April 4, 2009

AP: Insensitivity toward immigrants caused Binghamton Massacre

The Associated Press reports:
The man who police say killed 13 people in a shooting rampage inside an immigrant community center was depressed and angry over losing his job and about his poor English skills, the Binghamton mayor and police said Saturday.

Police Chief Joseph Zikuski told NBC's "Today" that people "degraded and disrespected" the gunman over his poor English. Mayor Matthew Ryan, speaking on ABC's "Good Morning America," said the man, believed to be 42-year-old Vietnamese immigrant Jiverly Voong, was angry about his language issues and his lack of employment.

You know, you gotta give credit where it's due: this one was a real challenge to give the proper anti-anti-immigration spin to, but let them have a day to work on it, and they're now starting to get some English on the ball.

P.S. The LA Times reports that the 42-year-old shooter worked for nearly seven years as a sushi deliveryman in the LA area, and by the end of his sushi delivery career in 2007, he'd worked himself all the way up to $9 per hour.

It's just swell to be an unskilled laborer in LA.

My published articles are archived at iSteve.com -- Steve Sailer

Award-winning economist: I'm ignorant about my purported specialty and I intend to stay that way

From the NY Times's Freakonomist blog:

Last week, we solicited your questions for award-winning Oxford University economist Paul Collier, author of The Bottom Billion and the just-published Wars, Guns, and Votes: Democracy in Dangerous Places.

In his answers below, Collier talks about why the impact of colonialism on Africa is exaggerated, how African countries are “too big to be nations, yet too small to be states,” and his belief that the I.Q. of a country’s citizens is “not closely related to the performance of an economy.”

Collier received one unwelcome question:

Q. What do you think of Richard Lynn’s findings about race differences in intelligence and their relatedness to Africa’s continuing state of underdevelopment? In his work, Mr. Lynn compiled the results of numerous studies which appear to show fairly unambiguously that average I.Q.’s in sub-Saharan Africa are below 70. Studies furthermore show that this disadvantage is almost certainly inherited genetically. — Denis Bider

A. I don’t know this stuff and don’t want to. But I am just about prepared to believe that the average Chinese person is smarter than the average Englishman. Despite this, the average Englishman is more than 10 times richer than the average Chinese person — so intelligence is manifestly not closely related to the performance of an economy.

In other words, "Please don't Watson me! I'll be however stupid I have to be in order to keep my nice job at Oxford."

Ironically, the very low average IQs found in Africa can't all be genetic in origin because the gap between Africans (mean IQ of 70 according to dozens of studies) and African-Americans (mean IQ of 85 according to hundreds of studies) is as large as the gap between African-Americans and white Americans (100). Yet, African-Americans are no more than 20% white by genealogy.

Richard Lynn himself has repeatedly pointed to poor nutrition as one cause of low average IQs in some poor countries. We know of two micronutrients -- iodine and iron -- that can lower your IQ when not in sufficient supply in your diet. That's why in America salt is fortified with iodine and flour with iron. Extending these fortification programs to the Third World as a way to raise average IQ would probably give more bang for the buck than anything else.

My published articles are archived at iSteve.com -- Steve Sailer

April 3, 2009

Binghamton Immigration Massacre

You can imagine how the Mainstream Media was itching to start typing denunciations of hate-filled white male anti-immigration rednecks when the news came in today that 13 people had been shot dead at an immigration center.

Just like JFK's assassination set off the 1960s triumph of the Left because of the media's instant assumption that some rightwing redneck in Dallas had done it. (It eventually turned out that the shooter had defected to the Soviet Union, where he met his wife, who was then living with her uncle, a colonel in the secret police, but who remembers that?)

Well, it turns out that today's shooter was named Jiverly Voong. So, it's just another immigrant mass murder story that will disappear down the memory hole after some ritual calls for gun control. The VDARE.com blog has the details.

My published articles are archived at iSteve.com -- Steve Sailer

April 2, 2009

Shaming South Carolina

From an article in the New York Times, "Education Secretary Says Aid Hinges on New Data," about how Obama's Education Secretary Arne Duncan wants more data on school performance so he can shame states into performing better:

Speaking with reporters in a conference call, Mr. Duncan inadvertently demonstrated how the information collected from states could be used to try to shame educators and public officials into making changes.

Gov. Mark Sanford of South Carolina, a Republican who advocates issuing taxpayer-financed vouchers that parents can use to send their children to private schools, has told the Obama administration that he would not accept some $577 million in educational stimulus money for South Carolina unless he could use it to pay down state debt.

Mr. Duncan unleashed a barrage of dismal statistics about the South Carolina schools, noting that only 15 percent of the state’s black students are proficient in math ...

Oh, my gosh -- only 15% of black students in South Carolina are Proficient in math! Obviously, that's the fault of that racist Republican governor.

The funny thing is, though, that if you go look up the data for yourself on the handy federal National Assessment of Education Progress website, it says for black 8th graders:
"The percentage at or above Proficient in South Carolina (15) is higher than the National Public (11)."

South Carolina's black 8th graders rank 7th in the country at percent proficient in math -- a rather good performance for what's not a wealthy state.

