Monday, August 13, 2018

How Banks Make Money

From 2005 to 2008 I worked as a bank manager for two banks, one was a giant international bank and the other was a Midwestern super-regional bank. I didn't really like the industry at all, although I did like aspects of banking, especially helping customers. But that was completely overshadowed by the endless pressure to sell, sell, sell. We had annual goals broken down to weekly goals which became daily goals. Open more checking accounts, close more loans, set people up with credit cards. You could have a super busy day, helping lots of customers with problems and building great relationships but if you didn't open any new checking accounts you could expect a phone call. The ethical lines got pretty blurry at times which was a major factor in me leaving retail banking. A few years ago, Wells Fargo got into a bunch of trouble for fraudulently opening millions of checking accounts and credit cards without customer authorization. When I heard of this, my initial reaction was "Yep" and a little surprise that a) it took that long to come out and b) that more banks haven't been busted. That's all I say about that. Wells has since modified their incentive program to eliminate the high pressure product goals. My point is that banking is highly competitive and bankers are always on the prowl for new accounts, new loans and new investments.

Well over the last few days I have gotten into a twitter scuffle (several actually) based on a post from Kyle Howard. Mr. Howard styles himself a preacher and Bible teacher, but also "Biblical Counselor (including race based trauma)". So when he made a claim that Asians are not very good "allies" for blacks in their struggle and that Asians have been "granted" social and economic "privilege" and I push back, the responses were predictable....

Me pushing the "tweet" button and girding my loins for battle
The thread devolved into a discussion of alleged discrimination against black mortgage applicants. Yeah, I know. Here is the thread in a couple of parts, I added the one where a lady said that my experience in lending is negated by being white. Although these are public tweets and you can easily find the names, I still marked out the names and avatars to protect the ignorant innocent.

I get it. Most people don't really understand how banks make money. It is not that complicated but they just have never been exposed to it. Banks make money in a lot of ways, like investments which are very lucrative and fees on accounts, loans and credit cards plus small amounts on debit card transactions, etc. But the real bread and butter of most banks is lending in a fractional-reserve system. This is basically how it works. People deposit money in bank accounts like checking and savings. These funds make up the deposit balance of a bank. The bank pays depositors a small amount of interest on savings and some checking accounts. On the other side, banks lend borrowers money to buy homes and cars. They charge the borrowers interest on the money lent. The difference between the interest paid on deposits and the interest charged, called the net interest spread or just spread, is where banks make their money. This is why interest rates paid on CDs and savings are so low and have been for years, because banks are charging relatively low rates on loans. I am not sure what the current rates are but when I left banking and up until recently, the interest rate on a savings accounts was functionally zero.

Most people think of a bank as a place to deposit money and to write checks from but that is really incidental to the bank, and messing with checks and cash is a hassle that banks would prefer to not deal with. Ideally a bank would get nothing but direct deposits and pay out only electronically. Banks act as an intermediary between depositors and borrowers. Thousands of people deposit money at a bank which creates a pool of money for a borrower to tap into for big purchases like a mortgage. If you didn't have banks and wanted to borrow $100,000 to buy a house, you would have to convince enough individuals to loan you their excess cash to raise the $100,000. Banks do that for you. There are lots of issues with this system. For example, most people would be surprised to find out how little actual cash there is in a bank. If a significant number of depositors showed up at a local branch and wanted all of their money, the branch would run out of cash in a hurry. In fact we would get in trouble from the higher ups if we had too much money on hand, so it was always a balancing act to make sure you have enough for daily demand, to keep the ATM full, etc. but not too much so branches constantly send money out and get different denominations in.

How do banks make money? Banks make money by making good, solid loans with a reasonable certainty of being repaid. Lending is all about balancing risk. Banks want to make loans but they want those loans to be repaid so they get their principal back plus interest. What they do not want is to foreclose on a house or repossess a car. That is hugely expensive and they usually take a bath on the property. During the financial crisis, a lot of banks essentially stopped foreclosing on delinquent mortgages because they already had too many homes that they have to try to resell, again often for a loss, and in the meantime they have to maintain the property so it doesn't lose even more value. Banks are lenders, not property managers.

