Thursday, August 30, 2007

Business? Why Business?

Disclaimer: I am only an armchair economist, this is purely my own opinion.

As the title suggests, this post won't necessarily touch recent issues, like the departure of Bush administration zealots like Alberto Gonzalez and Karl Rove. Instead, the purpose of this post is something far more important: The American Economy. The economy is so important because it literally determines the future of every American, and to some degree, every person in the world.

Recently, we watched the fall out over the sub-prime mortgage market plague the U.S. economy and the larger economies in Europe and Asia. Essentially, sub-prime exponentially expanded the availability of credit to those who couldn't otherwise afford the loans provided to them. This was largely driven by the inflation in real estate prices, and the low interest rates of 2004 and 2005. Arguably, real estate is one of the few American commodities that tracks real value juxtaposed currency value. The other commodity is Gold. If you look at both of these commodities next to one another, I imagine you will see a similar appreciation over the last five years. Arguably, this increase in value is due largely to inflation. As our debt load has increased, the value of the dollar as decreased. This isn't due entirely to the value of sub-prime, but also to the federal deficit. When we create debt, we create more money, even if that liquidity is a fiction created by increased debt.

Sub-prime started to show its weakness when the two year limit on many of these inexpensive loans came due. The net result was a substantial increase in foreclosures. To understand the next step, it is important to understand how investments in commercial paper, essentially the trade of debt. Banks buy and sell loans based on the interest rates, and the amount they can collect over the principal. When the debt is bought and sold, but goes into default, those investments are essentially worthless, absent the value of the collateral. The result is a mad rush to collect on worthless debt, and the acceleration of payments up the chain of debt, from one bank to another, until you reach the bank holding the note on the collateral. Unfortunately, the substantial increase in foreclosure has devalued collateral because of an increased supply.

The catalyst for this chain reaction came from an increase in interest rates. Those sub-prime loans became more expensive, and the borrowers were no longer able to pay. The purpose of that increase in interest rates is attributable to one thing...Inflation.

The purpose of this explanation of why the Federal Reserve should not lower the short term interest rate at its meeting in about a week and a half. Generally, a decrease in the rate will push the economy back to the previous cycle and not fix the core problem of inflation. If anything, rates should remain the same, and this market correction should be allowed to proceed. While there will be a substantial decline in large purchases, like automobiles and property purchases with more risk, this correction will hopefully balance the credit market and heal some of the damage caused by unchecked inflation in the last couple of years. While this won't necessarily result in a more valuable dollar, it should provide some stability for the volatile market.

Solving inflation, though, is an entirely different issue that is dependent on the ability of the government to balance their budget and create a sustainable financial system. For more on interesting economic issues outside of recent financial news, check out this scary video.

More on Rove and Gonzalez in the future, I promise.

Sunday, August 05, 2007

The Real Reason FISA Supposedly Needs Updates...

In the history of the Terrorist Surveillance Program, which really isn't designed to track terrorists, the FISA Courts took an active role in determining whether cause existed to issue orders to permit American intelligence agencies to tap wire communications. Then, for reasons we can only presume to be based on what the law actually says, the FISA Courts rejected a significant number of wire tap requests from the various intelligence agencies. As a result, the President authorized the warrantless wiretaps program, later to become known as the Terrorist Surveillance Program, or TSP. Recently, I have covered the development of proposed changes to FISA that would expand the President's power to watch anyone he wants, including American citizens, without having to muck about in the legal process put in place to protect us from abusive intelligence practices. What is more shocking is the reason for the change.

This story does a good job of explaining the current situation. Like in 2001, a FISA Judge has determined that the TSP violates the law, and did what it was supposed to by issuing a stop order to the intelligence agencies involved in the practice. The effect of this ruling included the President asking Congress to change the law. Regardless of the situation, the President can't avoid his oath to enforce the Constitution, which includes the Fourth Amendment's warrant requirement for spying on Americans. This policy to violate the Constitution notwithstanding his oath of office should be sufficient grounds for Congress to institute impeachment proceedings. Now I have only one question...

Why is Congress letting this happen?

For the branch of government with the most power and oversight ability, this spineless caving to the President's malice towards the American people and the Constitution demonstrates a weakness that runs contrary to the interests of the American electorate. If constituents really knew what was going on, there would likely be an entire turn over in Congressional representatives. Maybe new representation is what we really need, lest Congress continue to vitiate court orders aimed at restricting the President's abuses of power not rightfully his under the Constitution.

Saturday, August 04, 2007

So Long, Fourth Amendment...

As a follow up to my previous post, it appears as though the Congress, like the President, is more interested in disregarding the Constitution. This story explains what is going on. By the way, all of this domestic surveillance has nothing to do with fighting terrorism, it is to watch the American people. It sounds like it is time for a Hobbesian revolt, and replace everyone currently misrepresenting the interests of the American people in our government.

My Letter to Illinois Congressional Representatives on Modernizing FISA

The following is a copy of the letter I have submitted to both Illinois Senators, and Representative Jan Schakowsky of the Ninth District in Illinois in the House of Representatives. I am writing my Congressional representatives regarding the proposed updates to FISA. The letter follows.

As a young litigation attorney and constitutional scholar, I must implore you to prevent the passage of laws that would expand the President's power to spy on American citizens. Doing so would fundamentally debase the principles of privacy imbued in the Bill of Rights under the Fourth, Fifth, Eighth, and Ninth Amendments.

While the President appears noble in his cause, protecting Americans from Terrorism should not be a justification for eroding the protections that continue to separate American liberties from the rest of the world. The Fourth Amendment requires probable cause in order for the government to collect information on its citizens. This protection prevents government abuses by requiring process before a judge before permitting the government to violate the sanctity of one's home. The Fourth Amendment secures the notion of American individualism and autonomy. To denigrate the protections of the Constitution would serve only to make us less American by lending to more government oversight. Moreover, these evils were the express cause of creating a limited American governmental structure, which tied the hands of our leaders from invading the lives of those subject to the social contract.

Furthermore, the argument that this is necessary to prevent future terrorist attacks serves to abuse the baseless rhetoric of fear perpetuated by a President who has continuously disregarded his oath of office and acted out of irreverence for the people he was elected to serve. To date, the President can not point to empirical proof that more spying is necessary to make the United States more secure from foreign attack. The reason the President is asking for a review of FISA is because the law is operating to restrict the constitutional abuses the President wishes to propagate.

FISA originally came from Congress's reaction to Nixon era scandals. Similarly, the War Powers Act served to provide more balance between the President and Congress when both wish to exercise their constitutionally created war powers. Amending FISA to allow more latitude for Executive "intelligence" programs will fundamentally debase the balance between the three branches of government outlined in the Constitution and supported by FISA and the War Powers Act.

Congresswoman/man, I ask you, as an American, not to support a change in the law that will destroy the ideology that gave birth to this great nation. I ask you to oppose the expansion of executive power that will operate only to restrict our liberty and erode the freedoms the American Union stands for. I ask you not to fall into the traps of rhetoric used by the President, and to work towards policy that not only protects us from terrorists, but preserves the protections from the government the Constitution provides for the people.