On November 1, 2010, Bloomberg News put together a debate on the resolution Big government is stifling the American spirit.

The debate participants were Arthur Laffer, Phil Gramm, Nouriel Roubini, and Laura Tyson.

I thought this debate might be a counter to Faux News’ so-called fair and balanced propaganda.

The Bloomberg version of fair and balanced is to pit Arthur Laffer, Phil Gramm, and Laura Tyson for the resolution against Nouriel Roubini who argued against the resolution. This description of a three against one debate sounds imbalanced, but that is not the half of it.  They pretend that LauraTyson is on the same side of the issue as Nouriel Roubini.  So they have two coordinated proponents of the resolution and they put a double agent on the other side as one of the people purportedly arguing against the resolution.

Nouriel Roubini gets to throw a few damaging punches and then the other three get to throw punches on the other side.  I can see that Roubini is a good debater and really gets to the heart of the matter, but after seeing 20 minutes of this 51 minute debate, I am wondering if he can win in this lopsided debate.  I’d vote for Nouriel Roubini for President if he can pull this off.  Unfortunately, Nouriel  Roubini is not eligible to run for President because he was born in Istanbul, Turkey to Iranian parents.

I finished watching the debate. It turned out to be pretty much a Phil Gramm against empty air debate. Surprise, surprise, he won. This despite the fact that he was the proximate cause of our recent financial disaster with his repeal of the Glass-Steagal act that he pushed through Congress while he was a Senator. He managed to spew more misinformation than anybody could have corrected had they been given equal time. Of course they were not given equal time.

To be fair, perhaps someone ought to have turned the debate into one about which big government policies stifle and which promote the American spirit.

Someone could have picked on the deregulation of the financial markets as a policy that stifles the American spirit. The unfair promotion of rewards for manipulating financial instruments relative to the rewards for invention, manufacturing real goods and services, and promoting the elevation of the skills of our work force is a real stifling of the American spirit. Some of our most talented, inventive, educated, and skilled people go into the profession of money manipulation instead of engineering, science, and manufacturing, because that is where people like Phil Gramm have shifted the balance of financial rewards.

Phil Gramm’s argument is akin to his watching a boxing match where one fighter uses every dirty and illegal practice in the book while the other boxer is trying to fight fairly and within the rules. It has been fixed that the referee will stand back and do nothing to enforce the rules. If he were true to his position in this debate, Phil Gramm would say that the referee is good for the sport of boxing because he is not stifling any boxer’s spirits.

Phil Gramm effectively fixed it so that the financial regulators would stand back and do nothing while the bankers and pseudo-bankers robbed the economy of its wealth. I suppose Gramm would take some of the loser’s share of the gate in the boxing match and give it to the dirty fighter so as to lift his spirits.

The audience in this debate just lapped it up. They couldn’t figure out for themselves what a charlatan Gramm is. They were not even upset at Arthur Laffer’s condescension to the audience when he claimed to simplify his argument so that it would not go over their heads.. And Bloomberg thinks this is an intelligent debate.

The article Volcker Sidelined as Obama Reshapes Economic Advisory Panel, is just one article in a long list that indicates to me that the Obama administration has gone completely off the rails.

Volcker, known for taming inflation in the 1980s, was disappointed with the way his advisory group became a public relations tool for the White House as its meetings with the president were televised live, making honest discussion difficult to conduct, the person familiar with his views said.

Volcker had rocky relations with Obama’s top economic staff from the start. Although the former Fed chief was in Obama’s circle of advisers early in the 2008 election campaign, he lost much of his influence when the newly elected president chose Lawrence Summers to head his National Economic Council.

The above two quotes may indicate that the derailment may be nothing new.  The frightening thing is that these moves separate Obama from any of the people who might have put the train back on the track.

Either someone has gotten to Obama so that he has taken complete leave or his senses, or as I feared, his time at the University of Chicago has corrupted his mind when it comes to economic policy.  Of course there really are other possibilities that I have not thought of to explain the loss of the Obama administration.