Back to risk. How does a bank gauge risk? This is important because the more risky a loan is, the higher interest rate the bank will charge because they are less certain of being repaid. Someone with great credit and low outstanding debt relative to their income (debt to income ratio) will get a lower interest rate on a loan because they are less risky. Someone with poor credit and a lot of existing debt will be assessed a much higher rate to offset the bank's risk. How does a bank make this determination for a pool of tens of millions of potential borrowers? In the old days when banking was more local, it was based on relationships. Suzy has been a long time customer of the bank, has a solid job history and has paid back loans before so she is a good risk. Tom is always overdrawn in his checking account, had a car repossessed by the local bank and is often changing jobs so he is a poor risk. This is sort of how some of our local banks around here operate because of our large Amish community. They make better borrowers because the older members of the community will often act as a de facto guarantor of loans for younger Amish. But today that is not realistic because people move around a lot and banks have too many customers to get to know them. Plus basing credit decisions on relationships also creates a lot of subjectivity. So banks use credit scores as their main initial qualifier.

Credit scores are not perfect but they do provide a neutral means to track credit history. If you borrow money and you pay as agreed (which is what your signature on a credit slip means), your credit goes up (influenced as well by lots of other factors like total available credit, credit inquiries, etc.). If you borrow money (credit card, car loan, mortgage, etc.) and you don't pay as agreed, your credit goes down. Again, not a perfect system but it does provide the most objective measurement of credit history which is, like it or not, the best gauge a lender has of the likelihood you will pay back a loan.

The other side of risk that is less obvious is the risk of being too conservative. Sitting on money you are paying interest on means you are losing profit every day it sits in your virtual vault. It is not just the mitigating of risk of loan default, it is also the risk of not lending enough to make your profit. A bank paying interest to depositors and not getting interest paid on loans goes out of business. So banks want to make good loans. They have to make good loans and they need to keep making loans because people pay off existing loans early or refinance somewhere else or the loan just gets to the end of the term and is paid off naturally. A bank manager with a huge portfolio of solid, profitable loans making money that is not building their loan portfolio with an active pipeline of new loans is going to get phone calls and will lose their job pretty quickly.

Like I said, banking is a highly competitive, very stressful and cutthroat industry. Everyone I knew was too busy trying to make their goals each week to waste a good loan opportunity just to screw over a black person. If a customer that happened to be black, Hispanic, Muslim whatever, came into my branch and asked to apply for a loan, you can bet I took their application eagerly. First of all, by law I was required to. Second, I needed to get as many loans into the pipeline as I could. A lot of people of every race came in to apply for loans and a lot of them I was pretty sure were not going to be approved but I took every application and treated everyone fairly because it was the right thing to do. Of course I also learned early on in banking that looks can be deceiving, often the old guy in bib overalls with the "aw shucks" demeanor had a ton of money and the people with the fancy car and expensive clothing lived paycheck to paycheck.

So one the ones side you have enormous pressure to only make good loans and on the other hand you have just as much pressure to make lots of loans. Most of the pressure on the first is taken away from lenders. The people you see in branches or mortgage offices are just taking the app and collecting the documentation. They don't make the decisions. An underwriter sitting in some prison office complex somewhere makes the decisions, mostly via automation.

As I said to someone I respect on Facebook; what possible reason would an underwriter sitting in some cubicle farm with a never ending queue of loan apps have to pick out otherwise solid applications because of the last name? That just stretches the bounds of credulity. If you have decent credit, a reasonable debt to income ratio, a steady job history and the value of the collateral doesn't exceed the amount of the loan, all things being equal you will be approved. If you don't, you either won't be approved or you might be approved for a loan with a much higher interest rate and it has been my experience that people who were shaky loan candidates that managed to get approved anyway were very quickly over their heads. Like insurance companies that rely on being right about life expectancy to make money on life insurance, so too do banks rely on being right about loans to make their profits.

So where does this idea of banks discriminating against blacks come from? Certainly in the past this was a huge issue. That was the reason for the Community Reinvestment Act passed in 1977. This bill is not without it's critics. As Ron Paul wrote: "Laws passed by Congress such as the Community Reinvestment Act required banks to make loans to previously underserved segments of their communities, thus forcing banks to lend to people who normally would be rejected as bad credit risks.".

