The St. Croix Review

The St. Croix Review

The St. Croix Review speaks for middle America, and brings you essays from patriotic Americans.

The De Facto Nationalization of JPMorgan Chase

Mark W. Hendrickson

Mark W. Hendrickson is a faculty member, economist, and contributing scholar with the Center for Vision and Values at Grove City College, Grove City, Pennsylvania. This article is from V & V, a website publication of the Center for Vision & Values.

March 2008 may go down as a major turning point in U.S. financial history. The Federal Reserve crossed a Rubicon of sorts, lending tens of billions of dollars, not to a commercial bank, as has been its historical practice, but for the very first time to an investment bank.

For the record, commercial banks pay the Federal Deposit Insurance Corporation -- FDIC -- for deposit insurance, whereas investment banks do not, and yet the Fed suddenly made liquidity available to the latter. Commercial banks are legally allowed to use leverage to a maximum ratio of 13 dollars of debt to every dollar of equity, whereas investment banks -- ironically subject to less regulatory oversight than commercial banks -- can leverage their equity by a factor of 34.

Invoking an obscure, never-before-invoked legislative provision, the Fed made billions of dollars available to JPMorgan Chase to acquire another investment bank, the essentially insolvent Bear Stearns.

The Fed-engineered JPMorgan takeover of Bear raises startling questions: What was/is the degree of cooperation between the Fed and JPMorgan? Was this an impromptu alliance, or had it been plotted in advance? Was JPMorgan drafted against its will to absorb Bear Stearns, or did the central bank give JPMorgan a plum that it already coveted? More importantly for the country, what will be the relationship of JPMorgan and the Fed going forward?

Clearly, if Bear was "too big to fail," then undoubtedly the much larger JPMorgan is too big to fail. JPMorgan was already a key dealer of U.S. government debt before absorbing Bear, and now it has Bear's erstwhile share of that operation, too. Of even greater significance, even before the takeover, JPMorgan already had multiples of the kind of illiquid financial derivatives that did in Bear Stearns -- in fact, more derivatives than any other company in the world -- and now it owns Bear's junk, too. This implies that the Fed will have to make good on those derivatives -- even if it eventually means giving JPMorgan real money for worthless "assets" -- if that's what it takes to keep JPMorgan alive. Apparently, investors quickly grasped that implication. The perception that JPMorgan has a new partner -- the ultimate sugar daddy, the Fed -- helped JPM's stock to soar 30 percent in the week after the Bear takeover was announced.

The Fed and JPMorgan partnership will remain implicit. There will be no official merger or formal union of the two; on the other hand, it may be no exaggeration to say that the Federal Reserve has effected a partial de facto nationalization of JPMorgan. It will be interesting to see what degree of autonomy JPMorgan will retain. There is an old saying that if someone owes the bank a million dollars, the bank owns him, but if someone owes the bank a billion dollars, then he owns the bank. In the present case, JPMorgan appears to be under the Fed's thumb. However, because the Fed now requires JPMorgan's survival, it will do whatever it needs to do to accomplish that. The potential moral hazard created by this dynamic is enormous. JPMorgan may have the Fed over a barrel, too.

On March 31, Treasury Secretary Paulson proposed sweeping regulatory reforms that would extend the kind of control that the Fed now has over JPMorgan to all investment banks. Theoretically, such power is necessary to prevent investment banks from ever putting our country into such a precarious situation again. In practice, though, this would be a huge step toward a national banking monopoly. Considering the various boom-bust cycles caused by the Fed, not to mention the loss of 98 percent of the dollar's purchasing power under the Fed's watch, do we really want to place our faith in a bulked-up, super-powered, but clearly fallible Fed?

Actually, I feel sorry for Paulson. His is the same dilemma that the United States repeatedly faces in foreign affairs. If Uncle Sam intervenes, the critics denounce us for not minding our own business; if we don't, they lambaste us for not helping. Similarly, Paulson is in a no-win situation, damned if he does and damned if he doesn't.

For the present, Paulson and Bernanke have postponed the financial apocalypse. Gold and commodities prices are tumbling. Real-estate markets are making necessary adjustments. It would be premature, though, to declare the financial crisis over. As long as trillions of dollars of derivatives -- ticking financial time bombs -- continue to lurk on the balance sheets of our major financial institutions, we are not out of danger. *

"[T]he Constitution is not a living organism. It's a legal document." --Supreme Court Justice Antonin Scalia

Friday, 20 November 2015 13:19

The Wrong Cure

The Wrong Cure

David J. Bean

David J. Bean is a freelance writer living in California.

In March 2008 the Federal Reserve Bank began to dramatically increase the amount of dollars in circulation. The Fed does this by permitting the big Wall Street investment banking firms to borrow from the Fed at very low rates and then count these funds as part of their reserve. Because of our fractional banking laws a regular bank can lend out about ten times the amount it has on reserve, but the much larger Wall Street investment banks usually can lend out as much as 30 times the amount of their reserves. By packaging real estate loans and selling them, they increased their reserves and thus could loan out more money. The result is that when the loans started to go bad it created the mess our credit system is in now. The cure the Fed has embarked upon is exactly the wrong cure for the country's financial problems. The value of a dollar has already tanked because of previous Fed actions that created too many dollars, and the increase in liquidity they have recently initiated will only exacerbate the problem.

The housing problem has been attributed to the overextension of credit, especially to high-risk customers, but this in itself would not have become the problem it has had it not been for the loss of faith in the dollar. Our foreign investors have finally decided that our spending was not going to be trimmed, and looking at the resulting increase in our debt they have decided that inflation would soon be rampant. Inflation is the politicians' way of repudiating debt. Politicians, compliant economists, and a sympathetic press have all accepted some low figure for inflation as being acceptable, but whatever the figure is, it is a direct assault on the value of a debt. Any inflation reduces the value of a debt to the holder of that debt.