In contrast, in Illinois, where Arne Duncan was in charge until very recently of many of the state's black 8th graders as Chicago Schools boss, only 7% are Proficient at Math, which is less than half South Carolina's figure. Illinois ranks 10th from the bottom on this measure that the Chicagoan data wizard chose to use to shame South Carolina.

Do you get the feeling that Duncan's not really going to make good use of additional data?

My published articles are archived at iSteve.com -- Steve Sailer

Do musicians tend to be skinny?

Martin Regnen wonders why musicians tend to be skinny:

I got talked into playing a last-minute sub gig yesterday which much to my surprise turned out to be a battle of the bands. That turned out to be an opportunity to do some amateur anthropological fieldwork. A dozen bands were competing, and I haven't seen that many non-orchestra musicians in one room at the same time. There were over 40 of them there, which suddenly made me realize just how different musicians are from non-musicians. I'm not counting myself as part of the sample, of course. Aside from the high frequency of black clothing (there was no band without at least one black shirt) and lots of hair (apparently 5 cm is very short for a male musician), the most striking thing was how skinny the guys were. The sample of women numbered only seven so there's not really much data there - too bad that I couldn't really test the pretty songbird hypothesis. ...

I have no idea why this is, but it's interesting that so many skinny guys were there. Steve Sailer has proposed that rock musicians might be thin because it's easier on their knees in the long run, but only a few of the bands played rock and just about everyone was much too young to have to deal with wearing their knees down. So the explanation has to lie elsewhere. It can't be just that guys who are no good at sports are attracted to music to boost their social standing - if that were it, there should be plenty of fatasses as well. Maybe young guys who spend money on instruments and amps just don't have much left for food? Then again, symphonies aren't really full of fat guys, either.

Does music somehow attract men with faster metabolisms? Or does anyone else have any ideas?

Was it always like this? Or did it change at some point? Was there some first role model of skinniness? Sinatra? The young Elvis? The British Invasion? Perhaps English lads born in the 1940s were undernourished as youths, so they stayed scrawny as young men, and that set a stereotype that has endured.

Or, perhaps there is something deeper here than mere fashion?

My published articles are archived at iSteve.com -- Steve Sailer

April 1, 2009

Teaser rate mortgage loans

Can anybody think of any reason why "teaser rate mortgages" where the borrower pays an extremely low interest rate for the first two to five years shouldn't be banned? Aren't these just ways to lure people who aren't good with Excel in over their heads into debt? Isn't home buying too massively serious for the kind of marketing gimmicks that are fine with cheaper products?

By the way, doesn't Obama's mortgage bailout plan feature five year teaser rates?

My published articles are archived at iSteve.com -- Steve Sailer

Democratization of Credit

A reader writes in response to my post about Thomas Geoghegan's article in Harper's calling for bringing back anti-usury laws:
I'm confused about your argument re: usury.

Isn't the scam that they charged too little for loans? That would be the case with AIG for sure, that they insured banks' assets for far too little. Rarely, it seems, does a crisis occur because the lender was too aggressive about charging for risk. Unless I'm missing something with your argument -- if anything, we need more usury.

Let me try to put the question in a more general context of the "democratization of credit" in return for higher interest rates, which has been a major trend in my lifetime.

But, first, I'll admit that the risk premiums for subprime loans were low -- a few percentage points -- compared to the much higher risk premiums seen for other kinds of loans to marginal borrowers. Presumably, this was because lenders assumed that they could get the collateral -- the house -- back from mortgage defaulters much more easily and profitably than they could get collateral back from, say, credit card defaulters. So, Geoghegan was, to some extent, using the mortgage meltdown to ride a hobbyhorse of his.

Still, Geoghegan has revived a very old perspective on human affairs that has been all but forgotten over the last few decades when "the democratization of credit" was the byword, and it's worth seeing what we can learn from that viewpoint.

I don't think what follows is by any means the full story, but the downsides of the democratization of credit is a line of thought that I, personally, just didn't pick up on during a rather conventional education in contemporary economic thought -- BA in Econ in 1980, MBA in Finance in 1982, long time reader of the WSJ op ed page after that, etc.

I could tell you all the arguments against anti-usury laws, but I couldn't tell you the arguments for them. I just assumed that protests against "predatory lending" were just economically ignorant and probably anti-Semitic to boot.

Now, I'm a pretty skeptical guy overall, who usually isn't bad at figuring the tradeoffs, the pros and cons, in various practices. I'm a staff guy by nature, who spent years telling CEOs stuff like: "If we do A, we'll come out ahead on X but behind on Y, while if we do B, we'll be worse off on X but better on Y, so, which do you choose?" And I didn't have any financial stake in high-interest lending. So, if I was a chump for the reigning zeitgeist that assumed that only anti-Semitic know-nothings used the word "usury," then how can I blame people in the financial business for falling for their own propaganda?

Here's what I've only recently figured out, after decades of thinking about economics.

Traditionally, there were legal or cultural limits on interest rates. Even though anti-usury laws and traditions were often perceived as a populist issue, it actually meant in practice that finance used to be much more elitist. If people in Arkansas got their state legislature to cap interest rates that New York banks could charge them, well, the New York banks would then lend only to the least risky Arkansawyers.

