Ayaan Hirsi Ali has written a very good explanation of Huntington’s Clash of Civilizations as it applies to the modern world.  She rightly explains that:

Our civilization is not indestructible: It needs to be actively defended. This was perhaps Huntington’s most important insight. The first step towards winning this clash of civilizations is to understand how the other side is waging it—and to rid ourselves of the One World illusion.

The failure is not in solving the problem, it is in the rush to judge who is responsible for a problem.  Because the finger pointing scares people from wanting to be involved in solving the problem.  It scares people from wanting to propose new ideas or try new things out of fear of being blamed when it goes wrong.

The current mess in the Gulf of Mexico is a very good example of this.  Dr. Harrison Schmitt, a geologist and the only scientist to go to the moon (Apollo 17) wrote a VERY good comparison of the current oil spill situation and the fire on Apollo 1 (he uses the internal NASA designation 204).  To quote:

“Failure was not an option” for Gene Kranz and his Apollo 13 flight controllers and engineers. In contrast, failure clearly has been an option for President Obama and those claiming to have been on top of this situation “from day one” in his White House and in the Departments of Interior, Energy and Homeland Security. With no single, competent, courageous and knowledgeable leader in charge of a comparably competent, courageous and knowledgeable team as we had with Apollo 13, the Administration has been doomed to failure from the start. The President, without any experience in real-world management of anything, much less a crisis, has no idea how to deal with a situation as technically complex as the Gulf oil spill.

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NASA’s response to the 204 fire was to rapidly implement its previously well-formulated, objective investigation of its causes, both technical and managerial. Managerial responsibilities were identified, and George Low and his engineering team made appropriate changes without a prolonged exercise in finger pointing or the delays of another Presidential, buck-passing “commission.” NASA of that day moved forward and even accelerated the Apollo effort to its successful conclusion. Apollo 8’s Frank Borman, Jim Lovell and Bill Anders orbited the Moon less than two years after the 204 fire. Seven months after that, on July 20, 1969, Apollo 11’s Neil Armstrong and Edwin Aldrin, with Mike Collins in orbit overhead, landed on the Moon.

The lessons from the 204 fire were applied and we moved on. In contrast, President Obama’s and his Administration’s otherwise rambling response to the Deepwater Horizon explosion has been to stop offshore oil exploration by the United States.

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Essential to the prevention of future accidents will be an objective, complete technical and managerial investigation of why a geological and engineering situation of known risks spun out of control. The primary question is, will such an investigation be possible in the politically charged, adversarial “boot on the neck” atmosphere created by President Obama and his team? Imagine if such an atmosphere had surrounded the 204 fire investigation and recovery.

Responsibility for the Deepwater Horizon accident ultimately lies with the chaotic regulatory environment for petroleum exploration created over recent decades by the Congress, courts, Department of the Interior and environmental pressure groups. Will we learn anything about regulatory overkill from this tragic loss of eleven lives, extensive environmental damage, and disruption of business and employment in the Gulf?

A second example of this, on a much smaller scale, has occurred in Calgary in the last week.  Last weekend, a small group of ne’er-do-wells decided to steal a city transit bus and take it on a joy-ride.  One of the miscreants has been apprehended in part because of an onboard video camera that captured the action.   In order to prevent future incidents, Calgary Transit has decided that they must install video cameras on all buses.  Excuse me, but isn’t that a knee-jerk reaction to a single event?  How often are there problems on a bus where video evidence would be useful in a court of law?  Or are we hoping that because Big Brother is watching that it will deter criminal activity?  This seems like an unnecessary expense to deal with an uncommon event.  If we have a problem with civil behaviour in society, perhaps we need to look at causes, not deal with the after effects.

One of my readers has asked a question about climate risk.  Recently, statements have been made in various publications, ranging from Scientific American, Discover and The Economist positing that:

Action on climate is justified, not because the science is certain, but precisely because it is not.

This is a combination of the precautionary principle and the logic of buying insurance.

The fundamental problem with applying this to the climate change issue is that the likely magnitude of the problem is not very large (if it exists at all), and the costs to mitigate the supposed source is ridiculously high.

One buys fire insurance for your house because that while the risk of fire is small, the consequences are catastrophic.  But you do it because the cost of insurance is low.  If the cost of fire insurance was, say 10% of the replacement cost of the house on an annual basis, you wouldn’t buy it.  You’d bet that you wouldn’t have a fire.

With regard to the climate, while the IPCC has claimed very wide ranges of potential temperature increases, 1.4°C to 6.4°C, the probabilities lean much more to the bottom end of the range.  This must be particularly considered as the data of the last 12 years indicates a leveling off of global temperatures, even with increasing CO2 concentrations.