The investing public reminds one of the children's game where they all march around a set of chairs that are fewer than the marchers. When the music stops they all dive for a chair and those who don't make it are out of the game. The investors are looking desperately for a store of value and are scrambling from oil to gold to commodities trying to find something they feel comfortable with. Many have gone to euro-priced investments but the euro is not even backed by gold or a national government. Today no country's currency is backed by gold or any other tangible thing; the only force keeping the value of any currency up is faith, and many people have lost that for the U.S. dollar.

As Reuven Brenner pointed out in a recent Wall Street Journal article, "There is much talk about restoring trust in the financial markets but you cannot restore trust while taking no steps to halt the further fall of the dollar." He thinks that U.S. real estate value will languish as long as the Federal Reserve and the government do not take action to fix monetary policy. Even Fed Board members have been recently quoted as saying the Fed must now give priority to the liquidity problem in spite of the fact that too much liquidity has caused the problem. The vast expanse of credit could not have happened if the Fed had concentrated on a more stable dollar. Any currency designated as a "reserve" currency, as the dollar has been, needs an independent organization to keep it stable to keep global credit expansion under control. The Fed could have filled this function by keeping the dollar stable compared to gold or other commodities.

It is important for trade for countries to have a stable unit of exchange, especially for contractual reasons. Today, with the dollar at such a low regard, investors are somewhat paralyzed in trying to determine how to trade with the U.S. We need a stable unit of trade to ensure long-term wealth-producing employment. When the Fed finally starts concentrating on the proper cure it is going to be very painful for everyone, but until then the present course is taking us further down the road to tremendous inflation.

"One may smile and smile and be a villain." --William Shakespeare (Hamlet)

Concluding Report from the Global Warming Conference

Joseph Bast

Joseph Bast is the President of the Heartland Institute.

The final day of the 2008 International Conference on Climate Change, hosted by The Heartland Institute and more than 50 cosponsors, began with a keynote presentation by the Honorable Vaclav Klaus, president of the Czech Republic, who received a thunderous standing ovation from an international audience of some 500 scientists, economists, and other experts on global warming. It ended with withering criticism of the mainstream media's biased and alarmist coverage of the global warming issue by ABC News correspondent John Stossel.

President Klaus -- who won reelection just two weeks ago -- explained his strong opposition to claims that global warming is a "crisis" that requires rapid reductions in human greenhouse gas emissions. An economist by training and author of a new book on environmentalism, Dr. Klaus pointed out the impossibility of meeting the ambitious emission reduction goals being endorsed by European countries, saying they would require lowering populations or widespread poverty.

Dr. Klaus was followed by Dr. William Gray, one of the country's preeminent hurricane forecasters and a pioneer in tropical meteorological research. Gray described what he called the huge errors in the treatment of water vapor by computer models used to forecast future weather conditions and pointed to evidence showing the warming predicted by the models was not occurring at the altitudes and latitudes predicted by the models.

Following Gray's presentation, scientists were urged to come to the front of the room for a group photo to commemorate the event and drive home the fact that "real scientists" were willing to speak out against global warming alarmism. Some 60 scientists stood for pictures.

The audience then split up to attend concurrent sessions on climatology, the impacts of climate change, and the economics and politics of the global warming debate. Eight panels took place featuring such noted experts as Richard S. Courtney, technical advisor to several UK MPs and one of 15 scientists invited to brief the U.S. Congress on climate change in 2000; Andreas Prokoph, a professor of Earth sciences at the University of Ottawa; and Paul Waggoner, a distinguished scientist at the Connecticut Agricultural Experiment Station in New Haven.

The group reconvened for a final lunch and plenary session featuring Dr. Roy Spencer, principal research scientist for the University of Alabama in Huntsville and the U.S. Science Team Leader on NASA's Aqua satellite, and John Stossel, an ABC News correspondent and co-anchor of "20/20."

Spencer reported on his latest research documenting how background "noise" in climate systems creates temperature variations that are not random, the size of which exceed all of the warming attributed to human activity by the models. He further documented a major error in the way climate models attempt to deal with cloud cover and convection in the tropics.

Stossel delivered a withering critique of the way the news media cover science and health issues. While confessing to have been duped into covering alleged "crises" in the past, he said he now recognizes that advocacy groups take advantage of the scientific illiteracy of journalists and their natural interest in stories of lurking or invisible threats from which only government can protect people. He further decried the pervasive anti-capitalist bias of the media, represented by their attacks on the Heartland Institute and other organizations associated with the conference for accepting any corporate funding.

In his concluding remarks, Heartland President Joseph Bast observed that the audience, which had been quiet at the beginning of the opening dinner Sunday night, was now so loud it was difficult to bring to order. The willingness to speak out, it seemed, had grown in just the past day-and-a-half. Bast reported on the extensive press attention the conference had received, reporting interviews on CBS, ABC, BBC, CNN, PBS, Glenn Beck's television program, Fox News, and a score of print publications including The New York Times, Washington Post, and The Wall Street Journal.

Bast then laid out an agenda for future collaboration: expansion of the International Climate Science Coalition, completion and release of the report of the Nongovernmental International Panel on Climate Change, publication of books and a new journal on climate science, posting of videos of all the presentations online, creation of a speakers bureau, and planning for a conference in London in 2009. James Taylor, Heartland senior fellow and managing editor of Environment & Climate News who recruited many of the speakers who attended, added his closing remarks urging continued communication and collaboration for global warming realism.

Postscript by Joseph L. Bast: I have never before attended a conference, much less helped organize and host one, where so many people in the audience were so energized, engaged in the debate, and so obviously happy to be there. I saw friendships being created that I expect will last for lifetimes. The level of intellectual engagement was apparent from lively question-and-answer sessions and dueling presentations on several panels, the kind of free-spirited debate that is virtually absent from the global warming alarmist camp.