Bloomberg has two interesting interviews, December 16, 2010 Nouriel Roubini Interview on Economy and December 17, 2010 Taleb Interview on U.S. Economy, New Book.

In the Roubini interview, one of the key explanations by Nouriel Roubini is the following:

We need the fiscal austerity because otherwise there is a fiscal train wreck but unfortunately in the short run raising taxes and cutting spending makes the recession worse. It makes a vicious circle of deflation and recession. Same things for the structural reforms. You have to fire workers, you have to close down firms and move resources to the other sector in the short run that is deflationary. And if you don’t have growth you have two problems. One is social and political, the backlash against it – revolts, demonstrations, strikes, free governments falling.  And the other one is economic.  You have to stabilize debt and deficit in the private and public sector as a share of GDP, but if GDP keeps on falling stabilizing those things becomes mission impossible. So you have to restore economic growth, because without it the condition for doing these things is going to fail.

It would be easy for someone listening to the interview to take away the lessons of his long term prescriptions without remembering what is needed to get past the short run problems.  If you take only the second prescription without first taking the short run prescription, you are doomed to failure as he says in the above quote.

What you get out of Taleb requires more interpretation and filling in the gaps on the listeners part.  For that reason, there is less practical advice in the Taleb interview.  If you have the knowledge to fill in those gaps, you might get more out of Taleb than I have hinted at here.

To understand the significance of the title of Taleb’s new book, The Bed Of Procrustes: Philosophical and Practical Aphorisms, it helps to have the explanation of Procrustes from WikiPedia.

In the Greek myth, Procrustes was a son of Poseidon  with a stronghold on Mount Korydallos, on the sacred way between Athens and Eleusis. There, he had an iron bed in which he invited every passer-by to spend the night, and where he set to work on them with his smith’s hammer, to stretch them to fit. In later tellings, if the guest proved too tall, Procrustes would amputate the excess length; nobody ever fit the bed exactly because secretly Procrustes had two beds.  Procrustes continued his reign of terror until he was captured by Theseus, travelling to Athens along the sacred way, who “fitted” Procrustes to his own bed:

“He killed Damastes, surnamed Procrustes, by compelling him to make his own body fit his bed, as he had been wont to do with those of strangers. And he did this in imitation of Heracles. For that hero punished those who offered him violence in the manner in which they had plotted to serve him.”

Killing Procrustes was the last adventure of Theseus on his journey from Troezen to Athens.

If Roubini and Taleb spoke more slowly and put in all the words in their sentences, it might be easier for people to understand all the nuances of what they are saying.  To get the Roubini quote above, I replayed the segment of the interview many times to transcribe his words.  Few people will have the time or patience to do that.  More’s the pity. (Perhaps, as per Taleb’s book excerpts, Taleb would call me a nerd for trying to explain.)

I was going back to Bloomberg to find the interview with Mario Gabelli to post here in order to demonstrate my even handedness (fair and balanced) when I stumbled across this video. It may serve a purpose similar to the Gabelli interview.

November 12, 2010 (Bloomberg) Taleb Interview on Bernanke, QE.

The interview is introduced by Erik Schatzker on Bloomberg Television’s “Inside Track,”

The ink was barely dry on the FED statement last week announcing QE2 when a distressed email lit up my inbox “Something needs to be done about Bernanke” and it was from none other than Nassim Taleb.

I am having a devil of a time trying to reconcile what he is saying with my preconceived notions. He keeps going in and out of focus in my mind. I think what he says at the end of the interview does bring him back into focus without having to cut off his head to fit him into my Procrustean bed.

These tips are not only for parents. As a sufferer from depression, Therese J. Borchard, the author of the book Beyond Blue: Surviving Depression & Anxiety and Making the Most of Bad Genes has some good insights. The interviewer has some good ideas herself.

There is also a Beyond Blue Blog and a Beyond Blue Community.

Forbes.com web site has a very good interview with John Bogle, founder of the Vanguard Mutual Fund company.

Bogle always has sensible advice.  I only wish I had the courage to follow it.  I make this post so that I can remember the link to the interview.  I may go back and read it a few times so that I can contemplate really following his advice for once.