The notion that there is still widespread, systemic discrimination comes from stories like this in the Detroit News: Detroit-area blacks twice as likely to be denied home loans. That certainly sounds ominous, right? Detroit is the "blackest" major city in the country, as recently as 2010 it was over 82% black while the white population plummets and the Hispanic population percentage increases rapidly. Detroit also has a very low median family income and around a third of the population lives in poverty. The article linked above clearly tries to show that this is do to discrimination but buried in the story are some important facts.

Lenders and their trade organizations do not dispute the fact that they turn away people of color at rates far greater than whites. They maintain that the disparity can be explained by two factors that the industry has fought to keep hidden: the prospective borrowers’ credit history and overall debt-to-income ratio. They singled out the three-digit credit score — which banks use to determine whether a borrower is likely to repay a loan — as especially important in lending decisions.

“While quite informative regarding the state of the lending market,” the records analyzed by Reveal do “not include sufficient data to make a determination regarding fair lending,” the Mortgage Bankers Association’s chief economist, Mike Fratantoni, said in a statement.

The American Bankers Association said the lack of federal enforcement proves discrimination is not rampant, and individual lenders told Reveal that they had hired outside auditing firms, which found they treated loan applicants fairly regardless of race.

“We are committed to fair lending and continually review our compliance programs to ensure that all loan applicants are receiving fair treatment,” Boston-based Santander Bank said.

Michigan lenders echoed their national counterparts, saying the mortgage process isn’t discriminatory but instead is driven by data: credit, collateral and income.

“Lending today is so automated,” said Jim Wickham, president of the Michigan Mortgage Lenders Association. “It’s difficult for me as a lender to look at this … data and see discrimination.”

Exactly so. The process is automated, it is heavily regulated and the same story shows that even under the Obama administration only 9 banks nationwide had action taken against them during his 8 years in office, and banks not only use internal auditors but also outside auditing firms to make sure they are in compliance. No bank wants to get dinged under the CRA because that sort of bad publicity will be followed by demagogues like Al Sharpton and Jesse Jackson looking for a handout. It is just too big a risk.

Banks freely admit they turn away blacks at a much higher rate and the reason is two-fold: credit scores and debt-to-income ratios. The credit score is the big one. The first thing the loan application system does is pull your score and right away that is going to either immediately disqualify you or advance you in the process. Likewise debt-to-income, or DTI. Even if you have decent credit and income, if your outstanding debt that you need to service eats up too much of your income, you won't get approved. This is not a racial issue, this is simply a risk factor. Again, and this cannot be overemphasized, the loan underwriting process is all about managing risk. Will you be likely, based on your income, outstanding debt and your credit history, to pay back money if it is lent to you? Keeping a good credit score is simple: Pay what you owe when you owe it. Show you are responsible with the credit you already have and you are far more likely to get more credit in the future.

A great resource on this is an article by Coleman Hughes writing for Quillette: Black American Culture and the Racial Wealth Gap. He writes:

To make matters worse, spending patterns are just one part of a larger set of financial skills on which blacks lag behind. Researchers at the Federal Reserve Bank of St. Louis followed over 40,000 families from 1989 to 2013, tracking their wealth accumulation and financial decisions. They developed a financial health scale, ranging from 0 to 5, that measured the degree to which families made “routine financial health choices that contribute to wealth accumulation”—e.g., saving any amount of money, paying credit card bills on time, having a low debt-to-income ratio, etc. At 3.12, Asian families scored the highest, followed by whites at 3.11, Hispanics at 2.71, and blacks at 2.63.

What does that mean? It means that in general, ranked by race, when it comes to overall financial management, blacks score far worse on measures like paying credit cards on time, having a low DTI ratio (quite likely related to the prior paragraph in the linked story that looks at luxury good spending by blacks). If you don't pay your credit cards on time, it really hurts your credit scores especially if you make a habit of it. If you have too much debt relative to your income, same thing. Mess those two factors up and you aren't getting a mortgage. That isn't a sign of systemic racism, everything that can be done is done to take human bias out of the process for a number of reasons.