The 2008 International Conference on Climate Change was a success by every measure: attendance, quality of presentations, media coverage, and as a catalyst for future programs. History may well note that the long and largely unimpeded march of error, exaggeration, and even lies in the campaign to turn climate change into a global "crisis" hit a bump in March 2008, when the advocates of sound science and common sense finally came together to expose and confront it.

It was the conference heard around the world. And its message was deceptively simple: Global warming is not a crisis. *

"A man generally has two reasons for doing a thing. One that sounds good, and a real one." --J. P. Morgan

Manhattan Declaration on Climate Change: "Global Warming" Is Not a Global Crisis

Heartland Institute Staff

(New York, NY/Chicago, IL -- March 4, 2008) Scientists and researchers participating in the 2008 International Conference on Climate Change at the Marriott Marquis Hotel on Times Square in New York City closed business today by considering the accompanying "Manhattan Declaration on Climate Change."

We, the scientists and researchers in climate and related fields, economists, policymakers, and business leaders, assembled at Times Square, New York City, participating in the 2008 International Conference on Climate Change,

Resolving that scientific questions should be evaluated solely by the scientific method;

Affirming that global climate has always changed and always will, independent of the actions of humans, and that carbon dioxide (CO2) is not a pollutant but rather a necessity for all life;

Recognizing that the causes and extent of recently observed climatic change are the subject of intense debates in the climate science community and that oft-repeated assertions of a supposed "consensus" among climate experts are false;

Affirming that attempts by governments to legislate costly regulations on industry and individual citizens to encourage CO2 emission reduction will slow development while having no appreciable impact on the future trajectory of global climate change. Such policies will markedly diminish future prosperity and so reduce the ability of societies to adapt to inevitable climate change, thereby increasing, not decreasing, human suffering;

Noting that warmer weather is generally less harmful to life on Earth than colder:

Hereby declare:

That current plans to restrict anthropogenic CO2 emissions are a dangerous misallocation of intellectual capital and resources that should be dedicated to solving humanity's real and serious problems.

That there is no convincing evidence that CO2 emissions from modern industrial activity has in the past, is now, or will in the future cause catastrophic climate change.

That attempts by governments to inflict taxes and costly regulations on industry and individual citizens with the aim of reducing emissions of CO2 will pointlessly curtail the prosperity of the West and progress of developing nations without affecting climate.

That adaptation as needed is massively more cost-effective than any attempted mitigation and that a focus on such mitigation will divert the attention and resources of governments away from addressing the real problems of their peoples.

That human-caused climate change is not a global crisis.

Now, therefore, we recommend:

That world leaders reject the views expressed by the United Nations Intergovernmental Panel on Climate Change as well as popular, but misguided works such as "An Inconvenient Truth."

That all taxes, regulations, and other interventions intended to reduce emissions of CO2 be abandoned forthwith.

Agreed at New York, 4 March 2008. *

Friday, 20 November 2015 13:19

From Climate Alarmism to Climate Realism

From Climate Alarmism to Climate Realism

Vaclav Klaus

Vaclav Klaus is president of the Czech Republic. These remarks were delivered at the 2008 International Conference on Climate Change, New York, March 4, 2008.

Mr. Chairman, ladies and gentlemen,

I would like first of all to thank the organizers of this important conference for making it possible and also for inviting one politically incorrect politician from Central Europe to come and speak here. This meeting will undoubtedly make a significant contribution to the moving away from the irrational climate alarmism to the much needed climate realism.

I know it is difficult to say anything interesting after two days of speeches and discussions here. If I am not wrong, I am the only speaker from a former Communist country and I have to use this as a comparative -- paradoxically -- advantage. Each one of us has his or her experiences, prejudices and preferences. The ones that I have are -- quite inevitably -- connected with the fact that I have spent most of my life under the Communist regime. A week ago, I gave a speech at an official gathering at the Prague Castle commemorating the 60th anniversary of the 1948 Communist putsch in the former Czechoslovakia. One of the arguments of my speech there, quoted in all the leading newspapers in the country the next morning, went as follows:

Future dangers will not come from the same source. The ideology will be different. Its essence will, nevertheless, be identical -- the attractive, pathetic, at first sight noble idea that transcends the individual in the name of the common good, and the enormous self-confidence on the side of its proponents about their right to sacrifice the man and his freedom in order to make this idea reality.

What I had in mind was, of course, environmentalism and its currently strongest version, climate alarmism.

This fear of mine is the driving force behind my active involvement in the climate change debate and behind my being the only head of state who in September 2007 at the UN Climate Change Conference, only a few blocks away from here, openly and explicitly challenged the current global warming hysteria. My central argument was -- in a condensed form -- formulated in the subtitle of my recently published book devoted to this topic which asks: "What is Endangered: Climate or Freedom?" [Blue Planet in Green Chain -- What Is Endangered: Climate of Freedom?] My answer is clear and resolute: "It is our freedom." I may also add "and our prosperity."

What frustrates me is the feeling that everything has already been said and published, that all rational arguments have been used, yet it still does not help. Global warming alarmism is marching on. We have to therefore concentrate (here and elsewhere) not only on adding new arguments to the already existing ones, but also on the winning of additional supporters of our views. The insurmountable problem as I see it lies in the political populism of its exponents and in their unwillingness to listen to arguments. They -- in spite of their public roles -- maximize their own private utility function where utility is not any public good but their own private good -- power, prestige, career, income, etc. It is difficult to motivate them differently. The only way out is to make the domain of their power over our lives much more limited. But this will be a different discussion.

We have to repeatedly deal with the simple questions that have been many times discussed here and elsewhere:

1) Is there a statistically significant global warming?
2) If so, is it man-made?
3) If we decide to stop it, is there anything a man can do about it?
4) Should an eventual moderate temperature increase bother us?

We have our answers to these questions and are fortunate to have many well-known and respected experts here who have made important contributions in answering them. Yet, I am not sure this is enough. People tend to blindly believe in the IPCC's conclusions (especially in the easier to understand formulations presented in the "Summaries for Policymakers") despite the fact that from the very beginning, the IPCC has been a political rather than a scientific undertaking.