Chris Barth, Forbes: One of the topics you cover in your latest book is “What’s Wrong With Mutual Funds.” That seems like a strange idea to push, given that you are the founder of one of the world’s largest mutual fund companies. So what is wrong with mutual funds?

John C. Bogle: Well, let me start off by saying that’s the reason that in the subtitle of the book, I have the word mutual in quotation marks, and a lot follows from that. Because mutual funds are not mutual. That is, just in general. Vanguard happens to be the only exception to that rule–we can talk about that a little later on, maybe. But in any event, they’re not mutual. Entrepreneurs or international conglomerateurs, or large financial institutions buy or create mutual fund management companies to create a return on their own capital. It’s capitalism at work, where the rewards tend to go to the managers rather than the investors.

And that’s why we have a big problem with fees, we have a big problem with mutual fund governance, we have a big problem with mutual funds participating in the governance of our industrial corporations and other kinds of corporations in the U.S. They don’t take the responsibility for ownership, because that doesn’t produce any returns for the owners of the management companies. Curiously enough, that idea of “mutual” funds was originally mentioned in a speech by Emmanuel Cohen, who was a wonderful chairman of the SEC, a long, long time ago. His speech on mutual funds that’s referenced in the book was maybe in 1960 or something like that. So he saw it then, and I see it now. And the reason I created Vanguard was to create a truly mutual mutual fund.

There are also valuable comments on the state of the economy, politics, and this country.

Here is one quote that is not related to his usual advice of investing in low cost index funds.

Only in America can we name a loose monetary program after a mothballed luxury liner, the Queen Elizabeth II. And only in America can we name a panel to investigate the causes of the stock market collapse and pass a law six months before they make their report. Some of the stuff that goes on out there is a little bit nutty, let’s face it. And my guess is that quantitative easing is the wrong move. My own personal conviction is that we should be doing more fiscal stimulus than monetary stimulus. And we see in the performance of the market after the announcement that QE2 was coming along, that interest rates did not go down, they went up very perversely. And that story is still to be fully written, but the initial impulses are not good.

Apparently it is too hard to prove, in a court of law, the bribery of our Federal Government officials and staff members.  So there is probably little hope of reforming the system by toughening bribery laws.

President Obama has tried to impose rules for members of his administration from immediately upon leaving government  taking a job with a company with which they dealt while in the administration.  This is not enough, because it does not cover enough people and it is not a big enough deterrent.

I suggest that a law be implemented which says that any earnings a federal elected official, appointed official, or staff member gets from eventually working for a company that gained a benefit from legislation or executive or judicial rule making be taxed by the Federal Government at a rate of 90% with no deductions allowed.  It could also be made a federal crime to try to disguise any such earnings so as to try to make them appear to not be earnings from such a company.  There could be a separate bureau in the IRS to monitor the earnings of former federal  legislators, executives, and judges.

This rule alone would cut the sweetheart deals that corporations get to such an extent that our deficit problems would practically solve themselves.  Any money the Federal Government would earn from the tax would just be gravy.

By comparison to the case of the oil billionaire in Russia, Khodorkovsky, our outrage ought not be that he was prosecuted because he was a political foe of Vladimir Putin.  Our outrage ought to be that friends of Putin do not get prosecuted for similar crimes.  We then ought to turn our outrage on the prosecution of people in this country for being foes of the party in power or the lack of prosecution for friends of the party in power.

I was looking at theREALnews web site’s list of best stories in 2010. The first story I looked into was Obama Big Pharma Deal (Devastating Video) by Cenk Uygur of The Young Turks.

Perhaps the most galling part of this presentation is that a huge part of the $4 or $5 trillion dollars that needs to be cut from the budget in the next ten years was given away to the pharmaceutical industry in the health care “reform” bill just passed this year.

A quick second on the galling scale is the multiple ways that Congress, the President, and the staff of the executive and legislative branches are being bribed by industry, the phramaceutical industry in particular in this presentation.

I’d have to rate the third place on the galling scale to this behavior being exactly what Obama promised to stop while he was running for President. (The above video shows you Obama saying this in front of an audience.)