So what should be done or can be done about blacks being denied for mortgages as such high rates? It is almost entirely a matter of changing a culture. Black civic groups, churches, families, need to emphasize the importance of maintaining good credit by paying debts on time and keeping outstanding debt to a reasonable level. Obviously many black families already do this because they have mortgages and are responsible with credit but the denial rate is still very disproportionate. Instilling a culture of responsible credit will also go a long way toward closing the "wealth gap". Owning a home has long been the key step in gaining wealth and passing that on to future generations. You can't help your kids or grandkids to buy their own place if you haven't accumulated wealth of your own. It won't happen overnight but it has to start somewhere.

Sunday, August 12, 2018

Alexandria Ocasio-Cortez: The World's First Living Meme

In 1985 I was a teen and that year the movie Weird Science came out (also the Breakfast Club). The "plot" if you can call it that, is that two lonely geeks use their computer to create a girl by feeding various magazine articles and stuff into it. It was a funny, mindless, mildly raunchy in a mid 80s kind of way, movie with cameos from Robert Downey Jr and Vernon Wells, the crazed biker with a mohawk in The Road Warrior, and is part of the cult legacy of 80s film. What got me thinking about that movie was this new video from the Republican Party that declares "Democratic" Socialist Congressional candidate Alexandria Ocasio-Cortez the future of the Democrat party:

I have made this point before that she is really the ultimate Democrat for our time. She is female, she is a minority, she is young and compared to most Democrat women she is fairly attractive and telegenic (as long as she isn't talking).

Alexandria Ocasio-Cortez might possibly be the world's first living meme. It is like the guys from Weird Science fed a bunch of memes into a computer and out popped a living person that decided to run for Congress as a natural next step from a bar-tending gig. The meme became flesh and dwelt among us. I can't tell if she is really just not very smart or she just can't speak extemporaneously but you can see when she is off script at all that she momentarily panics and is searching for a talking point. I don't think she really understands the issues at all, she just has a preset response to questions. It is pretty low hanging fruit to make fun of her but on the other hand she is about to enter Congress, making laws impacting hundreds of millions of people, and her ideas that are just dumb and misguided now will quickly become dangerous.

As the lines between politicians and celebrity continue to blur, expect to see more people like this in power, people who are pretty much just walking, talking memes. We aren't far away from seeing a real life President Dwayne Elizondo Mountain Dew Herbert Camacho.

Thursday, August 9, 2018

Satire Becomes Reality

For some time now, it has been getting harder and harder to distinguish between satire and reality. Satirical sites like The Babylon Bee must have a hard time come up with material that hasn't already become reality. Our entire culture, and especially our political scene, has become banal, silly and vacuous. The leadership of both parties reflects this.

In 1975 Monty Python and the Holy Grail was released. It remains one of the funniest, most quotable movies ever. This scene was supposed to poke fun as overly serious political wonks. In 2018 this is actually the state of politics, particularly on the Left. The absurdness of reality has overtaken satire and comedy.

Wednesday, August 8, 2018

The Cultural Revolution, Take Two!

The social media world is abuzz this week after the coordinated take-down of Alex Jones from Facebook, Youtube (Google), Spotify, even LinkedIn of all places. Jones' channel on Youtube had something like 2.5 million subscribers so that isn't a minor thing. Now, how many of them were "real" subscribers and how many people watched with any regularity, I don't know. I was a subscriber on Youtube and rarely watched his channel except when they were talking about the Bilderberg Group. I liked Paul Joseph Watson of Infowars a lot more.

This won't end with Alex Jones and it didn't start there. The Left has been picking off low hanging fruit for a while, softening people up for more serious deplatforming later. The alt-right has been a frequent target, especially after the media spun last year's Charlottesville fiasco into something very different from what really happened. Shortly after that happened the Daily Stormer was deplatformed on their main webpage, again and again. They seem to have found a stable home for now. Then there was a mass deplatforming on Twitter of people like Jared Taylor of American Renaissance along with many, many others although oddly alt-right poster-child Richard Spencer was not booted from Twitter. Others had their funding sources cut off by Patreon and Paypal. Even little stuff makes a big difference. The alternate social media platform Gab cannot get their app into the main app stores, making it very difficult for users to utilize the service. Even someone as harmless as goofy Youtuber PewDiePie regularly has his material "copy striked" and demonetized. Already voices are clamoring for the tech giants to keep going. This is from a sitting U.S. Senator:

The tip of the iceberg. Read that again and think about the implications. Our democracy depends on social media giants colluding together to censor and suppress speech that the Left doesn't like. What sort of "democracy" does Senator Murphy envision when he calls for the suppression of free speech and the squashing of dissenting views? Youtube deleting Alex Jones isn't a First Amendment issue but a U.S. Senator calling for more censoring of political speech comes awfully close.