So, if you couldn't qualify for a prime mortgage, you didn't get a mortgage. If your corporation couldn't issue bonds above junk quality, no reputable investment bank would issue bonds for it. If you had a bad credit record, you couldn't get a credit card.

(Of course, this meant there existed a nether world of pawn brokers for the broke and loan sharks for the truly desperate or deluded.)

For example, up through the mid-1970s, respectable Wall Street investment banks wouldn't involve themselves in the issuance of corporate junk bonds. It just wasn't done. Now, some corporate bonds at the time did fall to junk ratings as their issuers teetered near default. The young Mike Milken did a study and found that these formerly solid but now junk bonds tended to be profitable to own, as long as you owned a wide enough portfolio to diversify away the threat of gambler's ruin.

So, Milken recruited hard-chargers from the fringes of the financial world to bid for publicly traded companies and promise to issue bonds that were junk from the get-go to pay off the takeover price. If they made the payments, then they wound up owning a fancy company. If they defaulted, well, it was back to the fringes for them after a few fun years of being big shots.

Similarly, this "democratization of credit" went on in credit cards, mortgages, student loans, and the like. "Why should laws and traditions restrict credit to yacht club members when willing lenders and willing borrowers could work out a mutually beneficial deal, just involving a few extra points?"

This was a widely appealing argument. Libertarians thought it made perfect sense. Business liked it because it meant more lending and more buying. Liberals liked it because it let poorer people buy more stuff. Leftwing community activists often started out protesting against "predatory lending" but would eventually figure out that if they succeeded in cutting down on lending, that meant no money for them. So, they would negotiate deals with financial institutions to provide them with "regulatory cover" that would call for more lending minorities. At least this way, the leftist activists could get a cut.

And, indeed, for many borrowers, this worked out fine: some of the old restrictions and traditions were too restrictive.

The problem was that you just couldn't push this practice of extending credit all that far, because the higher interest rates increased the chances of default even higher. So, you rapidly ran out of borrowers who were just moderately too risky under the old system, and soon reached potential borrowers who were walking time bombs under the sky-high interest rates that their low chances of paying back those sky-high interest rates demanded.

But, in modern finance, everything profitable gets pushed too far. The sons forget what their fathers painfully learned. Moreover, the entire literature of anti-usury argumentation was dropped down the Memory Hole because so much of it was either explicitly (e.g., Henry Ford's) or implicitly anti-Semitic (or, in Ezra Pound's case, anti-Semitic and crazy).

The destruction caused by lending to walking time bombs was amplified by the fact that, in general, the higher reaches of the financial world have traditionally treated debt as something where defaults are the exception to the rule. In contrast, pawn brokers have a perfectly reasonable way to deal with likely deadbeats -- they hold on to the physical collateral. But a financial world where the laws, regulations, customs, and institutions were built assuming that borrowers aren't going to default because anti-usury laws and customs denied loans to marginal borrowers is extremely vulnerable to erosion of the quality of borrowers, which the relaxation of limits on interest rates made profitable.

My published articles are archived at iSteve.com -- Steve Sailer

Next April Fools Day

You know what would be a cool April Fools Day tradition? If journalists in the Mainstream Media were allowed to print truths for one day each year without damaging their careers.

They could print headlines like:

“Neocon foreign policy advocates tend to be Jews obsessed with Israel”

“Blacks are better at basketball on average”

"Affluent whites like illegal immigration because they are scared of letting black service workers into their homes and yards"

But there would be a Carnaval-in-Rio-style exemption for anything you publish on April 1st that would keep you from getting kicked off JournoList. You’d have Plausible Deniability. Indeed, you could get all PC and huffy on your critics:

“Hey, it was just an April Fools Day prank. What, you were so naive as to believe that blacks are better at basketball? What are you? Some kind of racist? Only a racist wouldn’t realize that was just an April Fools joke! You're probably a racist deep-down. Racist! Racist!”

March 31, 2009

Thomas Geoghegan calls for anti-usury laws in Harper's

The print edition of Harper's has an article, "Infinite Debt," by the widely admired liberal Chicago lawyer Thomas Geoghegan calling for the restoration of laws against usury. It's not online, but Freddie at The League of Ordinary Gentlemen summarizes it at length here:
Geoghegan identifies the beginning of the instability and bubble/bust cycle that has come to dominate American finance as being a product of the United States essentially abandoning usury law in the 1970s. As Geoghegan points out, usury law (laws that regulate the kind of interest rates lenders can charge to their lendees) have been around in almost every civilization that has had a currency, stretching back thousands of years. And he points to this current crisis as a demonstration of the basic wisdom of [anti-]usury [laws].

Say the interest rate for prime customers is five percent. What higher interest rate would it take for lending to nonprime borrowers, with a substantial risk of default, to be profitable? For some it might take eight percent, for others 12 percent, for others 20 percent. You can see, though, that this interest rate starts heading upward at an ever-growing pace because the chance of default goes up as the interest rates go up.

