March 2010

Sowell, Thomas. The Housing Boom and Bust. 2nd. ed. New York: Basic Books, [2009] 2010. ISBN 978-0-465-01986-1.
If you rely upon the statist legacy media for information regarding the ongoing financial crisis triggered by the collapse of the real estate bubble in certain urban markets in the United States, everything you know is wrong. This book is a crystal-clear antidote to the fog of disinformation emanating from the politicians and their enablers in media and academia.

If, as five or six people still do, you pay attention to the legacy media in the United States, you'll hear that there was a nationwide crisis in the availability of affordable housing, and that government moved to enable more people to become homeowners. The lack of regulation caused lenders to make risky loans and resell them as “toxic assets” which nobody could actually value, and these flimsy pieces of paper were sold around the world as if they were really worth something.

Everything you know is wrong.

In fact, there never was a nationwide affordable housing crisis. The percentage of family income spent on housing nationwide fell in the nineties and oughties. The bubble market in real estate was largely confined to a small number of communities which had enacted severe restrictions upon development that reduced the supply of housing—in fact, of 26 urban areas rated as “severely unaffordable”, 23 had adopted “smart growth” policies. (Rule of thumb: whenever government calls something “smart”, it's a safe bet that it's dumb.)

But the bubble was concentrated in the collectivist enclaves where the chattering class swarm and multiply: New York, San Francisco, Los Angeles, Washington, Boston, and hence featured in the media, ignoring markets such as Dallas and Houston where, in the absence of limits on development, housing prices were stable.

As Eric Sevareid observed, “The chief cause of problems is solutions”, and this has never been better demonstrated than in the sorry sequence of interventions in the market documented here. Let's briefly sketch the “problems” and “solutions” which, over decades, were the proximate cause of the present calamity.

First of all, back in the New Deal, politicians decided the problem of low rates of home ownership and the moribund construction industry of the Depression could be addressed by the solution of government (or government sponsored) institutions to provide an aftermarket in mortgages by banks, which could then sell the mortgages on their books and free up the capital to make new loans. When the economy started to grow rapidly after the end of World War II, this solution caused a boom in residential construction, enabling working class families to buy new houses in the rapidly expanding suburbs. This was seen as a problem, “suburban sprawl”, to which local politicians, particularly in well-heeled communities on the East and West coasts, responded with the solution of enacting land use restrictions (open space, minimum lot sizes, etc.) to keep the “essential character” of their communities from being changed by an invasion of hoi polloi and their houses made of ticky-tacky, all the same. This restriction of the supply of housing predictably led to a rapid rise in the price of housing in these markets (while growth-oriented markets without such restrictions experienced little nor no housing price increases, even at the height of the bubble). The increase in the price of housing priced more and more people out of the market, particularly younger first-time home buyers and minorities, which politicians proclaimed as an “affordable housing crisis”, and supposed, contrary to readily-available evidence, was a national phenomenon. They enacted solutions, such as the Community Reinvestment Act, regulation which required lenders to effectively meet quotas of low-income and minority mortgage lending, which compelled lenders to make loans their usual standards of risk evaluation would have caused them to decline. Expanding the pool of potential home buyers increased the demand for housing, and with the supply fixed due to political restrictions on development, the increase in housing prices inevitably accelerated, pricing more people out of the market. Politicians responded to this problem by encouraging lenders to make loans which would have been considered unthinkably risky just a few years before: no down payment loans, loans with a low-ball “teaser” rate for the first few years which reset to the prevailing rate thereafter, and even “liar loans” where the borrower was not required to provide documentation of income or net worth. These forms of “creative financing” were, in fact, highly-leveraged bets upon the housing bubble continuing—all would lead to massive defaults in the case of declining or even stable valuations of houses.

Because any rational evaluation of the risk of securities based upon the aggregation of these risky loans would cause investors to price them accordingly, securities of Byzantine complexity were created which allowed financial derivatives based upon them, with what amounted to insurance provided by counterparty institutions, which could receive high credit ratings by the government-endorsed rating agencies (whose revenue stream depended upon granting favourable ratings to these securities). These “mortgage-backed securities” were then sold all around the world, and ended up in the portfolios of banks, pension funds, and individual investors, including this scrivener (saw it coming; sold while the selling was good).