Many politicians, media commentators, public intellectuals, bureaucrats in more and more influential international organizations not only accept them but use them without qualifications which exist even in the IPCC documents. There are sometimes unexpected and for me unexplainable believers in these views. A few days ago, I have come across a lecture given by a very respected German economist (H. W. Sinn, "Global Warming: The Neglected Supply Side," in: The EEAG Report, CESifo, Munich, 2008) who is in his other writings very critical of the German interventionist economic policies and statist institutions. His acceptance of the "conventional IPCC wisdom" (perhaps unwisdom) is striking. His words:

* "The scientific evidence is overwhelming";
* "The facts are undeniable";
* "The temperature is extremely sensitive to even small variations in greenhouse gas concentration";
* "If greenhouse gases were absent from the atmosphere, average temperature of the Earth's surface would be -6C. With the greenhouse gases, the present average temperature is +15¡C. Therefore, the impact of CO2 is enormous";
* He was even surprised that "in spite of all the measures taken, emissions have accelerated in recent years. This poses a puzzle for economic theory!" he said.

To make it less of a puzzle, let me make two brief comments.

As an economist, I have to start by stressing the obvious. Carbon dioxide emissions do not fall from heaven. Their volume (ECO2) is a function of GDP per capita (which means of the size of economic activity, SEA), of the number of people (POP) and of the emissions intensity (EI), which is the amount of CO2 emissions per dollar of GDP. This is usually expressed in a simple relationship that is, of course, a tautological identity: ECO2= EI x SEA x POP -- but with some assumption about causality it can be turned into a structural equation. What this relationship tells is simple: If we really want to decrease ECO2 (which most of us assembled here today probably do not consider necessary), we have to either stop the economic growth, and thus block further rise in the standard of living, or stop the population growth, or make miracles with the emissions intensity.

I am afraid there are people who want to stop the economic growth, the rise in the standard of living (though not their own) and the ability of man to use the expanding wealth, science, and technology for solving the actual pressing problems of mankind, especially of the developing countries. This ambition goes very much against the past human experience that has always been connected with a strong motivation to go ahead, and to better human conditions. There is no reason to make the change just now -- especially with arguments based on such an incomplete and faulty science as is demonstrated by the IPCC. Human wants are unlimited and should stay so. Asceticism is a respectable individual attitude but should not be forcefully imposed upon the rest of us.

I am also afraid that the same people, imprisoned in the Malthusian tenets and in their own megalomaniac ambitions, want to regulate and constrain the demographic development, which is something only the totalitarian regimes have until now dared to think about or experiment with. Without resisting we would find ourselves on the slippery "road to serfdom." The freedom to have children without regulation and control is one of the undisputable human rights and we have to say very loudly that we do respect it and will do so in the future as well.

There are people among the global warming alarmists who would protest against being included in any of these categories, but who do call for a radical decrease in carbon dioxide emissions. It can be achieved only by means of a radical decline in the emissions intensity. This is surprising because we probably believe in technical progress more than our opponents. We know, however, that such revolutions in economic efficiency (and emissions intensity is part of it) have never been realized in the past and will not happen in the future either. To expect anything like that is a non-serious speculation.

I recently looked at the European CO2 emissions data covering the period 1990-2005, which means the Kyoto Protocol era. My conclusion is that in spite of many opposite statements the very robust relationship between CO2 emissions and the rate of economic growth can't be disputed, at least in a relevant and meaningful time horizon. You don't need huge computer models to very easily distinguish three different types of countries in Europe:

* The less-developed EU countries -- Greece, Ireland, Portugal and Spain -- which during this very period tried to catch up with the economic performance of the more-developed EU countries. Their rapid economic growth led to the increase of their CO2 emissions in 15 years (in which they signed Kyoto) by 53 percent;
* The European post-Communist countries which after the fall of Communism went through a fundamental, voluntarily unorganized, transformation shake-out, and an inevitable radical economic restructuring with the heavy industry disappearing (not stagnating or retreating) practically overnight. Their GDP drastically declined. These countries decreased their CO2 emissions in the same period by 32 percent;
* The "normal" EU, slow-growing if not stagnating countries (excluding Germany where it's difficult to eliminate the impact of the fact that the East German economy almost ceased to exist in that period) increased their CO2 emissions by 4 percent.

The huge differences in these three figures -- +53 percent, -32 percent and +4 percent -- are fascinating. And yet, there is a dream among European politicians to reduce CO2 emissions for the entire EU by 30 percent in the next 13 years (compared to the 1990 level). What does it mean? Do they assume that all countries would undergo a similar economic shock as was experienced by the Central and Eastern European countries after the fall of Communism? Now in the whole of Europe? Do they assume that the economically weaker countries of Europe would stop their catching-up process? Or do they intend to organize a decrease in the number of people living in Europe? Or do they expect a miracle in the development of the emissions/GDP ratio, which would require a technological revolution of unheard-of proportions? With the help of a -- organized from Brussels -- scientific and technological revolution?

What I see in Europe (and in the U.S., and other countries as well) is a powerful combination of irresponsibility, of wishful thinking, of implicit believing in some form of Malthusianism, of a cynical approach by those who themselves are sufficiently well-off, together with the strong belief in the possibility of changing the economic nature of things through a radical political project.

This brings me to politics. As a politician who personally experienced Communist central planning of all kinds of human activities, I feel obliged to bring back the already almost forgotten arguments used in the famous plan-versus-market debate in the 1930s in economic theory (between Mises and Hayek on the one side and Lange and Lerner on the other), the arguments we had been using for decades -- until the moment of the fall of Communism. Then they were quickly forgotten. The innocence with which climate alarmists and their fellow-travelers in politics, and the media now present and justify their ambitions to mastermind human society belongs to the same "fatal conceit." To my great despair, this is not sufficiently challenged, neither in the field of social sciences, nor in the field of climatology. Especially the social sciences are suspiciously silent.