There is more. New York City Mayor Bill De Blasio, in an interview with a foreign newspaper, seems to think that we would be more "unified" if dissenting political speech was suppressed.


New York City Mayor Bill de Blasio (D) is slamming conservative media mogul Rupert Murdoch and Fox News, saying that “we would be a more unified country" without their influence. 

“If you could remove News Corp from the last 25 years of American history, we would be in an entirely different place," de Blasio told The Guardian last week before he spoke at an event in New Orleans, adding that he believes Murdoch is responsible for President Trump's election in 2016. 

I am sure it would be. There have been plenty of experiments with restricting political speech and only allowing a single viewpoint. The Soviet Union for example. Sure they had Pravda to provide the "news" but it was only the news the Communist party allowed. I guess Hizzoner the Mayor thinks that the only path to "unity" is forced uniformity backed up with secret police and gulags for dissenters. His irony knows no bounds...

He also voiced strong disapproval for Trump's rhetoric regarding the media, saying "there is no comparison between a progressive critique of the media — and overwhelmingly corporate media, by the way — and a president who does not believe in free speech and is trying to undermine the norms of democracy."

Ah, see when "progressives" critique the "corporate media", which is almost exclusively far-left, that is noble and proper but when Trump does it, he doesn't believe in "free speech". So says the guy that wants to get rid of any conservative voices, no matter how mainstream and feeble.

Heck, why stop there? Instead of restricting what news and opinion voters use to make their voting decisions, why not just restrict the ballot to only have Democrats? That would make things so much simpler and unified. They had elections like that in the Soviet Union and they were incredibly unified, and if you weren't....well you just disappeared. Twitter CEO Jack Dorsey posted a lengthy thread explaining why Twitter did not ban Alex Jones. The thread was fairly reasonable from Jack, the response was over the top, frothing at the mouth anger from "liberals" demanding he censor Alex Jones and anyone else to the right of Nancy Pelosi. Unhinged former governor, Presidential candidate  and renowned incoherent screamer Howard Dean took to Twitter to fulfill Godwin's Law and denounce Jack Dorsey for not censoring everyone Dean dislikes. Cuz Nazis and stuff.

Again, this is just the beginning. I can think off dozens of Youtube channels and Twitter accounts that are to the right of mainstream "conservatism" that are undoubtedly on the wishlist of voices to be suppressed next. Already some libertarian voices on Twitter have been suspended and the list is only going to grow. The social media giants know that people will get outraged for a few days and then slip back into their soporific state and each time they ban someone a little less radical, the response gets a little more lackluster. Then Breitbart and Daily Caller get banned, and maybe even more centrist outfits like Fox News and National Review. They will just keep wearing us down and lulling us back to sleep and they will never, ever stop.

This is not happening in a vacuum. All it takes is a little legwork and an open mind to start drawing the lines of connection between different events. Groups like the ADL and SPLC have been tasked by these big tech firms to police content and they both have moved far, far beyond their alleged original mandates to become professional pseudo-"hate speech" detectors. In other words the same small groups of wildly radical leftist partisans are making the decisions on who gets to post to Youtube or Twitter or Facebook.

I read something the other day that made an interesting connection between what is going on now and a major cultural upheavel from the past. The analogy is not perfect on course, they never are, but on the other hand there is that old saying about those who fail to learn the lessons of history being doomed to repeat them. In the 1960s and 70s, Mao Zedong decided that "capitalism" was creeping back into Communist China and threatening to undo the work of the Communist project in China. So he launched what came to be known as the Cultural Revolution. Mao mobilized students and young people to root out counter-revolutionary thought in China, a group known as the Red Guard.

