Sunday Reflections

Daffodils

More on those GSEs

Russ Roberts takes on Barry Riholtz on the notion that Fannie and Freddie had nothing to do with the economic meltdown:

But Ritholtz ignores why subprime was so profitable. And part of the answer is that Fannie and Freddie had been buying up a lot of mortgages made to low-income buyers pushing up the demand for low-income housing. That in turn pushed up the price of houses in low-income areas.

He provides this chart and explanation that shows how aggressive the GSEs came in purchasing low-income loans:

He maintains that as the GSEs pushed into this market, creditors expected to be bailed out as subprime became more profitable.

Multiculturalism and the Rejection of Modernity

As the Feds arrest 3 men while investigating the Times Square bombing,  Fouad Ajami's opinion piece in the WSJ this week opens with a quote from Sayyidd Qutb: "A Muslim has no nationality except his belief." The article is titled: Islam's Nowhere Men, and outlines the dangers of Islamic fundamentalism we face within our own borders that will only be exacerbated by multiculturalism:

In an earlier age—I speak here autobiographically, and not of some vanished world long ago but of the 1960s when I made my way to the United States—the world was altogether different. Mass migration from the Islamic world had not begun. The immigrants who turned up in Western lands were few, and they were keen to put the old lands, and their feuds and attachments, behind them. Islam was then a religion of Afro-Asia; it had not yet put down roots in Western Europe and the New World. Air travel was costly and infrequent.

The new lands, too, made their own claims, and the dominant ideology was one of assimilation. The national borders were real, and reflected deep civilizational differences. It was easy to tell where "the East" ended and Western lands began. Postmodernist ideas had not made their appearance. Western guilt had not become an article of faith in the West itself.

Nowadays the Islamic faith is portable. It is carried by itinerant preachers and imams who transmit its teachings to all corners of the world, and from the safety and plenty of the West they often agitate against the very economic and moral order that sustains them. Satellite television plays its part in this new agitation, and the Islam of the tele-preachers is invariably one of damnation and fire. From tranquil, banal places (Dubai and Qatar), satellite television offers an incendiary version of the faith to younger immigrants unsettled by a modern civilization they can neither master nor reject.

Yet many of our elites do not want to acknowledge the fact that many Muslims view Islam as their ultimate identity; they would rather turn to ridiculous moral equivocating by pointing out that Shahzad, after all, was under much stress because he had to foreclose on his home.  Or they dismiss him as a lone extremist, refusing to examine any pattern of homegrown attacks, despite the successful attack of Maj Hassan on a US army base, or Umar Farouk Abdulmutallab, the unsuccessful underwear bomber.  The media seems utterly incapable of harnessing our technological advantages to examine and thoughtfully debate Islamist ideology out in the open, for it undermines their cherished narrative of multiculturalism:  that all cultural values are equal and worthy in their own right, and no values need to be promoted over each other, certainly not the white man's values. The result of such thinking is ultimately destructive to the goal of tolerance; for the determined ideologues will fill the vacuum with their own ideology, dominating the apologists who no longer have a philosophical basis for defending their own values. Freedom of speech is muzzled--after all, why provoke an aggrieved minority with your racist outbursts?

Multiculturalism is a step backwards from the values of individual freedom and modernity; it provides a deterministic context to society based on a person’s ethnic or religious origins, or gender.  It excuses tribalistic loyalties under the guise of tolerance. The idea that no absolute values should dominate in any one society flies in the face of reason.

A rejection of multiculturalism is not a rejection of cultural diversity or tolerance.  On the contrary, recognizing the contributions of different cultures can enrich society and serve as a barrier to racism and xenophobia. Immigrants and different cultural groups in democratic societies are often changed by, and change society for the better.  However, it must be done in the context of individual freedom as a cornerstone for the person's relationship to their government and to each other;  this individual freedom allows us to chose our own cultural context within the values of our society. These open debates with a strong defense of our values are the only antidote to marginalizing the lure of extremist ideology.