The climate alarmists believe in their own omnipotency, in knowing better than millions of rationally behaving men and women what is right or wrong, in their own ability to assemble all relevant data into their Central Climate Change Regulatory Office (CCCRO) equipped with huge supercomputers, in the possibility to give adequate instructions to hundreds of millions of individuals, and institutions and in the non-existence of an incentive problem (and the resulting compliance or non-compliance of those who are supposed to follow these instructions).

We have to restart the discussion about the very nature of government and about the relationship between the individual and society. Now it concerns the whole of mankind, not just the citizens of one particular country. To discuss this means to look at the canonically structured, theoretical discussion about socialism (or Communism), and to learn the uncompromising lesson from the inevitable collapse of Communism 18 years ago. It is not about climatology. It is about freedom. This should be the main message of our conference. *

"Liberalism is so impressed with its own brilliance that results apparently don't matter." --Brent Bozell

Opening Remarks at the 2008 International Conference on Climate Change

Joseph L. Bast

Joseph Bast is President of the Heartland Institute (www.heartland.org). The next four articles cover the events of the 2008 International Conference on Climate Change that took place in March in New York City. All four of the following articles are republished with the gracious permission of Joseph Bast and the Heartland Institute.

Good evening, and welcome to the 2008 International Conference on Climate Change. I am Joseph Bast, president of the Heartland Institute, and along with James Taylor, I will be your co-host tonight and for the next two days.

This dinner kicks off a truly historic event, the first international conference devoted to answering questions overlooked by the Intergovernmental Panel on Climate Change. We're asking questions such as:

* How reliable are the data used to document the recent warming trend?
* How much of the modern warming is natural, and how much is likely the result of human activities?
* How reliable are the computer models used to forecast future climate conditions?
* Is reducing emissions the best or only response to possible climate change?

Obviously, these are important questions. Yet the IPCC pays little attention to them or hides the large amount of doubt and uncertainty surrounding them.

Are the scientists and economists who ask these questions just a fringe group, outside the scientific mainstream? Not at all. A 2003 survey of 530 climate scientists in 27 countries, conducted by Dennis Bray and Hans von Storch at the GKSS Institute of Coastal Research in Germany, found:

* Eighty-two percent said global warming is happening, but only . . .
* Fifty-six percent said it's mostly the result of human causes, and only . . .
* Thirty-five percent said models can accurately predict future climate conditions.

Only 27 percent believed "the current state of scientific knowledge is able to provide reasonable predictions of climate variability on time scales of 100 years."

That's a long ways from "consensus." It's actually pretty close to what the American public told pollsters for the Pew Trust in 2006:

* Seventy percent thought global warming is happening . . .
* Only 41 percent thought it was due to human causes . . .
* Only 19 percent thought it was a high-priority issue.

The alarmists think it's a "paradox" that the more people learn about climate change, the less likely they are to consider it a serious problem. But as John Tierney with The New York Times points out in a blog posted just a day ago, maybe, just maybe, it's because people are smart rather than stupid.

And incidentally, 70 percent of the public oppose raising gasoline prices by $1 to fight global warming, and 80 percent oppose a $2 a gallon tax increase, according to a 2007 poll by The New York Times and CBS News.

I've got news for them: Reducing emissions by 60 to 80 percent, which is what the alarmists claim is necessary to "stop global warming," would cost a lot more than $1 a gallon.

The United Nations, environmental groups, and too often the reporters who cover the climate change debate are the ones who are out of step with the real "consensus." They claim to be certain that global warming is occurring, convinced it is due to human causes, and 100 percent confident we can predict future climates.

Who's on the fringe of scientific consensus? The skeptics, or the alarmists?

These questions go to the heart of the issue: Is global warming a crisis, as we are so often told by media, politicians, and environmental activists? Or is it moderate, mostly natural, and unstoppable, as we are told by many distinguished scientists?

Former Vice President Al Gore has said repeatedly that there is a "consensus" in favor of his alarmist views on global warming. And of course, he's not alone.

Two weeks ago, Jim Martin, executive director of the Colorado Department of Public Health and Environment, when told of our conference, said, "You could have a convention of all the scientists who dispute climate change in a relatively small phone booth." (Denver Post, February 12, 2008).

RealClimate.org predicted that no real scientists would show up at this conference. Well . . .

We have with us, tonight and tomorrow, more than 200 scientists and other experts on climate change, from Australia, Canada, England, France, Hungary, New Zealand, Poland, Russia, Sweden, and of course the United States.

They come from the University of Alabama, Arizona State, Carleton, Central Queensland, Delaware, Durham, and Florida State University.

From George Mason, Harvard, The Institute Pasteur in Paris, James Cook, John Moores, Johns Hopkins, and the London School of Economics.

From The University of Mississippi, Monash, Nottingham, Ohio State, Oregon State, Oslo, Ottawa, Rochester, Rockefeller, and the Royal Institute of Technology in Stockholm.

And from the Russian Academy of Sciences, Suffolk University, the University of Virginia, Westminster School of Business (in London), and the Wharton School at the University of Pennsylvania. And I apologize if I left anyone out.

These scientists and economists have been published thousands of times in the world's leading scientific journals and have written hundreds of books. If you call this the fringe, where's the center?

Hey Jim Martin, does this look like a phone booth to you?

Hey RealClimate, can you hear us now?

These scientists and economists deserve to be heard. They have stood up to political correctness and defended the scientific method at a time when doing so threatens their research grants, tenure, and ability to get published. Some of them have even faced death threats for daring to speak out against what can only be called the mass delusion of our time.

And they must be heard, because the stakes are enormous.

George Will, in an October Newsweek column commenting on Al Gore's Nobel Peace Prize, wrote that if nations impose the reductions in energy use that Al Gore and the folks at RealClimate call for, they will cause "more preventable death and suffering than was caused in the last century by Hitler, Stalin, Mao, and Pol Pot combined."