Let's consider, for the sake of simplicity, a consol, a rare interest-only bond of infinite duration for which the principal is never paid back. Say I have a 10% chance of failing to make my 5% per year interest payments. So, nobody is going to lend to me at the prime rate.

What about charging me 15% per year to cover your 5% profit margin and my 10% chance of default? Swell, except now my risk of defaulting isn't 10%, it's a higher number, so I need to be charged an even higher interest rate, which in turn gives me a higher default likelihood. And so on.

This tree doesn't grow to the sky, but the interest rate and, more importantly, the default rate gets to be rather high rather quickly.

Now, what's the harm if two adults come to an agreement about a fair price?

Well, the problem is that defaults can have widespread costs to people who weren't parties to the agreement -- another case of privatizing profits and socializing costs.

For example, Joe Cassano of AIG bet Goldman Sachs that Goldman's mortgage-backed subprime securities wouldn't default, and now I and my descendants unto the 7th generation are supposed to pay off the damn things.

More subtly, if a firm lends money to people who have nothing to lose, there can be collateral damage. If the house next door gets bought by deadbeats who don't have a prayer of paying off the mortgage, but are just going to live in it rent-free until the sheriff finally kicks them out, I'm harmed. A foreclosure next door lowers my property value. Moreover, I had to live for two years next to deadbeats who shouldn't have been able to afford to live there. Very easy credit with very high interest rate opens up the door to all kinds of fraud and abuse.

Also, a generation freed from limits on interest rates is typically going to push them too far, with widespread damage. We saw that with Mike Milken's junk bonds back in the 1980s, which worked pretty well at first, but generated so much profit that ever junkier junk bonds came out, culminating in the 1991 recession.

So, it can make sense to have some maximum interest rate allowed to prevent the more egregious of this kind of thing. (Or, it could be that we just have to live through a crash to learn from our mistakes and lenders will be smarter next time.) I don't have a strong opinion on whether or not we should have legal limits on interest rates, but I do agree with Geoghegan that the subtle costs of not having any limits are too widely ignored in economics classes.

These are old lessons which we are relearning at painful cost.

Unfortunately, Geoghegan's article is kind of a mess at explaining the history of how anti-usury laws became a dirty word in modern upscale America. As a lawyer, he traces it back to a 1978 Supreme Court decision, but then he's baffled by the fact that it was written by his liberal hero William Brennan.

Because I was an economics major back then, it's easy to fill in what Geoghegan misses in his attempt to explain the triumph of anti-anti-usury:

First, the inflation of the 1970s made the old anti-usury laws impractical. If interest rates were capped at, say, 9% and prices were expected to rise 10% over the next year, then nobody would lend. So, getting rid of the old interest rate cap laws was justified as simply a practical expedient for adapting to an era of high inflation. (Of course, the laws weren't put back in place when inflation came back down.)

Second, the historical link between usury and Jews (e.g., The Merchant of Venice) meant that opposition to usury was increasingly seen as historically anti-Semitic (e.g., Henry Ford's kulturkampf against New York banks), so it became politically untenable after, say, 1967. Anti-anti-usurism and anti-anti-Semitism triumphed together.

This isn't to say that Jews were the only ones charging high interest rates, nor even a majority. For example, a key move toward higher interest rates on credit cards, which allowed banks to issue credit cards to anybody with a pulse, was the move by John Reed's Citibank to running its credit card business in 1981 out of South Dakota, which had just eliminated its interest rate caps. This legislation made South Dakota very attractive during a time of high inflation rates.

Still, since everybody knew that many of those pushing for elimination of legal and/or traditional limits on interest rates, such as Milken and countless economists, were Jewish, Geoghegan's kind of views were widely seen as antiquated and unenlightened and, to be frank, anti-Semitic.

Indeed, it might be worth exploring more generally how the ascendancy of Wall Street and the paucity of criticism of finance in recent decades was related to would-be critics' fears of being accused of anti-Semitism. As I pointed out recently in reply to a Maureen Dowd column based on her outmoded stereotype that Wall Street is run by WASPs, when you sit down and tote up the names of Wall Street big shots, it turns out that Wall Street isn't as Jewish as some might assume. Bigshots in the financial world come from a wide variety of backgrounds. Nonetheless, Jews obviously make up a striking fraction of the most aggressive players in the financial world, so criticism of aggressive financial tactics was often denounced by, say, the Wall Street Journal editorial page as more or less anti-Semitic. A perusal of WSJ editorials and op-eds defending Milken in the 1980s and 1990s might be eye-opening.

My published articles are archived at iSteve.com -- Steve Sailer

The Second Whitest City in America

From the New York Times on the success of the new professional soccer team in Seattle:

Ushers who work games at Qwest stadium for the Seattle Seahawks football team and now the Sounders say they are amazed by Sounder fans standing, stomping and chanting for the full 90 minutes of play, many waving bright green Sounders scarves. Joy, underwritten by one of Microsoft’s ubiquitous sponsorships, prevails.

“They wanted this,” said Grallin Butler, an usher presiding over Section 129 on Saturday.