But in the Left's view of multiculturalism, we are a flawed nation no more special than any other; our values are specific to white Anglo-Saxen Protestants and are racist towards other cultures.  Christian expression of any sort must be banned from the public square.  Our national identity is fragmented, leaving us with an empty quasi-capitialist materialism. And young men like Shahzad will continue to turn to fill that void with a radicalized belief system we dare not critique.

Charts of the Day: Negative Home Equity

Calculated Risk's chart below (H/T: Marginal Revolution).  Wondering how your house fares? Punch in your address at Zillow.

So how soft is the housing sector? Zillow's chief economist has the report. The bottom line: it's still soft.  The tax credit for home buyers is helping lift sales but inventory supply is increasing. As CR notes:

Research has shown that once negative equity exceeds 25 percent "owners begin to default with the same propensity as investors", and it is these 4.9 million borrowers - with $656 billion in debt - that are most at risk for foreclosure.

This chart on their blog sums it up; more than 10% of homeowners nationwide have negative equity at or exceeding the 25% level:

 On a brighter note, the Fed's Lacker sees we're heading into a sustained recovery, although one should note that over half the uptick in April's unemployment numbers are due to the hiring of Census workers (see NYT). MaxedoutMama concurs on the economic recovery.  NOFP has links to economists' opinions and charts that show the stimulus had nothing to do with the recovery.

Update:  The HuffPo has an article where the nation's 2nd largest bank, JPMorgan Chase, is warning investors that underwater homeowners may walk away.

New Atheism: A Noisy Fad That Will Soon Pass?

David Hart over at First Things takes on well known atheists (Dawkins, Hitchens, etc) and their literature, lamenting the lack of intellectual vigor applied to any of their arguments on the existence of God:

A truly profound atheist is someone who has taken the trouble to understand, in its most sophisticated forms, the belief he or she rejects, and to understand the consequences of that rejection. Among the New Atheists, there is no one of whom this can be said, and the movement as a whole has yet to produce a single book or essay that is anything more than an insipidly doctrinaire and appallingly ignorant diatribe.

If that seems a harsh judgment, I can only say that I have arrived at it honestly. In the course of writing a book published just this last year, I dutifully acquainted myself not only with all the recent New Atheist bestsellers, but also with a whole constellation of other texts in the same line, and I did so, I believe, without prejudice. No matter how patiently I read, though, and no matter how Herculean the efforts I made at sympathy, I simply could not find many intellectually serious arguments in their pages, and I came finally to believe that their authors were not much concerned to make any.

What I did take away from the experience was a fairly good sense of the real scope and ambition of the New Atheist project. I came to realize that the whole enterprise, when purged of its hugely preponderant alloy of sanctimonious bombast, is reducible to only a handful of arguments, most of which consist in simple category mistakes or the kind of historical oversimplifications that are either demonstrably false or irrelevantly true. And arguments of that sort are easily dismissed, if one is hardy enough to go on pointing out the obvious with sufficient indefatigability.

Read it all for his specific metaphysical and logical takedowns of atheism.  The demographic trends on religion point to an uncertain future for western civilization. I do not think atheism is a passing fad as there is some evidence it is growing in America, however, atheist cultures in Europe and Russia are in a demographic crisis and dying.  On the flip side, Christianity worldwide is the fastest growing religion, followed closely by Islam.  We can't afford to simply shrug our shoulders about Europe: it's the other half of Western civilization.  The question will be what will replace western cultures, or will these cultures do an about face and begin assimilating immigrants as they had in they had in the past, or continue down the path of morally relativistic policies like multiculturalism. If current demographic trends hold, it points to an increasing Islamization of Europe, and/or balkanization of European society.


Here's a bonus video of two intellectuals going at it on the utility of religion vs secularism.  Dinesh D'Souza, author of "What's So Great About Christianity," debating Christopher Hitchens, one of the more charismatic atheists, and author of "God is Not Great." While the video is from 2007, they continue to cover the same ground in current debates across college campuses.

Sunday Reflections

Happy Mother's Day!

