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"Spengler’s" piece about Western grasshoppers and Chinese ants points out one of the sad facts of U.S. economic policy: its willingness to endure long-term trade deficits without allowing those who accumulate the dollars to invest them in U.S. equities.

A couple of years ago CNOOC (China National Offshore Oil Corporation) made a bid for Unocal.  In the oil industry, it was yet another consolidation.  But Congress whined and complained and CNOOC backed off.  With this kind of policy in place, Asian investors went where they could.  In many cases this meant the subprime derivatives market, and we all know where that’s gone lately.

The biggest danger out there is that Asian investors, with a broader view of what’s possible, will cease to see the dollar as a reserve currency and start treating it as a state controlled one.  They well understand the concept of a state controlled currency.  The dollar’s hegemony is largely based on a) the faith people have in the stability of the U.S. and b) the dollar’s ready convertibility.  If that convertibility is compromised by ill-conceived policies of the Treasury Department, it will chip away at both strong points.

Besides, if they were allowed to more freely invest, it would increase demand for U.S. equities, which would increase their value and thus help pension funds along as well.

One "back door" solution to this problem would be for Asian investors to participate more in private placements.  Given the nature of Sarbanes-Oxley, this is sensible from a number of standpoints.  But having been already burned with the subprime derivatives, they may not have the stomach to try this on a broad basis.

The sudden "revelation" by the California Governor and Attorney General, who say marriage can be eliminated in the future is only news to those who have not thought the issue out very carefully.

Before Christians in California go off and begin a quest for a constitutional amendment, they need to think about a few things.

First, without going into a long theological dissertation, marriage for the Christian is an institution of God.  Allowing the state to dictate the terms and conditions of that institution as blithely as American Christians do is a mistake.  We’ve already seen that many of those terms and conditions have been changed at law.  The opinions of both the Governor and Jr. Brown confirm the obvious: with marriage, what the state gives, the state can take away.  (The phrase "rational legislative purpose" is absurd; legislatures do all kind of things for all kinds of reasons, rational and irrational.)  The "rights" of civil marriage are in reality very ephemeral, which makes one wonder why some are fighting so hard to obtain them.

Second, in order for a constitutional amendment to be meaningful, it would have to enumerate each and every one of the rights that its proponents wish to preserve, which would make quite an amendment to write, let alone get through the referendum process.

Third, preserving the rights at the state level doesn’t do anything at the federal level.  What I specifically have in mind are the provisions of the Internal Revenue Code, which have the stability of Burnham Wood.  An example of this is the back and forth on estate and gift taxes, documented here.

Finally, ending civil marriage ends the quest for same-sex civil marriage.  This is why proponents of same generally oppose the abolition of civil marriage.  It will be interesting to see how advocates of same-sex civil marriage react to this.

In CIA: The perils of being a good citizen, Dmitry Shlapentokh tells us why we missed the coming of 9/11:

It also means that naive folks who look for "truth" and "efficiency" usually do not exist in real life. They are mostly characters from Hollywood movies where the good guys finally triumph over the bad guys. Those who work in the CIA, as well as in any big US organization, understand that real life is a far different story and that their behaviour as "good citizens" should produce endless paperwork, meticulously following all rules, attending all prescribed meetings and, above all, being nice to colleagues.

As to bin Laden and other similar chaps, it would, of course, be nice if they would be caught or eliminated; but it is hardly a priority. Or to be precise, the catching of bin Laden, the "final product" of the CIA, is the last priority. And it becomes important only when the agency, as happens with other US institutions, from universities to medical establishments, asks for public money.

This kind of problem isn’t unique to the CIA.  It explains, for example, many of the woes we experienced with Katrina, especially at the federal level.

The resignation of Alberto Gonzales is sad, but could have been avoided if Gonzales had taken more of a "Clintonesque" approach with the U.S. Attorneys firing.

U.S. Attorneys serve at the pleasure of the President and the Attorney General.  There’s no reason why Gonzales needed to go through a long justification of their termination.  The Clintons didn’t when they terminated all of them at the beginning of their term.  The more Gonzales tried to justify the termination, the more he eroded the "at-will" nature of the position of U.S. Attorney, and the weaker his case looked.  And, as any employer will tell you, the last thing you need to do is to erode at-will employment.

I’ve said before that blind legalism was an Ashcroft trait that held him in good stead as Attorney General.  But that cuts both ways; if you have an advantage, it’s unwise to throw it away the way Gonzales did.