Even in a city that has supported professional football, baseball and basketball teams for decades, many people say that something else is at work in the instant passion for the Sounders. They say it reflects the region’s well-established affection for soccer but also its conviction that it is not quite like the rest of America. When Seattle cheers the Sounders, it cheers its civic image.

“Soccer is kind of the alternative sport for the United States,” said J. B. Wogan, 24, a reporter for a suburban weekly newspaper. “And Seattle is kind of an alternative city.”

Mr. Wogan was standing with friends in a section where a man with a megaphone led cheers of “Seattle Sounders Olé.”

The promotion plan for the team has appealed to that notion as well as to the city’s international aspirations. The FC at the end of the team’s name stands for Football Club, intended to evoke a European feel. The Sounders scarves were another idea imported from overseas. Billboards, including one near the docks where salmon fisherman still leave for Alaska each spring, say: “The world’s game comes to Seattle.”

The funny thing, of course, is that Seattelites aren't worldly enough to realize that soccer is a prole sport in Europe.

From Stuff White People Like, #80 "The Idea of Soccer:"
Many white people will tell you that they are very into soccer. But be careful, it’s a trap.

If you then attempt to engage them about your favorite soccer team or talk about famous moments in soccer history, you are likely to be met with blank stares. This is because white people don’t actually enjoy watching soccer, they just like telling their friends that they are into it.

In fact, the main reason white people like soccer is so they can buy a new scarf.

My published articles are archived at iSteve.com -- Steve Sailer


Here's the opening of my review from The American Conservative of the film opening this Friday:
Mid-20th Century American writers competed on their dust flaps to list the most jobs held. The more proletarian occupations an author enumerated, such as short order cook, hod carrier, and lobsterman, the more legitimate was his assault on the Great American Novel.

Today, however, a generation of the well-educated has grown up assuming “there are jobs Americans just won’t do.” “Adventureland,” a witty, nostalgic love story is set in the summer of 1987, about the time when tuition started being inflated so high by competitive elitism and unskilled wages pounded so low by illegal immigration that “summer job” was increasingly replaced in the upper middle class vocabulary by “unpaid internship.” (By now, a few parents are paying fashionable employers to let their kids make photocopies and fetch coffee.)

A new Oberlin graduate, James Brennan, has his costly Eurail Pass backpack tour canceled by his parents because his alcoholic father’s executive career is wobbling. Suddenly needing a summer job to pay for tuition in the fall at the Columbia Journalism School, he finds that a resume featuring his SAT scores and his Renaissance Studies major doesn’t compensate for his lack of any work experience. Nobody in Greater Pittsburgh, it turns out, needs a fresco restored. He winds up at the employer of last resort, the Adventureland amusement park.

Writer-director Greg Mottola, who helmed 2007’s comedy hit “Superbad,” explains the origin of his quasi-autobiographical film with an ingenuous snobbishness that would have annoyed and amused John Steinbeck. “I was talking with a bunch of writer friends, and I was telling them these embarrassing stories about a summer in the ‘80s that I spent as a carnie working at an amusement park … It was the worst job I’ve ever had… I should have had a good job—I should have been a tutor or gone to Manhattan and been an intern at a magazine or something respectable ...”

Please note that Mottola isn’t, personally, a jerk. Judging from “Adventureland,” he’s an insightful yet gentle observer. That’s just the way people think nowadays.

My published articles are archived at iSteve.com -- Steve Sailer

March 30, 2009

My VDARE review of Thomas E. Woods Jr.'s "Meltdown"

The beginning of my new VDARE.com article:

During the Republican Presidential primary campaign in 2007 and early 2008, Congressman Ron Paul (R-TX) insisted on talking about such outré topics as the dangers of the Federal Reserve System and fiat money, for which he was widely snickered at. Back then, everybody just knew that the geniuses at the Fed had solved all our fundamental economic problems. Now the only one that remained was (as Barack Obama kept pointing out) how to more equitably divvy up the endless stream of wealth.

Granted, when your kids would ask you why a dollar bill was worth a dollar, you’d start out confidently enough, but soon find yourself waving your hands around and answering their increasingly skeptical questions with "Because Daddy says so!"

Yet, even though you, yourself, might be a little hazy on the details, you could be confident that Alan Greenspan and his protégé Ben Bernanke had this money thing all figured out. So, why listen to Ron Paul talk about something as obviously obsolete as the gold standard?

Early 2008 sure seems like a long time ago now …

Perhaps not surprisingly then, one of the surprise bestsellers of 2009 is Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse by Thomas E. Woods Jr., a historian with the Ludwig von Mises Institute. Despite almost no reviews in what Treasury Secretary Tim Geithner might euphemize as the "legacy press"— Woods’s book (with its Foreword by Rep. Paul) has risen as high as #11 on the New York Times bestseller list.

Woods points to six main causes for the current economic travails, which began with the rise in mortgage defaults in 2007 (largely in the four Sand States). His assessment overlaps considerably with the under-reported aspects that I’ve emphasized:

The great sportswriter A. J. Liebling boasted: "I can write better than anybody who can write faster, and I can write faster than anybody who can write better," and Woods does a fine job of hitting Liebling’s sweet spot in lucidly presenting an Austrian School of Economics analysis of our current troubles.