Portrait of a Lady and her Child

Arthur Dampier May (19th century, expositions 1866–1875 in Suffolk Street Gallery, London)

Source: WikiMediaCommons

The Politics of a Welfare State

In one of my recent blogs on "Lessons From Greece," I note the window for action for true federal spending reform is rapidly narrowing in the US. While I pointed out we are not like Greece, we do have much more in common culturally with Great Britain, whose recent election shows how difficult fundamental reform is when the state creates an entitlement mindset among voters, destroying civic society that underlies successful representative democracies.  This WSJ article, "Not Britain's Finest Hour", highlights the depressing reality of British politics:

"Given that this fiscal repair job is likely to be the major domestic policy challenge for the next government, it is striking how reticent all three main U.K. parties have been in explaining how they would confront the task. Their public spending plans are particularly vague," said the Institute for Fiscal Studies, a nonpartisan think tank, this week.

In fact, even as they paid lip service to the scale of the fiscal dangers, the British political leaders' promises to voters seem to involve more spending increases.

On Wednesday, the day before the election, British televisions were in split-screen mode; on one side Messrs. Brown, Cameron and Clegg roamed the country competing to offer more money for health spending, education or the environment. On the other side, Greece, member of the euro zone, was burning as the political consequences of years of failing to address mounting debt problems were laid bare. 

To be sure, Britain's public finances are much more manageable than Greece's. Its debt is less than half that of Greece's in relation to its national income.

But the direction of the U.K.'s economics and politics are clear—and run directly counter to the nation's pressing needs.

The reality is that the state has—in economic terms—become so dominant in Britain, the public largesse so pervasive, that the political costs of reining it back are seen as dangerously high for any party that wants to get elected."  [emphasis added]

There are tradeoffs between having a more economically egalitarian society and freedom. To achieve egalitarianism, the state must rely on income redistribution, usually via higher taxation.  But you ultimately pay in freedom.  I remember having a conversation with a liberal concerning income redistribution for welfare payments. When I pointed out this out tradeoff, he said, so what? So you go to one less restaurant a week or don't buy that IPod.  Never mind that I think it's none of his business on how I should spend my money.  What if I want to save my money to reach my American dream, or to send my son to a better school?


Some liberals will undoubtedly see this as a bit selfish.  I'm not against all forms of income redistribution--I'll outline my philosophy on redistribution in a separate follow-up post.  However, while they may acknowledge the first order costs of egalitarianism on economic freedom, they don't acknowledge the indirect costs which when cumulative, cost us much more than that IPod.  
Here is where the difference between conservatives and liberals sharpen. Conservatives are more comfortable with inequality if they believe there are few barriers to someone born of any class, to have the freedom to achieve success. Liberals seen injustice in great inequality, and feel it's in society's interest to help those they feel are worse off--otherwise, they reason, they have little opportunity to achieve the American dream if they're too worried living hand-to-mouth. Additionally, they point out these people do not feel part of society and there is a greater likelihood of societal conflict with great inequality. The conservative rejoinder is that by giving government assurances of meeting all one's basic needs, the incentive for individual responsibility is reduced; security is traded for freedom over time.  And thus, the importance of freedom is diminished.  After all, what's the point of freedom without individual responsibility?

Britain is a prime example of this--the voters don't want to give up their entitlements, but somehow expect the government to return their nation to some semblance of fiscal order.  The conservative candidate, Dave Cameron, has claimed the Tories are the party of the NHS, and has pledged more government spending on it.  Since the costs of egalitarian programs like health care are socialized, economic freedom isn't the only freedom that suffers--even individual freedom to eat what you want starts coming under scrutiny since the rationale goes, society is paying the costs for your obese behind.  


Suffice it to say, philosophers of these positions articulate them much more elegantly than I can do on a blog.  The liberal economic tradition is often articulated by John Rawls and Ronald Dworkin while the conservative position is take by John Kekes.


My simple point as with Britain, our nation is not immune to these types of policies and politics which will irreversibly change our national character. For once, I actually hope Britain proves me wrong on this.