Then, as always happens in financial bubbles, the music stopped. Back in the days of ticker tape machines, you could hear the popping of a bubble. The spasmodic buying by the greatest fools of all would suddenly cease its clatter and an ominous silence would ensue. Then, like the first raindrops which presage a great deluge, you'd hear the tick-tick-tick of sell orders being filled below the peak price. And then the machine would start to chatter in earnest as sell orders flooded into the market, stops were hit and taken out, and volume exploded to the downside. So it has always been, and so it will always be. And so it was in this case, although in the less liquid world of real estate it took a little longer to play out.

As you'll note in these comments, and also in Sowell's book, the words “politicians” and “government” appear disproportionately as the subject of sentences which describe each step in how a supposed problem became a solution which became a problem. The legacy media would have you believe that “predatory lenders”, “greedy Wall Street firms”, “speculators”, and other nefarious private actors are the causes of the present financial crisis. These players certainly exist, and they've been evident as events have been played out, but the essence of the situation is that all of them are creations and inevitable consequences of the financial environment created by politicians who are now blaming others for the mess they created and calling for more “regulation” by politicians (as if, in the long and sorry history of regulation, it has ever made anything more “regular” than the collective judgement of millions of people freely trading with one another in an open market).

There are few people as talented as Thomas Sowell when it comes to taking a complex situation spanning decades and crossing the boundary of economics and politics, and then dissecting it out into the essentials like an anatomy teacher, explaining in clear as light prose the causes and effects, and the unintended and yet entirely predictable consequences (for those acquainted with basic economics) which led to the present mess. This is a masterpiece of such work, and anybody who's interested in the facts and details behind the obfuscatory foam emerging from the legacy media will find this book an essential resource.

Dr. Sowell's books tend to be heavily footnoted, with not only source citations but also expansions upon the discussion in the main text. The present volume uses a different style, with a lengthy “Sources” section, a full 19% of the book, listing citations for items in the text in narrative form, chapter by chapter. Expressing these items in text, without the abbreviations normally used in foot- or end-notes balloons the length of this section and introduces much redundancy. Perhaps it's due to the publisher feeling a plethora of footnotes puts off the causal reader, but for me, footnotes just work a lot better than these wordy source notes.


Smith, Lee. The Strong Horse. New York: Doubleday, 2010. ISBN 978-0-385-51611-2.
After the attacks upon the U.S. in September 2001, the author, who had been working as an editor in New York City, decided to find out for himself what in the Arab world could provoke such indiscriminate atrocities. Rather than turn to the works of establishment Middle East hands or radical apologists for Islamist terror, he pulled up stakes and moved to Cairo and later Beirut, spending years there living in the community, meeting people from all walks of life from doormen, cab drivers, students, intellectuals, clerics, politicians, artists, celebrities, and more. This book presents his conclusions in a somewhat unusual form: it is hard to categorise—it's part travelogue; collection of interviews; survey of history, exploration of Arab culture, art, and literature; and geopolitical analysis. What is clear is that this book is a direct assault upon the consensus view of the Middle East among Western policymakers which, if correct (and the author is very persuasive indeed) condemns many of the projects of “democratisation”, “peace processes”, and integration of the nations of the region into a globalised economy to failure; it calls for an entirely different approach to the Arab world, one from which many Western feel-good diplomats and politically correct politicians will wilt in horror.

In short, Smith concludes that the fundamental assumption of the program whose roots can be traced from Woodrow Wilson to George W. Bush—that all people, and Arabs in particular, strive for individual liberty, self-determination, and a civil society with democratically elected leaders—is simply false: those are conditions which have been purchased by Western societies over centuries at the cost of great bloodshed and suffering by the actions of heroes. This experience has never occurred in the Arab world, and consequently its culture is entirely different. One can attempt to graft the trappings of Western institutions onto an Arab state, but without a fundamental change in the culture, the graft will not take and before long things will be just as before.