The "Austrians" (most of whom are American these days) have been waiting a long time for an opportunity to make their case.

My published articles are archived at iSteve.com -- Steve Sailer

Do Indians just like memorizing stuff?

Here's a curious op-ed by Ashok Mitra in the Calcutta Telegraph that makes me fear I missed the point of "Slumdog Millionaire." I assumed that "Who Wants to Be a Millionaire?" was just a passing fancy in India like it was in America. But, I should have noticed by the fanaticism with which Indians in America approach things like spelling bees that something deeper was going on.
Parlous times, unless well-versed in the culture built around ‘quiz’ programmes, one would hardly be considered civilized. In one such programme, participants are grilled on their knowledge of the exact length of La Manche, otherwise known as the English Channel: is it 563 or 564 or 565 kilometres? Another ‘quiz’ wants participants to pick the number of children Queen Victoria bore: six, eleven, or whatever. Yet another demands to know whether the Gettysburg Address was delivered on March 25, 1865 or on February 28, 1860 or on November 1, 1863.

A multiple choice test on the date of the Gettysburg Address is reasonable because you can work it out from the concurrent date of the Battle of Gettysburg and the Fall of Vicksburg, which famously hit the newspapers on July 4, 1863. Of course, that's a reasonable question for Americans, not for Indians.

A multiple choice test on whether the English Channel is 563, 564, or 565 km long is just stupid for everybody.

Not just in India, but over the entire subcontinent too, a child’s intellectual prowess is being judged by the criterion of his or her ability to cope with frivolities of this nature. How does it matter to the realities of living for children in these former colonial countries if the length of the English Channel is a kilometre more or a kilometre less, or whether the Gettysburg Address was delivered on this particular date in the 1860s? To be well-informed on the number of children that prim woman, Queen Victoria, gave birth to is surely not a matter of life and death, either, for South Asian children circa the first decade of the 21st century. It could not, but it is being made out that it is. A great colonial haze hovers over the post-colonial sky. ...

A child’s mind can absorb only so much of information; ... In the given social framework, the vacuity of mind amongst the rich influences the roster of daily existence of children belonging to lower echelons. Once, within their circle, it is a matter of pride for sons and daughters of affluent households to know the precise length of La Manche, it becomes essential for children from financially far worse off families too to be equipped with the same load of junk; otherwise they will not be able to survive the competition.

The grand coalition of the creamy layer at home and the diaspora emerged as determinants of Indian culture and civilization. It is terribly important in the context of this nascent, but assertive, cultural milieu that the members of the new generation do not mess up the dates of earthshaking events in the United States of America and Europe.

Okay, but maybe Indians just like memorizing stuff. Maybe they're just good at it ... Remember how well Indian children did on that Wechsler Digit Span test of working memory? You don't? Well, then you probably aren't Indian.

But if Indians love historical trivia so much, how come they didn't write any down when it was happening to them? The Chinese, in contrast, kept records on everything. We know that the Crab Nebula was a supernova that became visible on Earth on July 4, 1054 because Chinese bureaucrats wrote down the exact date they first saw it. One reason Indians ask each other questions about Western historical trivia is because Indian history is so vague. Nobody bothered to write down what had just happened, so Indian history is hard to use as trivia questions, which need precise answers.

I mean, here's a paragraph from Wikipedia on the origin of the Gupta Empire:
The origins of the Guptas are shrouded in obscurity. The Chinese traveler Yijing(see also Xuanzang) provides the first evidence of the Gupta kingdom in Magadha. He came to north India in 672 CE and heard of Maharaja Sri-Gupta, who built a temple for Chinese pilgrims near Mrigasikhavana who lost their lives in epic battle . I-tsing gives the date for this event merely as '500 years before'. This does not match with other sources and hence we can assume that I-tsing's computation was a mere guess. Very recently a few scholars have linked Guptas with rulers mentioned in Bhagwatam; however, these things are largely disputed and the idea seems politically motivated and to promote the sale of books written and promoted by some entities.[1]

What the hell kind of trivia questions can you make up out of that? "What year did that Chinese guy visit India who first heard of something or other having to do with the Gupta Empire that was built "500 years before"?"

My published articles are archived at iSteve.com -- Steve Sailer

Obama Administration cracking down on the border ... the Canadian border

From the Toronto Globe & Mail:
Janet Napolitano has a message for Canadians: It's a border. Get used to it.

The new Homeland Security Secretary had only stern comments yesterday about the state and future of the Canada-U.S. border, at a symposium hosted by the Brookings Institution. ...

“It's a real border, and we need to address it as a real border,” Ms. Napolitano said, calling on both Americans and Canadians to accept this “change of culture.”

That culture changes most emphatically June 1, when the United States will require anyone entering from Canada to produce a passport or its equivalent. ...

Roberta Jacobson, who is Deputy Assistant Secretary for Canada, Mexico and NAFTA at the State Department, said that Canada and the United States should talk about border issues without involving Mexico, the third member of the North American Free Trade Agreement partnership.