One of their primary targets were the so-called "Four Olds". These four were: Old Customs, Old Culture, Old Habits, and Old Ideas.

A movement led by students and young people, long on fervency and radicalism and short on reason and critical thinking destroying the "old culture". Getting rid of "old customs" and "old ideas". Ridding themselves of "old habits". Any of this sound familiar? What is the removal of Confederate monuments that have been around for a century and never bothered anyone or the recasting of the Founding Fathers with a multi-racial cast in the musical 'Hamilton' but getting rid of the old culture? Old ideas like monogamy, traditional marriage and the cultural rejection of cross-dressing and homosexuality are being thrown out and labeled "hate speech". Screeching pink haired fruitcakes demand an end to the "patriarchy" and the destruction of "whiteness". Even the renaming of streets and schools has precedent in the Cultural Revolution. Outright anti-white racists get hired for the editorial board for the self-proclaimed "paper of record". The names and the locations have changed but the methods and the goals have not.

The far left cultural war didn't end when the communist Soviet Union fell, it just morphed into something new. Now we have the cultural Marxists, the social justice warriors and "democratic socialists". Instead of a class war, we have a war between competing identity groups. It is not the proletariat being oppressed by the bourgeoisie, it is the "disenfranchised" and various oppressed victim groups being oppressed by white people. Race, gender and sexual identity are the new class and the "white cis-male" that doesn't want to have sex with a cross-dressing dude is the new class enemy.

What the cultural revolutionaries realized pretty quickly was that it was not enough to simply suppress teaching and speech that was counter-revolutionary. You had to crush any dissent utterly and ruthlessly, otherwise concepts like freedom and liberty kept popping up in spite of the educational and media indoctrination. So that left you with terror to keep people in line. Untold millions of people were murdered during the Cultural Revolution, part of the tens of millions who died as a direct result of Communist rule, both in China and other communist states. Millions more were uprooted, imprisoned and tortured, all in the name of "unity" of the sort that the mayor of New York City seems to envision and dream of.

This is not a mere political struggle we are engaged in. That has been one of the blind spots of the political Right for decades. We think we are engaged in a struggle over ideas and policies. We think that if we make a better argument for tax cuts, we will win. But we are not in a struggle of policies. We are in a multi-front cultural war. The Right pats itself on the back when it gets tax cuts passed, while the Left is cementing their hold on the media, the government bureaucracy and the educational establishment. The Right crows about ambushing a patrol while the Left is occupying our capitol. Like the British troops at the Battle of New Orleans, many of us are fighting a meaningless battle while our "leaders" have already surrendered.

The insane rage against Trump has little to do with Trump himself or his politices. The rage is over what he represents. Trump is a counter-revolutionary, a reactionary force that threatens the cultural revolution. If Jeb Bush or Marco Rubio had been the GOP nominee and defeated Hillary, the Left would have been upset because after all she was pre-ordained as the Chosen One to be the first woman President but it wouldn’t have been anything like this. A President Bush 3.0 or Rubio would have been like a President McCain or Romney, just a caretaker making soothing sounds while the nation was culturally gutted. People like Rubio are tame "conservatives" that don't really conserve anything. They are perennial punching bags that show up on Sunday shows or write their little columns and dutifully squeak with indignation after they surrender the latest fight. Of course they don't squeak too loudly lest they stop getting invited to the right sort of cocktail parties.

This also explains the rage against Trump from "conservative" NeverTrumpers. People like Bill Kristol are obsessed with Trump. Little Ben Shapiro who fancies himself the next great conservative intellectual seems to think that he has a sacred obligation to reply to every tweet from Trump. Trump threatens their social standing in D.C. and Washington, upsetting the comfy existence they love.

I am a firm believer that we are headed toward a major break-up of the United States. We simply can't keep living together. Many people think we are going to have a new Civil War, dress up in blue or gray and start shooting at each other in set-piece battles. I don't think that is the case. Something akin to the Chinese Cultural Revolution seems far more likely and I also think we are already deep into this conflict but most of us on "our side" don't realize the full extent of the struggle. A bunch of people better wake up and soon or tax cuts and tariffs will be the least of our worries.