It takes only four Norwegian socialist members or ex-members of Parliament to win a Peace Prize, so I'll put George Will's Pulitzer Prize and his recent Bradley Prize up against Gore's Nobel any day.

You've probably read some of the attacks that have appeared in the blogosphere and in print directed against this conference, and against the Heartland Institute. Let me repeat for the record here tonight what appears prominently on our Web site:

* No corporate dollars were used to help finance this conference.
* The Heartland Institute has 2,700 donors, and gets about 16 percent of its income from corporations.
* Heartland gets less than 5 percent of its income from all energy-producing companies combined. We are 95 percent carbon free.

And let me further add to the record:

* The honoraria paid to all of the speakers appearing at this conference add up to less than the honorarium Al Gore gets paid for making a single speech, and less than what his company makes selling fake carbon "off-sets" in a week.
* It is no crime for a think tank or advocacy group to accept corporate funding. In fact, corporations that fail to step forward and assure that sensible voices are heard in this debate are doing their shareholders, and their countries, a grave disservice.

We're not doing this for the money, obviously. The Heartland Institute is in the "skeptics" camp because we know alarmism is a tool that has been used by opponents of individual freedom and free enterprise since as early as 1798, when Thomas Malthus predicted that food supply would fail to keep up with population growth.

We opposed global warming alarmism before we received any contributions from energy corporations and we'll continue to address it after many of them have found ways to make a fast buck off the public hysteria.

We know which organizations are raking in millions of dollars a year in government and foundation grants to spread fear and false information about climate change. It's not The Heartland Institute, and it's not any of the 50-plus co-sponsoring organizations that helped make this conference possible.

The alarmists in the global warming debate have had their say -- over and over again, in every newspaper in the country practically every day and in countless news reports and documentary films. They have dominated the media's coverage of this issue. They have swayed the views of many people. Some of them have even grown very rich in the process, and others still hope to.

But they have lost the debate.

Winners don't exaggerate. Winners don't lie. Winners don't appeal to fear or resort to ad hominem attacks.

As George Will also wrote, "people only insist that a debate stop when they are afraid of what might be learned if it continues."

We invited Al Gore to speak to us tonight, and even agreed to pay his $200,000 honorarium. He refused. We invited some of the well-known scientists associated with the alarmist camp, and they refused.

All we got are a few professional hecklers registered from Lyndon LaRouche, DeSmogBlog, and some other left-wing conspiracy groups. If you run into them over the course of the next two days, please be kind to them, and call security if they aren't kind to you.

Skeptics are the winners of EVERY scientific debate, always, everywhere. Because skepticism, as T. H. Huxley said, is the highest calling of a true scientist.

No scientific theory is true just because a majority of scientists say it is. Scientific theories are only provisionally true until they are falsified by data that can be better explained by a different theory. And it is by falsifying current theories that scientific knowledge advances, not by consensus.

The claim that global warming is a "crisis" is itself a theory. It can be falsified by scientific fact, just as the claim that there is a "consensus" that global warming is man-made and will be a catastrophe has been disproven by the fact that this conference is taking place.

Which reminds me . . . the true believers at RealClimate are now praising an article posted on salon.com by Joseph Romm -- a guy who sells solar panels for a living, by the way -- saying "consensus"? We never claimed there was a "consensus"!

And notorious alarmist John Holdren a couple weeks ago said "global warming?" We never meant "global warming." We meant "global climate disruption"!

I'd say this was a sign of victory, but that would suggest their words and opinions matter. It's too late to move the goal posts, guys. You've already lost.

It is my hope, and the reason the Heartland Institute organized this conference, that public policies that impose enormous costs on millions of people, in the U.S. and also around the world, will not be passed into law before the fake "consensus" on global warming collapses.

Once passed, taxes and regulations are often hard to repeal. Once lost, freedoms are often very difficult to retrieve. *

"These days Democrats are not sounding very liberal. Classic liberals, after all, would support free markets, internationalism and the universal desire for constitutional government, while downplaying racial affinity." --Victor Davis Hanson

Friday, 20 November 2015 13:19

P. T. Barnum's Rules for Success in Business

P. T. Barnum's Rules for Success in Business

Clifford F. Thies

Clifford F. Thies is the Eldon R. Lindsay Professor of Economics and Finance at Shenandoah University. This article was a presentation to the Clarke County Rotary Club.

P. T. Barnum (1810 -1891) is most famous for something he did not say, "There's a sucker born every minute." He was, by far, the greatest showman of his day and the greatest huckster. He turned the exhibition of curiosities into an art form that he described as "The Greatest Show on Earth." And, more than anyone else, he turned entertainment into a business.

Among the more famous freaks he introduced to the American public were Tom Thumb and the original Siamese Twins (Chang and Eng Bunker). His shows were laced with humor, as well as oddity, such as his exhibit of "A Man Eating Chicken," which consisted of a man eating chicken.

During the 1850s, Barnum brought the beautiful young singer Jenny Lind, the Swedish Nightingale, to America. To bring her to America, Barnum had to advance her $200,000, or in today's money, $5 million, and by the time she was finished with her tour, she had earned $3 million, or in today's money, $80 million. Barnum made perhaps five times this amount, not only from the concerts, but from franchising the Jenny Lind name. It appeared on products from music and pianos to furniture and clothing. Her name even appeared on candy wrappers.

Jenny Lind sang a range of songs, from opera to folk songs, in several languages, and was accompanied by a full orchestra and other singers. Some of her songs showcased her talents, as ''The Echo Song," in which she seemed to sing in two voices simultaneously. When she sang "I Know my Redeemer Liveth" from "The Messiah," it was a conversion experience. And, when she closed her performance, with a beautifully sung simple song such as "Home Sweet Home," a cappella, she left the audience stupefied.

