Monday, December 10, 2007

Business as usual

From the horse's mouth

I was poking about for investment advice when I ran across a fascinating blog entry, "Investing Lessons from My Secret Life as a CIA Agent", by Mark Skousen, which is just what it says.

I don't usually tell my subscribers or friends very much about my stint as a junior economic officer at the CIA in the early 1970s, but after reading Tim Weiner's expose, "Legacy of Ashes: The History of the CIA," I thought it appropriate to reveal some insights I learned there, and how to apply it to one's finances.

Tim Weiner, a New York Times reporter, tells a depressing story of how the CIA failed repeatedly in its mission to predict international conflicts and attacks on the U.S. For example, to cite two recent examples of bad intelligence, the CIA failed to warn America of the 9/11 terrorist attacks from Islamic extremists; and it gave faulty information on weapons of mass destruction, and thus condemned the U.S. to a misconceived war in Iraq.

My Run-In with Former CIA Director George Tenet

I confronted George Tenet, director of the CIA from 1997 to 2005, on these two blunders at a session I moderated at last year's New Orleans conference. He could only answer, "Our failures are always publicly trumpeted; but our successes - which were many - are always a secret."

He's right. When I was at the CIA in the early 1970s, the agency's mistakes were all too prominent. As a member of the Office of Economic Research (OER), we were in charge of warning the President and Congress of imminent economic crises. But we failed to anticipate the power of OPEC, the 1973-74 energy crisis, and the subsequent gasoline shortages.

A few years later, when Mexico devalued the peso, the CIA economists were silent. They were just as surprised as everyone else. Tim Weiner recounts numerous tales of failed missions by the clandestine service, such as the Bay of Pigs invasion of Cuba.

Even when the CIA was right, its successes were suppressed. I co-authored a secret report on the meat shortage in the U.S. as a result of Nixon's wage-price-controls. (Yes, Virginia, the CIA is into everything.) We predicted that when the price controls were lifted, beef prices would not increase, but would actually fall. But the White House refused to believe our prediction, and buried the report.

The CIA failed repeatedly because of two persistent problems: ignorance and arrogance. More often than not, they just didn't have the intelligence to know what was really going on in the Middle East, Vietnam or Latin America. And they refused to admit they didn't know, so they often lied to presidents and Congress.

In sum, billions of taxpayer dollars were wasted on the CIA, and thousands of American citizens, as well as freedom fighters in foreign lands, were killed.

Fascinating what one can find where.

More from Bali

Harlan Watson, the chief U.S. climate negotiator, said the tough targets included in a draft document in Bali would be "prejudging what the outcome should be." I don't know about you, but even after seven years of this administration and a hide of cynicism 8 inches deep, I'm dumbfounded.

Um, yes, Harlan, that's the general idea of plans for solving a problem, they are sort of, um, based on determining what the outcome should be. Problems, plans, outcomes, there is usually a--how can I put this?--relationship there.

Mind, spend enough time hanging around with Bushies and I guess plans without "prejudged" outcomes begin to seem like the normal way of doing things.

No flip-flops here

Mike Huckabee believes in making things easy for those who are unsure about him. He disputes the characterization that [in 1992] he was calling for individuals infected with HIV to be quarantined. "Now, would I say things a little differently in 2007? Probably so. But I'm not going to recant or retract from the statement that I did make because, again, the point was not saying we ought to lock people up who have HIV/AIDS." But, as the CNN article notes, Huckabee did not explain just how individuals with HIV were to have been "isolated" without being "quarantined".

During that 1992 Senate run, Huckabee also stated that he found homosexuality to be "an aberrant, unnatural and sinful lifestyle." Speaking Monday in Miami, Florida, Huckabee said he still stands by his earlier remarks on homosexuality.


Newsweek's John Barry has posted an article, "Watching Torture: A reporter's reflections on 'the pornography of violence'"; it is a must-read. Here's a sample:
This was an instructional film. These torture sessions were not even designed to elicit information. The film was intended to teach Savak recruits.

Who's in first?

The Republican presidential race remains wide open. A Rasmussen Reports article entitled "Five Paths to the Republican Presidential Nomination" lays out the possibilities rather neatly.

More Farm Follies

That's the apt title of a Washington Post editorial on the current monster (and, arguably, monstrous) Farm Bill before Congress. As the editorial puts it, "This is not a 'safety net' for the beleaguered denizens of 'farm country', as supporters of agricultural subsidies mawkishly insist." They then go on, "It's central planning at its most profligate." One has to admire that wording: central planning, with its clear allusion to Communism, would not be popular down on the farm.

But, regrettably, it's spitting (or voiding some bodily fluid) into the wind. The bill will doubtless pass easily, despite the endless cataloging (such as the Post's running two-year exposé "Harvesting Cash") of the jaw-dropping abuses of public monies.

The whole thing is one of the simplest, clearest examples around of the "divide and conquer" strategy of lobbying, pretty much as pinned to the cardboard over 60 years ago by Henry Hazlitt in his still-in-print (and still-popular) book Economics in One Lesson, which I much recommend.

What's happening with that bill, and in general in our system, is that a relatively small minority for whom some fiscal policy--be it tax relief or outright payments--brings great benefit at a relatively small per-person cost to the rest of society has a great financial incentive to see that the policy is adopted. Assume some group comprising, say, a million persons stands to gain (or not lose to taxes) $100 a year each if some policy is adopted. That doesn't sound like much is at stake, yet it's a hundred million bucks that the taxpayers are forking over. But . . . that's still only about 33 cents per person across the nation. People do not get all riled up over 33 cents a year. Moreover, and here's the kick, it's well worth investing say $10 per person in the benefit group to get back $100. And a million times $10 is, yes, ten million bucks. And for ten million bucks spent on lobbying and carefully selected campaign donations, you can buy a lot of fiscal policy that only costs a dollar a year to the average household.

Now take that process and multiply it by the number of interest groups (of which any one person may belong in dozens), and suddenly the costs to the taxpayers mounts up drastically. (As Everett Dirksen once famously remarked, "a few billion here and a few billion there and pretty soon you're talking about real money.")

And when the group is farmers--especially since most farming today is by large-scale agribusiness--well, you see the results.

And more mortgage follies

Paul Krugman dissects the massive deception that is passing for mortgage relief in Washington.
By Bush administration standards, Henry Paulson, the Treasury secretary, is a good guy. He isn’t conspicuously incompetent; and he isn’t trying to mislead us into war, justify torture or protect corrupt contractors.

But Mr. Paulson’s actions reflect the priorities of the administration he serves. And that, ultimately, is what’s wrong with the mortgage relief plan he unveiled last week. . . .

In fact, there’s a growing consensus among financial observers that the Paulson plan isn’t mainly intended to achieve real results. The point is, instead, to create the appearance of action, thereby undercutting political support for actual attempts to help families in trouble.
It's called "compassionate conservatism". By some.

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