Let me make clear a point the author stresses. There is not the slightest intimation in this book that there is some kind of racial or genetic difference (which are the same thing) between Arabs and Westerners. Indeed, such a claim can be immediately falsified by the large community of Arabs who have settled in the West, assimilated themselves to Western culture, and become successful in all fields of endeavour. But those are Arabs, often educated in the West, who have rejected the culture in which they were born, choosing consciously to migrate to a very different culture they find more congenial to the way they choose to live their lives. What about those who stay (whether by preference, or due to lack of opportunity to emigrate)?

No, Arabs are not genetically different in behaviour, but culture is just as heritable as any physical trait, and it is here the author says we must look to understand the region. The essential dynamic of Arab political culture and history, as described by the 14th century Islamic polymath Ibn Khaldun, is that of a strong leader establishing a dynasty or power structure to which subjects submit, but which becomes effete and feckless over time, only to eventually be overthrown violently by a stronger force (often issuing from desert nomads in the Arab experience), which begins the cycle again. The author (paraphrasing Osama bin Laden) calls this the “strong horse” theory: Arab populations express allegiance to the strongest perceived power, and expect changes in governance to come through violent displacement of a weaker existing order.

When you look at things this way, many puzzles regarding the Middle East begin to make more sense. First of all, the great success which imperial powers over the millennia, including the Persian, Ottoman, French, and British empires, have had in subduing and ruling Arabs without substantial internal resistance is explained: the empire was seen as the strong horse and Arab groups accepted subordination to it. Similarly, the ability of sectarian minorities to rule on a long-term basis in modern states such as Lebanon, Syria, and Iraq is explained, as is the great stability of authoritarian regimes in the region—they usually fall only when deposed by an external force or by a military coup, not due to popular uprisings.

Rather than presenting a lengthy recapitulation of the arguments in the book filtered through my own comprehension and prejudices, this time I invite you to read a comprehensive exposition of the author's arguments in his own words, in a transcript of a three hour interview by Hugh Hewitt. If you're interested in the topics raised so far, please read the interview and return here for some closing comments.

Is the author's analysis correct? I don't know—certainly it is at variance with that of a mass of heavy-hitting intellectuals who have studied the region for their entire careers and, if correct, means that much of Western policy toward the Middle East since the fall of the Ottoman Empire has been at best ill-informed and at worst tragically destructive. All of the debate about Islam, fundamentalist Islam, militant Islam, Islamism, Islamofascism, etc., in Smith's view, misses the entire point. He contends that Islam has nothing, or next to nothing, to do with the present conflict. Islam, born in the Arabian desert, simply canonised, with a few minor changes, a political and social regime already extant in Arabia for millennia before the Prophet, based squarely on rule by the strong horse. Islam, then, is not the source of Arab culture, but a consequence of it, and its global significance is as a vector which inoculates Arab governance by the strong horse into other cultures where Islam takes root. The extent to which the Arab culture is adopted depends upon the strength and nature of the preexisting local culture into which Islam is introduced: certainly the culture and politics of Islamic Turkey, Iran, and Indonesia are something very different from that of Arab nations, and from each other.

The author describes democracy as “a flower, not a root”. An external strong horse can displace an Arab autocracy and impose elections, a legislature, and other trappings of democracy, but without the foundations of the doctrine of natural rights, the rule of law, civil society, free speech and the tolerance of dissent, freedom of conscience, and the separation of the domain of the state from the life of the individual, the result is likely to be “one person, one vote, one time” and a return to strong horse government as has been seen so many times in the post-colonial era. Democracy in the West was the flowering of institutions and traditions a thousand years in the making, none of which have ever existed in the Arab world. Those who expect democracy to create those institutions, the author would argue, suffer from an acute case of inverting causes and effects.