Barnum also built the forerunner of Madison Square Garden. It featured everything from religious revivals to "boxing exhibitions" (boxing having been illegal in New York at the time).

As for the statement attributed to him, it arose from a libel suit against him by another exhibitionist. The other exhibitionist was charging people $1 to look at what he claimed was a fossilized giant man of prehistoric times. Barnum attempted to buy the supposed fossil, but his offer was turned down. Barnum then had his own fake made and put it on display. He placed stories in various newspapers that the other exhibitionist was displaying a fake. Hence, the libel suit against Barnum.

When the trial got underway, the other exhibitionist -- who claimed that Barnum's business was based on the theory that "There's a sucker born every minute" -- admitted that Barnum was actually correct in saying that he was displaying was a fake. The judge then dismissed the libel suit.

Eventually, Barnum and a rival, James Bailey, formed the traveling circus still in business as The Ringling Brothers, Barnum and Bailey Circus. It featured exotic animals, clowns and other circus performances and, of course, side shows.

Barnum shamelessly promoted himself through a series of autobiographies. Indeed, his autobiography was the second most widely sold book of the 19th century, following only The Bible.

Whatever the merits of his ventures, Barnum was a highly successful businessman. The following are the rules he once listed as his rules for success in business.

1) Select the kind of business that suits your natural inclinations Blockquote: and temperament.
2) Let your pledged word ever be sacred.
3) Whatever you do, do with all your might.
4) Use no description of intoxicating drinks.
5) Let hope predominate, but be not too visionary.
6) Do not scatter your powers.
7) Engage proper employees.
8) Advertise your business.
9) Avoid all extravagance and always live considerably within your income.
10) Do not depend on others. Your success must depend upon your own exertions. *

"All that the law can do is to shape things so that no injustice shall be done by one to the other, and that each man shall be given the first chance to show the stuff that is in him." --Theodore Roosevelt

Friday, 20 November 2015 13:19

Letter to the Editor:

Letter to the Editor:

W. G. Thompson

Dear Editor:

Of all the pronouncements by politicians and editorialists about government medicine, I have found only one person who has expressed the concerns of physicians. This exception was Angus MacDonald in the December issue of The St. Croix Review. Please allow me to expand upon his identification of a serious problem.

It would be impossible to have statistics about future events. I will base my assumptions on 32 years of private practice and my own attitudes. Mr. MacDonald tells of five physicians who changed jobs ahead of the problem. Five is a tiny number compared to the many doctors of near-retirement age who may quit as the government takes over. Younger men and women will follow suit as they become aware of government interfering in both medical and business decisions. A number of other physicians will look elsewhere when they find their income is determined by socialism but their office expenses continue to be capitalistic.

There will also be discontent as a number of physicians will find themselves having demands made by "I have my rights and I am a taxpayer" attitudes.

Who will take up the slack? The obvious answer is nurse practitioners and physician assistants. There are two thoughts about this. First, fully-trained physicians make errors in ideal care. How will these ancillary healthcare people, as good as many are, do with only five percent of the training?

Another source of medical care is by foreign physicians. The few I've met have all seemed quite capable. Two points are worth bringing up. Americans converse partly with slang and idioms. How well can foreign physicians communicate? Secondly is the concern, maybe groundless, of how Middle East doctors will relate to American women.

A much more serious problem looms in the future. It takes excellent grades in some difficult areas (think organic chemistry) to be accepted to medical school. Will young men and women, most of whom can handle any college curriculum, desire a career as a government employee when the sky is the limit as to income in a number of other fields?

Will there be a reduction in the quality of applicants to medical school? Will the quality of physicians decline as medical schools reach deeper into the list of applicants to fill their classes?

There are many sides to the problem of medical care supply and financing. Smart people need to work on the many choices, but should not exclude the physicians.

W. G. Thompson, M. D.

Friday, 20 November 2015 13:19

The Housing Adjustment -- Editorial

The Housing Adjustment -- Editorial

Angus MacDonald

The stimulus package being offered by the federal government to almost everyone was initiated because would-be owners of homes have not been able to pay their mortgages. Financial institutions in the U.S. have lost about $170 billion as of February 2008. These losses create a negative market for genuine business credit.

Alan Greenspan has written that the present financial crisis is the gravest since the end of World War II and will end only when home prices stabilize. Builders and investors have built about 800,000 vacant, single-family homes, waiting to be sold. Hundreds of thousands have moved into rental housing.

To ease the crisis our politicians from both parties, including President Bush and House Speaker Nancy Pelosi, created a stimulus package, and are ecstatic about the good that will be done. Individuals will get $600 and couples $1,200. There will be $300 for each child. Those who earn up to $75,000 a year, or $150,000 as a couple, will be eligible for the payments. Nancy Pelosi says that about 116 million American families will get rebates.

I doubt if the money being sent will be used to pay mortgages. A one-time check of $1,200 is not much in relation to the cost of a home. A lot of people would prefer a trip to Florida in the winter. Our family paid for our home years ago and does not need another $1,200 for that purpose. One thing is sure. We shall not spend it. My ambition for the rest of my life is to spend nothing. If we find a sound vehicle for savings that would increase the ability of an entrepreneur to get some needed capital that would be a good use of the money.

The effect of the stimulus package will do little if anything for the mortgage crisis and will, instead, create inflation. Cheapening the value of the dollar, we are in effect being taxed further while we are told we are getting a gift. Politicians are not consciously dishonest but are carried away by dreams of euphoria so they lose common sense. We want the nicest help we can have, and the banks want us to have this niceness, but when the roof collapses the banks and citizens are in deep trouble. At the moment, the roof has collapsed in the housing market and will not be corrected until houses lose value to where they can be bought and sold.

Many individuals and many investors and many banks will lose money and perhaps become bankrupts. There is no way around it. Giving a stimulus to those who are irresponsible is to be irresponsible.