“This is one where we ought to start with Canada,” she said. This has long been the wish of Canadian officials, who believe that bringing Mexico into border discussions prevents agreements in areas where Canada and the United States could work co-operatively.

But Ms. Napolitano doused that idea as well, reminding the gathering that “one of the things that we need to be sensitive to is the very real feelings among southern border states and in Mexico that if things are being done on the Mexican border, they should also be done on the Canadian border.”

It seemed to be another lesson learned: when it comes to national security, the Obama administration's policies are often consonant with its Republican predecessor.


The Obama Administration's goal here is presumably to build a coalition against enforcement on the Mexican border by annoying Congressmen on the Canadian border. When they complain, the Obama Administration will say, "Obviously, being tougher on the Mexican border than the Canadian border would be racist. You don't want to be racist, do you? So, you must join us in voting for making both borders laxer." And the far northern Congressmen will figure, "Hell, it will be at least a generation before illegal immigrants overrun my frigid district, so it's no skin off my nose to go along with Obama and Napalitano. Too bad about the bottom two-thirds of the country, but that's not my problem."

My published articles are archived at iSteve.com -- Steve Sailer

March 29, 2009

Are the Blue-Eyed Greedy? The Ethnicities of 40 Prominent Financial Players

Maureen Dowd's NYT column "Blue Eyed Greed?" convinced me to sit down and take a vaguely systematic stab at figuring out the ethnic backgrounds of the people whose names come up these days in relation to the universe of American finance.

I first wasted time some time squinting at pictures of Angelo Mozilo and Bernie Madoff trying to figure out what their eye colors were, but then I gave that up as hopelessly literal-minded. Obviously, Dowd (a red-haired Irish Catholic who felt undervalued because she has brown eyes) is using the code terms "blue eyed" and "white bread bankers" to refer to Northern European Protestants. So, it made more sense to look up ancestry, religion, and self-identification directly.

But, who to look up? I ended up making up a list of 40 figures important in the finance story of the last couple of years, drawn from both my writings and a list of about a dozen Wall Street figures sent me by a reader who long worked on Wall Street.

This is not the proper way to do it. The better way is to be staring at somebody's list of the Top Whatevers and then have it suddenly dawn on you that you could use this list to answer a question that the people who made up the list never considered. But, I already had my question and I didn't have a list. Also, I'm not sure if I could find a list that would fit my needs. So, I made up a list, trying not to be biased. It's not a very good list, but it's a start. It's got Wall Street bosses, national bankers, politicians, bureaucrats, and crooks on it.

So, here's what I found.

- The old stereotype that the financial world is run by Northern European Protestants from the Northeast appears outmoded. I came up with six WASPs out of 40, but three were politicians (George W. Bush, Bill Clinton, and Phil Gramm, only one of whom grew up wealthy); one was an accused crook of working class rural origin (Sir Allen Stanford); one was a Southern army sergeant's son (Ken Lewis of Bank of America); and one was from the Northeastern media elite, Daniel Mudd of Freddie Mac, son of newscaster Roger Mudd and a descendant of the doctor who set John Wilkes Booth's broken leg, who has managed to make the family name mud again. (If you want to count Barack Obama as half-WASP, you can make it 6.5.) This 6 out of 40 feels a little low, but that's what I've got.

- A lot of people assume that anybody with a German name who is famous for anything having to do with money was raised Jewish, but both Treasury Secretary Tim Geithner and Clinton adviser and former Fed chairman Paul Volcker were raised Protestant. I'm also guessing that Kerry Killinger of Washington Mutual is gentile German by background. So, that's three German gentiles.

- There was one Presbyterian Scotsman: John Thain of Merrill Lynch.

- There was one Norwegian name -- Treasury secretary and Goldman Sachs boss Hank Paulson (who was raised as a Christian Scientist).

So, I come up with 11 out of 40 names on the list being Northern European Protestants.

- Jewish individuals make up the largest single ethnic group on the list, but they might be less numerous than you'd think: 11 out of 40: Roland Arnall (Ameriquest subprime mortgages), Ben Bernanke (Fed), Lloyd Blankfein (Goldman Sachs), Rep. Barney Frank, Dick Fuld (Lehman Bros.), Hank Greenberg (AIG), Alan Greenspan (Fed), Bernie Madoff (Ryker's Island), Robert Rubin (Treasury and Citigroup), Larry Summers (Treasury), and Sandy Weill (Citigroup).

- There were four Irish, largely in political roles: Sen. Chris Dodd, John Taylor of the National Community Reinvestment Coalition, Richard Syron of Freddie Mac, and Sheila Bair of the FDIC (I'm just guessing with her because her middle name is Colleen).

- There were three blacks: Franklin Raines of Fannie Mae, President Barack Obama, and Joy Jackson of Stripper Fraud Mortgages. And there was one Mexican-American, Henry Cisneros of HUD.

- Two Asians: Vikram Pandit of Citigroup and rocket scientist statistician David X. Li.

- That leaves 8 of the 40 names belonging to one general group that has been overlooked in most ethnic theorizing about finance: Mediterranean gentiles.