The question of whether such risks are catastrophic must be compared to past temperature changes and the impact on the civilization and ecosystems.  As there is significant evidence that the Roman and Medieval Warm Periods were warmer than today and the consequences for civilization was good, I would posit that attempting major changes to our economic structure in the name of “maybe things are going to go bad” seems awfully foolish.

Second, the cost of the such mitigations efforts must be compared to the risk.  Capture of CO2 costs >$100/tonne.  For Canada alone, this would be >$100 Billion just to reduce emissions by 17% from 2006 levels to by 2020.   This will result in us being 7% poorer than if we do nothing.  Are we willing to pay that much for that little change in emissions.  Atmospheric concentrations will still be rising…  To begin to reduce atmospheric CO2 and actually “stop” the suspected warming will cost a lot more.

Plus there is the question of whether it is even possible.  Replacing fossil fuels with wind and solar isn’t going to work unless there is a major improvement in PV cell technology and cost.  Nuclear could do some of the work, but environmentalists don’t like that and the regulatory structure makes it expensive – and the projects take too long.   Replacing 100 years of infrastructure isn’t going to happen in 40 years while still growing the economy.  This is why I used the cost of carbon capture as the yardstick – only it will be able to happen fast enough…

We must also look at whether adaptation is the better path.  People have adapted to climate change before – just not with the population we have.  But they also didn’t have the advantages of modern technology or free market forces that will create incentives and opportunities.

The “act now” crowd are responding to a statistically small risk with an exaggerated consequence – much like a lot of the health insurance programs in the United States – they cost too much for what they really do.

The real problem with the proposals to “act now” are that this action is to be arranged and operated by inefficient and corrupt government and supranational agencies, like the UN.   Adaptation will happen at the level of the individual, village, city, and nation, with entrepreneurs figuring out how to turn challenges into opportunities and profit.

So say no to “act now” and prepare to adapt if things do change.

The federal Finance Minister, Jim Flaherty, today released revised rules for mortgages to try to avert a housing bubble.  His mechanism is to make it more difficult for people to buy houses without taking more equity and to make it so that borrowers need to meet a higher bar of being able to pay back the house (5 year fixed rate vs. a shorter term or variable rate).

Here is the problem – this is a band-aid solution to the housing problem that doesn’t address the fundamental problems:

• We have too much debt
• Debt is too easy to acquire
• Interest rates are too low, making debt appear less risky (it is only truly less risky if it is very short-term debt)

A simpler solution is for the Bank of Canada, and central banks everywhere, to consider changing the measures that are used to guide the setting of interest rates.  Today, there are three criteria that the BoC is using to set interest rates:

1. Inflation (CPI)
2. Economic Growth
3. The value of the Loonie

The problem with these is that the Inflation rate has been compromised by politics.  They removed “volatile” prices like food and energy, which means that the remaining prices are more greatly affected by things that are deflationary, such as electronics.   Economic growth is likewise a dangerous measure, especially if that growth is being built with a large current account deficit or increase in debt levels.  And the third is simple ridiculous.  Maintaining a low Canadian dollar protected Canadian business from having to spend money on improving efficiency and productivity – but we should have known we could not rely on that forever.  Also, the value of currencies is likely to shift significantly over the next few years as Europe, Japan and America deal with their giant fiscal problems and China grows into the largest economy on Earth.

A better method for setting interest rates would be for the central banks to use the same kinds of measures that the free market would (i.e. if we didn’t have central banks) – RISK.  If there is a rising level of debt, there is a rising level of default risk.  Lenders (i.e. bondholders) would demand a higher interest rate to counter the risk profile.  Central banks should do the same.  If the level of private and public debt is rising to quickly, interest rates should be increased to slow or cease said growth.  The painful part may be that we are so far gone that economic contraction may be necessary to unwind the debt.  Imagine for a moment that we didn’t have CMHC (or Fannie Mae or Freddie Mac in the US) insurance for mortgages – would banks be rushing to offer mortgages with zero down and low interest rates?  I don’t think so.  The risk profile for banks would be very different and the housing market would likewise be very different.

Therefore, the Bank of Canada and the Minister of Finance should sit down and decide what a reasonable debt level is for Canada – preferably by asking the banks what they would be comfortable with if they had to lend with no insurance policies from government.   Then raise interest rates until debt levels fall.

Jeffrey Simpson, writing in the Globe and Mail, sometimes surprises me.  He hits the nail on the head that Canadian businesses need to look beyond the US market and find more customers overseas – even if that is hard.

Mr. Simpson wrote a good book review a couple of years ago, on the same subject.  But my question is, does he now accept and understand that the government is a big part of the problem – coddling local industries and throwing wrenches in trying to pick winners – that he tried to pass off as the lesser of the complaints in the book.   While I agree that Ms. Mandel-Campbell’s book pointed out the failings of Canadian business people on the international stage, I can understand if one company is badly run – it really only affects that one company.  But when the government gets involved it screws up everyone.  Be it the wheat board, the dairy marketing system and tariffs, the way EDC is structured or government intervention in international trade in an attempt to protect/help a single “national champion”, the government isn’t helping.  They are part of the problem.