We are a democracy, but when popularity becomes the law of the land democracy cannot stand. Simple honesty and individual responsibility are the only foundation that will give a lasting basis, individually and collectively. On the other hand, I am not convinced that the average citizen lacks intelligence and character. If he is given the facts by honest and informed politicians and journalists he will choose with wisdom. Our young men don't hesitate to give their lives for their country in a time of war and they will do the same if the need is to get us on a sensible financial basis. It is not necessary that they give their lives but it is necessary that they preserve common sense and live within their income. We must not ask politicians to bail us out. We have to recover from our errors.

Some years ago, when I lived in Toledo, I visited with a friend as we looked at splendid homes in that city. My friend remarked that a lot of owners of these splendid homes could not afford them.

The inability of borrowers to pay their mortgages has to be the responsibility of lending institutions. That is obvious. Why have they been so foolish? And for many years? Mathematically, a new house does not have to be built until births are greater than deaths. If we have one house for every couple, we have enough. Some houses in Europe, and even in the United States, are centuries old and have housed many generations of a single family.

Houses are built beyond need because some people like to avoid extremes of climate, as summer vacation resorts, because they have the money, and houses have been a sound investment for a long time. Investment companies have agreed with the sentiments of would-be buyers and have extended credits to those with insufficient income or credit history. Mistakes have been made by dreams of euphoria.

A home is a sanctuary where a family gathers to live properly, with love and respect for each other, looking to the future when each member will look back and know that is where he learned to be a good person. We do not need more homes but more sanctuaries. Technically, we do not need more homes than we have of increased births. Homes may be old and delightful. That is how it is in old societies. A home is more than an investment that will increase in value.

We should only buy what we can afford and what we need, and we must listen to salesmen with caution. Salesmen are interested in their incomes, not ours. One called me today, insisting that I buy some stock costing $40. He ignored my refusal and forced me to hang up. Rudeness is bad but being forced to be rude is also rude. *

"Nothing happens without a reason, but all things occur for a reason, and of necessity." --Leucippus, of Miletus, 435 B.C.

Some of the quotes following each article have been gathered by The Federalist Patriot at: http://FederalistPatriot.US/services.asp.

Friday, 20 November 2015 12:58

The Economic Function of Colleges Today

The Economic Function of Colleges Today

Joseph S. Fulda

Joseph Fulda is a freelance writer living in New York City. He is the author of Eight Steps Towards Libertarianism.

"Purpose" is subjective and there are as many purposes for colleges as there are students, faculty, and administrators. But "function" is an objective matter, which wells out from all these purposes taken collectively. The purposes of the majority of players, in number and in funds, decide how those purposes play out in terms of actual social function. Let us speak plainly. Administrators routinely tout their institutions as career builders and paths to shining success -- and as fun places to spend four years. Thus, Directors of Admission have become Vice Presidents for Enrollment Management, and Deans of Students have been replaced or supplemented by Vice Presidents for Student Affairs. Students buy into this combo big-time. Overwhelmingly they attend colleges as career builders and as hoped-for paths to possible shining success -- while, hopefully, having a long and enjoyable ride.

Faculty, on the other hand, to a man and to a woman, are there to teach modes of critical thinking, reading, writing, and discrete bodies of knowledge, which they find both interesting and important. With a few exceptions, if truth be told, students are right on-target with the claim that hardly anything specific they learn in school will be of more than marginal use in a job or a career, a distinction often made which does not hold water. White-collar jobs, which is where most students will and hope to end up, require a plenitude of skills -- the most critical being proficiency with Microsoft Office, but most of these are learned or assimilated -- quickly or not -- on-the-job.

Yet students keep coming back for more, and faculty keep teaching critical skills and bodies of knowledge. And, it works! The holders of degrees do earn more, considerably more over a lifetime. Why? I suggest the following hypothesis. The main lesson students need to learn for the world of white-collar work is neither knowledge nor skills, but the single overriding necessity of maintaining attentional focus for extended periods of time on detailed matters that do not interest them. College provides most students with huge doses of this skill. The better workers will eventually devote enough focus and attention to their companies' goals as to become genuinely interested. These are the same workers who as students manage to fall into enough of their professors' nets to get genuinely interested in whatever is being taught. College is a four-year obstacle course which demonstrates to employers that graduates can, in greater or lesser degree, make the agenda of their employers -- like that of their professors before them -- their own. In this, it succeeds admirably.

Along the way, however, some students at most universities and many students at a few universities do much more than gain a semester's interest in a subject to which they were initially indifferent. These students begin to adopt the attitude of their teachers in finding academic subjects overwhelmingly intriguing, and they go on to get Ph.D.s. The normal function of college has failed utterly for these students; they cannot focus and maintain attention on the myriad of mundane, uninteresting tasks in which some company expects them to acquire (at least the illusion of) interest. Instead, these students really have only one option open to them, to focus on what they are interested in, an agenda of inquiry of their own making, normally possible (almost) only in an academic environment. This explains the overwhelming success of U.S. colleges and universities at producing excellent white-collar workers with bachelors' degrees and simultaneously a large number of Ph.D.s who are genuinely fit for no work other than as academics. It also explains, I think, why many Ph.D.s who are denied intellectual work the nature of which they can, at least in part, shape, choose not white-collar jobs on which they truly cannot focus, but instead service or blue-collar jobs which require a host of skills that notably exclude the main lesson that is taught to most college students -- the ability to maintain attention and focus on a myriad of uninteresting-to-them details -- the classic example being the taxi driver with the doctorate.

Thus, students are right when they say "the stuff" they're taught doesn't matter in (work) life, and right when they say a degree is important to getting a job; professors are right when they say that attending (in) class and doing homework is critical to students' success in life; and administrators are right in the way they depict their institutions. Everyone is "right" in the sense relevant to them, although no one has the whole picture figured out quite right yet. The above is one man's attempt. *

"Nothing fails like success because we don't learn from it. We learn only from failure." --Kenneth Boulding

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