- Two Italians: Angelo Mozilo (Countrywide) and Joe Cassano (AIG Financial Products).

- Two Lebanese Christians: John Mack (Morgan Stanley) and Nassim Nicholas Taleb (Black Swan)

- And four Greeks. Two are whistleblowers: Harry Markopolos, who tried to get the SEC after Madoff, and David Andrukonis, the chief risk officer of Freddie Mac, who clashed with his boss Richard Syron. Two are Wall Street big shots: Tom Kalaris of Barclay's and Jamie Dimon of J.P. Morgan Chase.

So, what does it add up to?

Well, first, Maureen Dowd's media stereotype about the financial world as dominated by an Old Boy's Network of blond, blue-eyed WASPs is badly out of date. Finance has evolved from an old Relationship Model to a newer Transaction Model about who can make you the most money in a New York minute.

Second, as the largest single group, Jews tend to set the tone, yet don't seem to be as dominant as some posit.

Third, the large numbers of Jews and Mediterranean gentiles suggests, unsurprisingly, that the financial world has a quite New York City flavor to it, with a lot of Outer Boroughs as well as Park Avenue.

Fourth, there is a sizable meritocratic element in the financial world. Of course, the emphasis on keeping objective score can lead to some of the problems we've seen, such as paying bonuses at the end of the year for transactions that appear profitable in the short run that might blow up the company in the long run.

A note about looking up ancestral backgrounds: if bigshots have parents or grandparents who were immigrants, they will generally boast about them to reporters. The people who tend to be hard to figure out are the Midwesterners like Killinger and Bair.

My published articles are archived at iSteve.com -- Steve Sailer

"Tim" v. "Tom"

David Warsh writes about the power struggle between Treasury Secretary Tim Geithner and NEC supremo Larry Summers, which reminds me of one of the deepest-rooted and most irrational prejudices I'm afflicted with:

Treasury Secretary Timothy Geithner, 47, was under fire again, some of it clearly fratricidal. Meanwhile, a talented and complaisant reporter, Noam Scheiber of The New Republic, rolled out a 6,000-word cover story assembled with the full cooperation of National Economic Council chair Lawrence Summers, 53: ''Springtime for Summers? Why the White House Needs to Unleash Him.''

Unleash him? Presumably he had in mind sending Summers back to the Treasury Department, which he had 18 months at the end of the Clinton administration. ...

Then Geithner himself ran into confirmation problems - those $40,000 in underpaid taxes in the years when he was moving from Washington to New York - and barely squeaked through on a 60-34 vote.

His first tentative plans to restore banking stability underwhelmed markets; his role in the initial AIG bailout (when he was president of the Federal Reserve Bank of New York) came under fire; Democrats criticized his communication skills; and last week he was caught in a wicked crossfire over those bonuses....

No doubt that Summers possesses the skills to be a highly effective finance chief, beginning with the fact that he grew up as an economists in an intensely competitive arena, the quasi-official non-governmental policy institute that is the National Bureau of Economic Research.

Since moving to Cambridge, Mass., from Manhattan, in 1973 - and especially since Harvard professor Martin Feldstein (Summers's thesis adviser) became president, in 1978 - the NBER has become policy economists' West Point, a highly selective academy in which future leaders of the profession from all over the world meet, match wits, and learn to assess each others' strengths and weaknesses.

Indeed, much of the aura of unquestioned deference that Summers enjoys among his policy-circle peers derives from having successfully persuaded others of his credentials as an alpha male in innumerable late-night bull sessions in the early 1980s in the NBER offices, located midway between Harvard and the Massachusetts Institute of Technology. He has been remarkably good at forging alliances as well. Since entering the political world full-time, in 1990, as chief economist for the World Bank, he has honed a second array of skills, including a deliberate manner of speech that conveys gravitas, disarming humor, a comfortable girth, and a baleful glare.

Geithner, on the other hand, has no such base among an academic discipline. Nor do his boyish face, runner's frame, or matter-of-fact delivery convey authority through a microphone (he has plenty of power in a conference room).

That reminds me that I realized when I was about 12 that I assumed that guys named "Tim" were skinny while guys named "Tom" were muscular. It's partly that "Timothy" requires more delicate pronunciation work than "Thomas," but I think it's mostly the different shape of the vowels in "Tim" and "Tom:" slender vs. sturdy. Granted, this is about as stupid a prejudice as you can imagine, but I suspect I'm not alone in feeling this way.

And I further imagine that a bit of Tim Geithner's image problem is that he came along and partly validated this pre-existing stereotype of what a "Tim" should be like, and then he got a lot of the rest of the stereotype dumped on him.

P.S. A reader points out that psychologists talk about the "Bouba/Kiki Effect:" they draw a jagged shape and a rounded shaped and ask people which one is most likely to be a "Bouba" and which one a "Kiki"? To find out what most people around the world think, see here. The implication is that how a word sounds is not wholly arbitrary. So, maybe Tim Geithner really does seem like what people expect a Tim to be like.

P.P.S. Also, the two Tiny Tims (Charles Dickens's and Johnny Carson's) don't help.

My published articles are archived at iSteve.com -- Steve Sailer