It is a story of secret P2 Masonic lodge, corrupt Italian bankers, bad business deals, and a strange death. The principle person was an Italian banker, Roberto Calvi, who was found hanging from a London bridge. Calvi’s bank collapsed. He was in London hiding because he feared for his life. His death was ruled suicide, but the circumstances are very strange.

It is in the area of lending to governments that the banks did their most foolish business. The amount of money owed the banks by South American government was so large that the banks were in danger of failing if the governments defaulted on the loans. But the American taxpayer came to the rescue. The banks were saved to practice moral hazard another day.

After reading the book I will never again see banks in the same way.

Posted in Book reviews | Tagged: , | Leave a Comment »

Gladiators for Food

Posted by heyrandy on July 17, 2012

The Hunger Games trilogy Susan Collins, 2008

America has collapsed. Civil war erupted among the thirteen regions. The region in the Rockies has subjugated twelve and obliterated the thirteenth. Panem (bread) is the new capital. Every year the twelve surviving regions must supply a male and a female child 12 to 18 years old to take part in the Hunger Games. The rules of the games are simple: only one person of the twenty-four comes out alive. The rules of the larger game are also simple: submit or be destroyed.

The books are about more than a neo-Roman Empire. The books are about the role government plays in ending freedom and how people cope. The books are a libertarian tale of free markets, resistance to tyranny, and the will to survive. The Hunger Games are an annual contest by twenty-four champions, but the real game is every day living. Everyone in the twelve districts plays. This is the real struggle for survival. Unlike the Games staged in the capital, the real games are not coerced. The real games are voluntary exchanges between free parties. In the real games everyone can win. The real is the underground, the staged is the fraud.

It is about power. The capital to maintain its sybaritic way of life must suppress the districts. It does this through transfer of wealth and draconian laws. Almost everything is illegal. No weapons, no free speech, no dealings outside of the government’s approved methods. It is a total state. Poverty is the rule.

But the novels show us that people do manage to survive. There is a black market operating openly. An electric fence encloses the community ostensibly to keep out the wild animals but really to keep the inmate confined, but a few hardy souls sneak under the fence when the power is off. It usually is, a shot at the ineptitude of a government-managed electric company.

My favorite character is the petty bureaucrat Effie (for effete?) Trinket. Vain (she wears a pink wig), self-centered, and ambitious, she would be dangerous if she were smart. All she cares about is a promotion to a better district. There is a distinct theme of regional prejudice. The people in the government do not care about the masses. “The élite are neat; the masses are ….” Trinket is more concerned about the drunken behavior and bad table manners of the district’s only living winner than the barbarity of the games. It is all so good and necessary. She cannot see the evil that she is a part of. She is part of the enforcement tier, useful for the time.

The novels also have allusions to the problem with genetically modified organisms: killer hornets and part-human dogs. Science fiction is a minor element, but evident in the arena.

Like all things competitive, there is betting. This is one of the reasons for the games. Influential, behind-the-scenes gamblers drive some of the action. The games are broadcast in full detail to all the districts. Cameras and microphones hidden in the arena make sure that every word and action is heard and seen by the masses. It is the circus part of the bread and circuses of ancient Rome. When the interest in the games wanes, the game-masters stir things up by introducing fire and changing the weather. Boredom is not allowed!


Posted in Book reviews | Tagged: , , | Leave a Comment »

Where Have All the S&Ls Gone?

Posted by heyrandy on July 9, 2012

The Best Way to Rob a Bank is to Own One, William Black, 2005

This book is an insider’s look at the savings and loan crisis of the 1980s. Black was an attorney working for the Federal Home Loan Bank Board. He saw first hand the machinations, cowardice, and corruption that went on within the industry and its regulators.

This book is an example of capture theory. Capture theory states that an industry regulated by the government will eventually capture the agency charged with regulation. In this specific case most of the capture was by one man: Charles Keating.

Keating was such a political force there is a group of five U.S. Senators named after him: The Keating Five. The five men, four Democrats and one Republican, ran much political interference for Keating. This enable Keating to keep looting Lincoln Saving and Loan. The Five have never been held accountable. One of the Five, John McCain, even got the Republican presidential nomination. Who says discipline themselves? Maybe Jim Wright.

Wright, Speaker of the House of Representatives and therefore the second most powerful person in Washington, was largely owned by Keating. This ultimately lead to Wright’s resignation in disgrace.