Sunday, August 5, 2018

The Bigotry Of Low Expectations, Example Number 8,767,312

It is often the little stuff in a news story that catches my eye. I read earlier in the day that it was another summer Saturday night in Chicago as the shootings kept coming. The number went up throughout Sunday as the chaos of the prior evening is sorted through but as of now "at least 41" people were shot and 4 have died. 25 people were shot in a 2 1/2 hour spree including an 11 year old boy who was inexplicably hanging around in a group of people at 2:35 AM. Even on a Saturday night, why is an 11 year old wandering around the streets? He, like many other teens and a bunch of girls and women, were apparently caught in the cross-fire and many of these teens were out apparently unsupervised after midnight in a city and in neighborhoods where gunfire is a common occurrence.

As you can imagine, the local hospitals were overwhelmed. Many shooting victims were taken to Stroger Hospital, a name I recognize from regularly reading the reports from Chicago's violence epidemic. At one point there were apparently over 200 people waiting to check on loved ones and relatives. According to the Chicago Sun-Times, people could be overheard on their cell phones plotting revenge on the shooters, who are known but no one goes to the police, while their friend or relative is still in the hospital being treated for their injuries. Tensions flared among those waiting: "A fight nearly broke out about 9:15 a.m. between two groups.".

But that is just a pretty typical weekend in Chicago. What got me riled up were statements from local Congressman Danny Davis. Davis is an elderly black Congressman who is associated with the "Democratic Socialists of America" and is unapologetically pals with noted racist and anti-Semite "Reverend" Louis Farrakhan. Davis is quoted in the Sun-Times as follows:

About a half hour later, U.S. Rep. Danny Davis showed up at the parking lot to offer comfort to people, many of whom are constituents.

“We continue to try to develop enough resources to prevent these kind of incidents from happening,” Davis told reporters, expressing frustration with a lack of government funding for programs that could prevent street violence.

“I’ll be willing to bet that many of the people who are here right now to express concern are also unemployed, don’t have jobs, are frustrated in terms of daily living,” he said.

This is the same tired old line we hear over and over. It is what the marchers who have shut down highways in Chicago keep saying. We need more money, more programs, more government intervention. Jobs programs and basketball leagues are not going to stop this. This is an issue with a culture that glorifies violence, that sees shooting into a crowd as a reasonable response to a slight, that sees the only way to deal with murder is to murder someone else in retaliation. It is a culture where kids are taught to fear and hate cops to the point that they will not aid an investigation into a murder, and then turn around and complain that the police don't solve enough murder cases. There are plenty of impoverished areas in this country but you don't see murder and shootings like this in Appalachia. Men don't shoot into a crowd where 11 year old children and women are present because they are out of work, especially when unemployment is at record lows. They shoot into those crowds because something is culturally broken, something that can't be fixed by after-school programs. You can't substitute a stable family with government and charity.

Ironically yesterday was the first ever "Barack Obama Day", an official state holiday in Illinois to celebrate the birth of President Obama. It is ironic because under Obama's watch violent crime soared to unprecedented levels in his own hometown. Last night, following this state holiday celebrating the birth of America's first black President, dozens of black men and women and children in his own home town ended up in the hospital, four of them so far in the morgue.

This epidemic of murder and retaliation can't be solved by the government nor can it be solved by diverting the blame. The solution has to come from within the black community. As long as the culture refuses to change, the cycle of violence will continue.

Irony Alert! Sarah Jeong Edition

Like virtually everyone else with a keyboard I wrote about the hypocritical hiring by the New York Times of racist Sarah Jeong a few days ago. Her juvenile anti-white racist tweets are still there for the world to see and the NYT is apparently not backing down. So conservative social media star Candace Owens, who is black, changed some of the instances of "white" with "black" and "Jewish" and retweeted the exact same thing that Sarah Jeong tweeted. But she didn't get a job offer from the New York Times. She got a twelve hour suspension from Twitter.

That is a pretty good question....

Paying attention yet?