It's tempting to dismiss Arab culture as described here as “dysfunctional”, but (if the analysis be correct), I don't think that's a fair characterisation. Arab governance looks dysfunctional through the eyes of Westerners who judge it based on the values their own cultures cherish, but then turnabout's fair play, and Arabs have many criticisms of the West which are equally well founded based upon their own values. I'm not going all multicultural here—there's no question that by almost any objective measure such as per capita income; industrial and agricultural output; literacy and education; treatment of women and minorities; public health and welfare; achievements in science, technology, and the arts; that the West has drastically outperformed Arab nations, which would be entirely insignificant in the world economy absent their geological good fortune to be sitting on top of an ocean of petroleum. But again, that's applying Western metrics to Arab societies. When Nasser seized power in Egypt, he burned with a desire to do the will of the Egyptian people. And like so many people over the millennia who tried to get something done in Egypt, he quickly discovered that the will of the people was to be left alone, and the will of the bureaucracy was to go on shuffling paper as before, counting down to their retirement as they'd done for centuries. In other words, by their lights, the system was working and they valued stability over the risks of change. There is also what might be described as a cultural natural selection effect in action here. In a largely static authoritarian society, the ambitious, the risk-takers, and the innovators are disproportionately prone to emigrate to places which value those attributes, namely the West. This deprives those who remain of the élite which might improve the general welfare, resulting in a population even more content with the status quo.

The deeply pessimistic message of this book is that neither wishful thinking, soaring rhetoric, global connectivity, precision guided munitions, nor armies of occupation can do very much to change a culture whose general way of doing things hasn't changed fundamentally in more than two millennia. While change may be possible, it certainly isn't going to happen on anything less than the scale of several generations, and then only if the cultural transmission belt from generation to generation can be interrupted. Is this depressing? Absolutely, but if this is the case, better to come to terms with it and act accordingly than live in a fantasy world where one's actions may lead to catastrophe for both the West and the Arab world.


Thor, Brad. The Last Patriot. London: Pocket Books, 2008. ISBN 978-1-84739-195-7.
This is a page-turning thriller which requires somewhat more suspension of disbelief than the typical book of the genre. The story involves, inter alia, radical Islam, the assassination of Mohammed, the Barbary pirates, Thomas Jefferson, a lost first edition of Don Quixote, puzzle boxes, cryptography, car bombs, the French DST, the U.S. president, and a plan to undermine the foundations of one of the world's great religions.

If this seems to cross over into the territory of a Dan Brown novel or the National Treasure movies, it does, and like those entertainments, you'll enjoy the ride more if you don't look too closely at the details or ask questions like, “Why is the President of the United States, with the resources of the NSA at his disposal, unable to break a simple cylinder substitution cipher devised more than two centuries ago?”. Still, if you accept this book for what it is, it's a fun read; this would make an excellent “airplane book”, at least as long as you aren't flying to Saudi Arabia—the book is banned in that country.

A U.S. edition is available.


Emison, John Avery. Lincoln über Alles. Gretna, LA: Pelican Publishing, 2009. ISBN 978-1-58980-692-4.
Recent books, such as Liberal Fascism (January 2008), have explored the roots and deep interconnections between the Progressive movement in the United States and the philosophy and policies of its leaders such as Theodore Roosevelt and Woodrow Wilson, and collectivist movements in twentieth century Europe, including Soviet communism, Italian fascism, and Nazism in Germany. The resurgence of collectivism in the United States, often now once again calling itself “progressive”, has made this examination not just a historical footnote but rather an important clue in understanding the intellectual foundations of the current governing philosophy in Washington.

A candid look at progressivism and its consequences for liberty and prosperity has led, among those willing to set aside accounts of history written by collectivists, whether they style themselves progressives or “liberals”, and look instead at contemporary sources and analyses by genuine classical liberals, to a dramatic reassessment of the place in history of Wilson and the two Roosevelts. While, in an academy and educational establishment still overwhelmingly dominated by collectivists, this is still a minority view, at least serious research into this dissenting view of history is available to anybody interested in searching it out.

Far more difficult to find is a critical examination of the U.S. president who was, according to this account, the first and most consequential of all American progressives, Abraham Lincoln. Some years ago, L. Neil Smith, in his essay “The American Lenin”, said that if you wanted to distinguish a libertarian from a conservative, just ask them about Abraham Lincoln. This observation has been amply demonstrated by the recent critics of progressivism, almost all conservatives of one stripe or another, who have either remained silent on the topic of Lincoln or jumped on the bandwagon and praised him.