Black spends a good deal of the book writing about the head of the Bank Board. This key person did the most to perpetuate the problems with the industry. His actions were always politically driven. This shows the one of the problems with regulation. Aggressive enforcement would cause the offenders to play their political cards. This would cause great problems for the Chairman. Even if the Chairman could withstand the political heat, he knew that his future in government was dead. He also knew he would have no job chances in the industry. So it was a case of play along to get along.

The title of the book is a reference to what Black calls “control frauds.” These are the men who control the company they are looting. Most of these men were major stockholders in the company. So why did they steal from themselves? Because that was where the money was. They got much richer much faster by fraud.

Corrupt accountants and real estate appraisers abetted the fraud. They overvalued land, recorded losses as profits. Big accounting firms gave glowing reports about their clients. The auditors and appraisers had play along to get repeat business. An honest appraisal or an audit that exposed the wrong doing would result in the appraisers and auditors not doing any more work for the control frauds.

The author has much expertise in fraud, but he show great ignorance in the real fraud that is modern banking. He says the S&Ls were insolvent because of their bad loans. He overlooks the real problem that comes from fractional reserve banking. All banks are insolvent. All banks are subject to catastrophic runs. When you lend out at thirty year notes but support those loans with demand deposits, you have a fraud.

The author further excuses government bank insurance as not being part of the problem. Apart from the moral hazard issue, the control frauds used their political might to keep the Bank Board’s insurance fund low. This was to prevent the Board from taking over too many banks or even the large ones.

Not answered by the book is why the Bank Board did not refer the obvious cases of fraud to the Justice Department. Black does not record anyone being prosecuted for not doing this.

The book’s inside view and first hand accounts make it a valuable resource for historians. The rest of us see it as a fine example of how the government can make a big problem into a disaster.

Posted in Book reviews | Tagged: , , , | Leave a Comment »

What’s Your Price?

Posted by heyrandy on July 7, 2012

The Child Buyer, John Hersey, 1960

Would you sell your eight-year child? No? You have not met Mr. Wissey Jones, child buyer. He persuades people to sell. It is always easy. How? He meets their price.

Jones buys prodigies for a large, mysterious company engaged in a long-term government project. The company uses the child’s brains to solve problems. The company connects the children to a network so they each can work on a small part of the larger problem. The connection is an irreversible process.

The novel is in the form of hearings before a state senate committee. The committee comprises three senators and a counsel. All the other characters in the novel are witnesses. The buyer arrives in town in a conspicuous way: atop a folding motorcycle and dressed in gaudy clothes. He does not normally work by stealth, but he does when he needs to.

There is much initial resistance to the idea of buying a child. The buyer overcomes it by appealing to the secret needs of the opponents. Some people, such as the child’s father, agree readily when approached. The rest take time to be won over.

The book is a story of how people sell out. They sell for very little. They justify their actions by saying that it is the right thing to do. The book is a study in self-deception, rationalization, and cowardice.

What of the senate committee? They are little more than dimwitted hacks. One is obviously so, the others are more subtle. All the characters in the book have agendas. They all are fighting for the petty kingdoms. They are all corrupt even before they are bought off. The only character that comes across as a reasonable person is the prodigy’s friend, the local juvenile delinquent.

The book should cause us all to consider where we will compromise. Would any of us take a bribe? We would all shout “No!” But when the offer is put in a more subtle manner we may be tempted. The mother, the last holdout, consented for a set of books, maid service, recorded music. The woman can sit in her hovel listening to Mozart and reading Aristotle while the maid cleans both rooms. What is your price?

Posted in Book reviews | Tagged: , | Leave a Comment »

They Saw What They Believed

Posted by heyrandy on July 5, 2012

Political Pilgrims, Paul Hollander, 1981

Can intellectuals be naïve? When it cames to evaluating communist countries the leading western intellectuals were quite naïve. This has long been a great mystery. How could such intelligent people be so blind to the horrors and misery of the communist countries? Hollander gives us a very believable answer.

Hollander begins his book with a struggle to define intellectual. It is not easy. There is no test. He defines an intellectual as a person interested in ideas. This is a broad but workable definition. What kind of ideas? Preconceived, it turns out.

Hollander avers that it was dissatisfaction with Western culture, the willingness to believe the Communists were right,  and ignorance about the countries the intellectuals visited. The author makes a strong case for this thesis by quoting from the writings of many intellectuals who made trips, or as the book’s title suggests, pilgrimages, to the communist dominated lands.

Now that the crimes of the Communists are very well-known, it is enlightening to read what visitors wrote. Some of the prose in fawning, some hagiographic, all untrue. Were these people this stupid?