We need to get rid of marketing boards, cultural protections for bookstores and broadcasters, restrictions on foreign investment and foreign competition and put the EDC on the footing to HELP Canadian businesses export – and not by demanding domestic borrowers or foreign buyers be restricted to EDC financing or other Canadian suppliers who may not be competitive.

In recent days, the Liberal Party of Canada has made a couple of statements indicating they think that the Government of Canada should be spending MORE of our tax dollars on new programs. Considering the problems we are having funding the programs we already have, this is hard believe – except that these are Liberals who believe more government has got to be a good thing. Read the rest of this entry »

George F. Will writes and EXCELLENT column in the Washington Post and published today in the National Post.

He clearly lays out why the Supreme Court of the United States was correct in it’s decision to overturn the ban on independent expenditures during elections.  He puts it most clearly here:

The Federal Election Commission, which administers the law that rations the quantity and regulates the content and timing of political speech, identifies 33 types of political speech and 71 kinds of “speakers.” The underlying statute and FEC regulations cover more than 800 pages, and FEC explanations of its decisions have filled more than 1,200 pages. The First Amendment requires 10 words for a sufficient stipulation: “Congress shall make no law … abridging the freedom of speech.”

The politicians and bureaucracy in America have been corrupted by power and need to go back and read their own Constitution and the writings of those who laid the foundation or wrote it, like Paine and Jefferson.

Canada can learn from this too… How many times have courts in Canada struck down similar regulations here only to have politicians reimpose them?  Too many.  And our current federal political financing system is corrupt too – giving entrenched political parties public monies removes them from having to raise funds themselves or be accountable to anyone.  And preventing third parties from advertising during elections protects the parties.

I am amazed how many people don’t understand the fundamental reason Jean Chretien changed the campaign finance rules – under the new rules, it is much more difficult (if not impossible) for a new party (a la Reform) to start from scratch again.  If you don’t already have seats in the House and already get a significant portion of the popular vote, a party is beggared by the system.  He was protecting the Liberals, Conservatives and NDP from new competition – because he knew that even the Conservatives would be corrupted by power and become mushy-middle, big government hacks just like himself…

Quebec is taking it’s own crazy socialist path by imposing restrictions on car makers and dealers with so little warning that it is impossible for them to meet the deadline.  The result will be that car sales in Quebec will necessarily drop off, residents of Quebec will buy cars in Ontario, New Brunswick or the USA and import them too Quebec.

Is Charest going to prohibit the registration of cars purchased outside Quebec in the name of green?  Really?

Yet another Quebec government comes up with an idea that will drive people and business out of the province.

Today, the Jerusalem Post published the best editorial I have ever read on the danger of Islamic fundamentalism and the so-called jihad being waged against western civilization.

Further, the JPost calls out western leaders who fear calling a spade a spade.  And the best part is right at the end:

Obama needs to tell Americans and Europeans willing to listen that, though the overwhelming majority of Muslims are not terrorists, pretty much all terrorists are Muslim, hence the need for profiling.

An overstretched army, supported by a weary home front, against an ill-defined enemy, does not offer a viable strategy for success. Better to tell people that the enemy is radical Islam, which wants to spread its religion using the sword, and that defeat would mean an end to Western values of pluralism, minority rights and democracy.

The war isn’t in Afghanistan, or Yemen. It’s everywhere. And until we the free peoples of the world realize that fact, we are losing.

Last night on 60 Minutes, the President of the United States squarely laid the blame for the economic recession of the last 18 months at the feet of “fat-cat bankers”.   I was disappointed, but not surprised, when the questioner failed to do their job and hold the President to account for the fact that state action over the last 40 years was the primary cause of these problems.

The administrations of Roosevelt, Nixon, Carter, Clinton and Bush all created a framework starting with the creation of Freddie Mac and Fannie Mae through to programs and rules forcing banks to lend money to people who in pure capitalist terms could never pay it back.     I have written on this before.

Admittedly, the bankers got greedy and had too much faith the “quants” who wrote the computer models that supposedly hedged the risk away to nothing (I still don’t understand how anyone thought that was possible).  But so did every investor in the stock market.   That is why it works.  Greed and fear are the primary drivers of humanity.  Nothing will change that.

And now Obama wants to repeat the mistakes that led to the crash of 2008.

The media should make sure they identify the right actors to blame – not trust the elected leadership to tell the truth.  That is why we have freedom of the press – to investigate the state!!!  60 Minutes has fallen a long way since the days of Mike Wallace…