This book is a frontal assault on the hagiography of Sainted Abe. Present day accounts of Lincoln's career and the Civil War contain so many omissions and gross misrepresentations of what actually happened that it takes a book of 300 pages like this one, based in large part on contemporary sources, to provide the context for a contrary argument. Topics many readers well-versed in the conventional wisdom view of American history may encounter for the first time here include:

  • No constitutional provision prohibited states from seceding, and the common law doctrine prohibiting legislative entrenchment (one legislature binding the freedom of a successor to act) granted sovereignty conventions the same authority to secede as to join the union in the first place.
  • None of the five living former presidents at the time Lincoln took office (only one a Southerner) supported military action against the South.
  • Lincoln's Emancipation Proclamation freed only slaves in states of the Confederacy; slaves in slave states which did not secede, including Delaware, Maryland, Kentucky, and Missouri remained in bondage. In fact, in 1861, Lincoln had written to the governors of all the states urging them to ratify the Corwin Amendment, already passed by the House and Senate, which would have written protection for slavery and indentured servitude into the Constitution. Further, Lincoln supported the secession of West Virginia from Virgina, and its admittance to the Union as a slave state. Slavery was not abolished throughout the United States until the adoption of the Thirteenth Amendment in December 1865, after Lincoln's death.
  • Despite subsequent arguments that secession was illegal, Lincoln mounted no legal challenge to the declarations of secession prior to calling for troops and initiating hostilities. Congress voted no declaration of war authorising Lincoln to employ federal troops.
  • The prosecution of total war against noncombatants in the South by Sherman and others, with the approval of Grant and Lincoln, not only constituted war crimes by modern standards, but were prohibited by the Lieber Code governing the conduct of the Union armies, signed by President Lincoln in April 1863.
  • Like the progressives of the early 20th century who looked to Bismarck's Germany as the model, and present-day U.S. progressives who want to remodel their country along the lines of the European social democracies, the philosophical underpinnings of Lincoln's Republicans and a number of its political and military figures as well as the voters who put it over the top in the states of the “old northwest” were Made in Germany. The “Forty-Eighters”, supporters of the failed 1848 revolutions in Europe, emigrated in subsequent years to the U.S. and, members of the European élite, established themselves as leaders in their new communities. They were supporters of a strong national government, progressive income taxation, direct election of Senators, nationalisation of railroads and other national infrastructure, an imperialistic foreign policy, and secularisation of the society—all part of the subsequent progressive agenda, and all achieved or almost so today. An estimation of the impact of Forty-Eighters on the 1860 election (at the time, in many states immigrants who were not yet citizens could vote if they simply declared their intention to become naturalised) shows that they provided Lincoln's margin of victory in Illinois, Indiana, Iowa, Michigan, Minnesota, Ohio, and Wisconsin (although some of these were close and may have gone the other way.)

Many of these points will be fiercely disputed by Lincoln scholars and defenders; see the arguments here, follow up their source citations, and make up your own mind. What is not in dispute is that the Civil War and the policies advocated by Lincoln and implemented in his administration and its Republican successors, fundamentally changed the relationship between the Federal government and the states. While before the Federal government was the creation of the states, to which they voluntarily delegated limited and enumerated powers, which they retained the right to reclaim by leaving the union, afterward Washington became not a federal government but a national government in the 19th century European sense, with the states increasingly becoming administrative districts charged with carrying out its policies and with no recourse when their original sovereignty was violated. A “national greatness” policy was aggressively pursued by the central government, including subsidies and land grants for building infrastructure, expansion into the Western territories (with repeatedly broken treaties and genocidal wars against their native populations), and high tariffs to protect industrial supporters in the North. It was Lincoln who first brought European-style governance to America, and in so doing became the first progressive president.

Now, anybody who says anything against Lincoln will immediately be accused of being a racist who wishes to perpetuate slavery. Chapter 2, a full 40 pages of this book, is devoted to race in America, before, during, and after the Civil War. Once again, you will learn that the situation is far more complicated than you believed it to be. There is plenty of blame to go around on all sides; after reviewing the four page list of Jim Crow laws passed by Northern states between 1777 and 1868, it is hard to regard them as champions of racial tolerance on a crusade to liberate blacks in the South.