Hollander notes that Stalin’s Russia of the 1930s was a great draw for the intellectuals. The Great Depression lead many  to think that there was a better land behind the Soviet border. The Great Purge was ignored.

Hollander also points to the turmoil of the 1960s. What silliness, what empty vanity, ruled much of the protests. It now seems stupid, but then it was so serious. Life was so empty here that it must be better there. So off went the radicals to tour paradise. They thought that they saw heaven on earth. The really saw only a Potemkin heaven. Those few visitors who escaped their guides managed to see the grimy reality of communist life.

The deluded intellectuals had much evidence to show that what they believed was false. The hordes of refugees, many who risked their lives fleeing their homelands, gave consistent testimonies about the misery they escaped. The intellectuals merely ignored this evidence, or they disparaged it by saying that it was the result of the Western colonial powers. Presuppositions do get in the way.

The intellectuals defended the known problems with blithe dismissals and excuses that the totalitarianism was mere a temporary necessity. The visitors accepted things that would never be tolerated in this country.”Yes, but….” was the usual excuse.

Hollander shows how easy it was to delude the visitors. Just treat them well. First-class accommodations, well-spoken tour guides; model factories, prisons, schools; folk dancing; and showplace farms all were used. The effect was great. Some clerics said they found more Christianity practiced in Stalin Russia than anywhere else they had been. Artist found freer expression than in the West. Writers marveled at the liberty Communist writers had. It was a case of believe-what-you-saw-because-you-saw-what-you-believed.

This problem will always exist. The lesson is not to take the self-appointed too seriously. They do that enough themselves.

Posted in Book reviews | Tagged: , , , | Leave a Comment »

Stalin’s Party

Posted by heyrandy on July 2, 2012

Great Terror, Robert Conquest, 1968

This is a deep, penetrating book. It in great detail describes the Purges of the 1930’s Russia. The book records how Stalin destroyed all of his rivals, established a system of terror, and sent millions to their death.

Stalin started with the Old Bolsheviks. They were the ones he feared would depose him. They should have. Stalin played on their party loyalty and their trust of him. The Party replaced God in the Communist system, so the members could not believe that the Party’s man could be wrong. When Stalin denounced a rival as an enemy, the other members of the party agreed with him. It began slowly. Just a few men. Then the police arrested many more. The conspiracy became larger.

As the conspiracy grew, the police people with things that were not before a crime. Every accident was sabotage. Every contact with a foreigner was an act of espionage. No one was safe. The Secret Police developed a system of informants. The informants were mostly self-seekers who would report people against whom they had a grudge or to gain some pay off. Late in the Purge it was the joke that the only person a man could talk to was his wife and then only in a whisper while in bed with the covers pulled over their heads.

Some of the confessions were simply ludicrous. One man confessed to putting nails into the butter supply. Some confessed to events that occurred while they were in jail on other charges.

No one has been able to explain the earliest confessions. Men of impeccable credentials confessed to the most horrible crimes. Conquest suggest that some men confessed on order of the Party. The Old Bolsheviks were so loyal that they obeyed the order. The Party promised they would not really be tried but secretly man a post in the far eastern part of the country. They learned the value of Stalin’s promises.

Others confessed as a way to protect their families. This sometimes worked. However, wives were often charged with being “the wife  of an enemy of the people.” This charge typically brought eight years in the labor camps.

As the Purge grew, people learned most confessed under torture. To avoid this fate, one doctor, a regional medical director, confessed upon arrest and named all his subordinates as co-conspirators. He still went to the labor camps, but he avoided torture. We are not told what happened to his subordinates.

The camps were a horror. Less than ten percent of the prisoners returned. Starvation and disease killed the most. The weather in Siberia was bitter cold for nine months followed by three months of mud and mosquitoes. The work was very hard. The discipline was brutal.

When the Purge swept through the military, the NKVD shot all the senior officers. This left the military, already in poor condition, without its best minds. When the Germans invaded, the Soviets were so ill prepared that the Germans nearly succeeded in taking Russia.

The press published accounts of workers’ committees demanding the traitors be executed. It was all false, but how could the average person know?

Stalin’s crimes have only recently been acknowledged by the West. The author deals with the West’s reluctance to believe in such horrors. Most writers were dupes. Some acknowledged that there were problems but dismissed them as irrelevant or exaggerated.

The author’s research is extensive. Most chapters have one hundred reference notes. I found the detail overwhelming. It is necessary in a historical book, but it was often too much. However, the book will provide a great resource for future writers. There is still so much to learn.

Posted in Book reviews | Tagged: , , , , | Leave a Comment »