Friday, December 17, 2004

Politics - The best government money can buy

I watched a movie last night that was a couple of years old... Gangs of New York. Usually, I don't go for gory films, but this was historically fascinating... even if fictional. The workings of William M. "Boss" Tweed and Tammany Hall seems to have become the archetype for the City of Detroit politics... you know... "He may be a crook, but he's our crook."

Admittedly, there isn't as much violence today as during Boss Tweed's time... but the principle still stands: power is the primary goal of a politician and money paid to the politician ensures that power will be used to deliver what the payer seeks.

Last night one of my sons came home agitated about how Detroit's mayor, Coleman Young... I mean Kwame Kilpatrick... and Kwame's dear mother, U.S. Rep. Carolyn Cheeks Kilpatrick, have actively blocked the development of a new tunnel that would link Michigan and Ontario. The Detroit Free Press reported how

"Manuel (Matty) Moroun, who collects an estimated $60 million a year from the 10 million vehicles that cross his Ambassador Bridge, has urged the city not to sell [city property that would allow completion of the tunnel]."
Moroun has a virtual monopoly on commerce that has to pass the Detroit River between the U.S. and Canada. But his monopoly is costing the region dearly, according to the Free Press:
"Delays at the bridge -- the top commercial crossing between the United States and Canada -- have been compounded by extra security since the Sept. 11, 2001, terrorist attacks. Idled trucks and production lines cost the U.S. and Canadian economies about $10 billion a year, according to a study cited by Detroit Renaissance, a group of local business leaders who support building a new tunnel."
Money... what money?
"The Morouns and their employees have contributed more than $350,000 to politicians, political action committees and both political parties since 1995.

But the $33,000 they have given Cheeks Kilpatrick over the years is more than they gave any other member of Congress from Michigan.

The Morouns also contributed $15,000 last year to help the congresswoman start the 21st Leaders political action committee. The Morouns and the congresswoman were the only donors to the PAC."

The problem is that this is not an isolated instance of political abuse of power by Kilpatrick or his staff.

But in much the same way as good Muslims around the world do not voice their opposition to so-called "Islamic" terrorists, the good black majority of Detroit do not seem concerned about their mayor... "he's our crook." You see, this is not about morality or ethics... it's all about power and the territorial imperative. It's just another example of a modern Boss Tweed flexing his political muscles to show who is really in charge. And for those who are powerless, it really feels good to have a leader who is powerful.

Coleman Young, the man who dismantled the Detroit economy with his racist policies but consolidated black power in Detroit, now lives on in a new edition... Kwame Kilpatrick, who simply has to demonstrate that he is capable of doing whatever it takes to maintain his power... and he does.

Perhaps he is not a "crook," but as Michigan Attorney General Mike Cox said:

"In short, while a number of decisions made were arguably shortsighted and the indications of bad judgment or inexperience, there is not any evidence of an obstruction of justice or other criminal wrongdoing."
Shortsighted, bad judgment, inexperienced... but a good guy and a great leader.

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There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
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Tracking Interest Rates


SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)