The greatest issue regarding the Civil War, discussed only rarely now, is why it happened at all. If the war was about slavery (as most people believe today), then why, among all the many countries and colonies around the world which abolished slavery in the nineteenth century, was it only in the United States that abolition required a war? If, however, the war is regarded not as a civil war (which it wasn't, since the southern states did not wish to conquer Washington and impose their will upon the union), nor as a “war between the states” (because it wasn't the states of the North fighting against the states of the South, but rather the federal government seeking to impose its will upon states which no longer wished to belong to the union), but rather an imperial conquest waged as a war of annihilation if necessary, by a central government over a recalcitrant territory which refused to cede its sovereignty, then the war makes perfect sense, and is entirely consistent with the subsequent wars waged by Republican administrations to assert sovereignty over Indian nations.

Powerful central government, elimination of state and limitation of individual autonomy, imposition of uniform policies at a national level, endowing the state with a monopoly on the use of force and the tools to impose its will, grandiose public works projects funded by taxation of the productive sector, and sanguinary conflicts embarked upon in the interest of moralistic purity or national glory: these are all hallmarks of progressives, and this book makes a persuasive case that Lincoln was the first of their kind to gain power in the United States. Should liberty blossom again there, and the consequences of progressivism be candidly reassessed, there will be two faces to come down from Mount Rushmore, not just one.


Flynn, Vince. Consent to Kill. New York: Pocket Books, 2005. ISBN 978-1-4165-0501-3.
This is the sixth novel in the Mitch Rapp (warning—the article at this link contains minor spoilers) series. In the aftermath of Memorial Day (December 2009), a Saudi billionaire takes out a contract on Mitch Rapp, who he blames for the death of his son. Working through a cut-out, an assassin (one of the most interesting and frightening villains in the Vince Flynn yarns I've read so far—kind of an evil James Bond) is recruited to eliminate Rapp, ideally making it look like an accident to avoid further retribution. The assassin is conflicted, on the one hand respecting Rapp, but on the other excited by the challenge of going after the hardest target of all and ending his career with not just a crowning victory but a financial reward large enough to get out of the game.

Things do not go as planned, and the result is a relentless grudge match as Rapp pursues his attackers like Nemesis. This is a close-up, personal story rather than a high concept thriller like Memorial Day, and is more morality play than an edge of the seat page-turner. Once again, Flynn takes the opportunity to skewer politicians who'd rather excuse murderers than risk bad press. Although events and characters from earlier novels figure in this story, you can enjoy this one without having read any of the others.

Vince Flynn is acclaimed for the attention to detail in his novels, due not only to his own extensive research but a “brain trust” of Washington insider fans who “brief him in” on how things work there. That said, this book struck me as rather more sloppy than the others I've read, fumbling not super-geeky minutiæ but items I'd expect any editor with a sharp red pencil to finger. Below are some examples; while none are major plot spoilers, I've put them in a spoiler block just in case, but also for readers who'd like to see if they can spot them for themselves when they read the novel, then come back here and compare notes.

Spoiler warning: Plot and/or ending details follow.  
I'll cite these by chapter number, because I read the Kindle edition, which doesn't use conventional page numbers.

Chapter 53: “The sun was falling in the east, shooting golden streaks of light and shadows across the fields.” Even in CIA safe houses where weird drug-augmented interrogations are performed, the sun still sets in the west.

Chapter 63: “The presidential suite at the Hotel Baur Au Lac [sic] was secured for one night at a cost of 5,000 Swiss francs. … The suite consisted of three bedrooms, two separate living rooms, and a verandah that overlooked Lake Geneva.” Even the poshest of hotels in Zürich do not overlook Lake Geneva, seeing as it's on the other end of the country, more than 200 kilometres away! I presume he intended the Zürichsee. And you don't capitalise “au”.

Chapter 73: “Everyone on Mitch's team wore a transponder. Each agent's location was marked on the screen with a neon green dot and a number.” A neon dot would be red-orange, not green—how quickly people forget.

Chapter 78: “The 493 hp engine propelled the silver Mercedes down the Swiss autobahn at speeds sometimes approaching 150 mph. … The police were fine with fast driving, but not reckless.” There is no speed limit on German Autobahnen, but I can assure you that the Swiss police are anything but “fine” with people driving twice the speed limit of 120 km/h on their roads.

Spoilers end here.  
The conclusion is somewhat surprising. Whether we're beginning to see a flowering of compassion in Mitch Rapp or just a matter of professional courtesy is up to the reader to decide.