Open Border Libertarianism Is Self-Defeating

For a period of time during the Obama administration, I followed a path many Americans on the Right have trod. I found myself less and less in tune with the traditional Republican party for a lot of reasons. Some of the big ones were the endless compromise on bigger government, thinking that slightly slowing the pace of growth was somehow a principled stand; the interventionst foreign policy was a big one with war after war being egged on by the neocon think tanks in the beltway but being fought by the children of the deplorables out in the heartland; and the simple fact that rank and file Republican voters in the South, Midwest and Mountain West were being played for suckers by the GOP, getting promises of action on the issues that mattered to us only to find that the party really only cared about the wealthy donor class.

So for someone who wanted smaller government and a less interventionist foreign policy, the Libertarian party seemed like the right way to go. I dutifully voted for Gary Johnson in 2012. I even voted for him again in 2016 although with much less enthusiasm, especially since his running mate Bill Weld didn't seem to be much of a libertarian and Gary seemed to be hitting the bong too much. The Libertarian slate got a huge number of votes in 2016, almost 4.5 million votes which was over 3% of the votes cast. That seems like a lot but during the election some polls had Johnson with double digits so the actual vote total was far less than the potential support. Gary Johnson seemed completely unprepared to capitalize on the surge in interest. He was apparently planning on just being a gadfly and never took the election seriously and it showed.

Since the election, the Libertarian Party has seemed to go off the rails. To read their tweets and the material published by beltway libertarians you would think that the most important issues in our nation were legalizing pot and supporting "gay marriage". I get the "libertarian case" for both of those, although I disagree, but really those seem like pretty minor issues to worry about. The LP even dutifully did the rainbow thing for gay pride month:

The LP Facebook banner during "Pride Month"

More and more it seems that the beltway/left-libertarian strategy is to try to appeal to disaffected Democrat voters by emphasizing socially liberal positions. I doubt this is attracting all that many pro-gay marriage/pro-pot legalization Democrats who have what they want already in the Democrat party. It is also quite off-putting to a lot of right-libertarians who are worried about things like the national debt and fiat currency instead of whether we can legally smoke pot while the country melts down around us.

One of the major recent transformations of libertarianism is an advocacy for open-borders. This has been around a while in some libertarian circles but it really is getting a lot of play recently. A lot of this is driven by groups like Cato and the Koch brothers. It is equal parts libertarian empty theorizing ("in a perfect world....") and crass exploitation from those who wants cheap labor.

Up until recently libertarians didn't use the term "open borders" because they know it is political poison. The official Libertarian Party platform dances around it with statements like this: "A truly free market requires the free movement of people, not just products and ideas". The "free movement of people" is a euphemism for open borders. At Reason Magazine, which is ironically becoming more and more unreasonable, blogger Ilya Somin penned a piece titled: The Hereditary Aristocracy of Citizenship which argues that having citizenship is some sort of elitist aristocracy, instead of a basic civic distinction between people of one nation versus another. Her "solution" to this "hereditary aristocracy" is another back-door way of saying open borders:

But there is much we can do to reduce the harm it causes. Broadly speaking, that can be accomplished either by broadening access to citizenship, or by reducing the extent of the privileges associated with citizen status. If citizenship no longer determined where you are allowed to live and work, to the extent it does today, its hereditary nature would be far less oppressive.

Subtle. We are not saying the words "open borders", we are just saying that citizenship no longer has any meaning when it comes to where you live and work. So just because you are a citizen of El Salvador, if you want to come to the United States to live and get a job, your citizenship doesn't matter. Like magic, a back-door to open borders.

Then on July 31st, the open borders cat was let out of the libertarian bag. Along comes Jeffrey Miron with an essay in USA Today: Forget the wall already, it's time for the U.S. to have open borders. There it is. Miron isn't some dimwit or garden variety liberal, he is "director of economic studies at the Cato Institute and the director of undergraduate studies in the Department of Economics at Harvard University.". What an embarrassing essay from someone on staff at Harvard and Cato. I don't have time to properly fisk the entire article here but allow me to share a couple of especially risible quotes:

Immigrants will not flood into America, although the rate of immigration might increase.

"Might" increase. Right. We have at least 12-15 million illegals in this country right now plus millions more from Mexico and Central America legally, and that is with immigration laws and border enforcement plus ICE. Take away any border controls and that number somehow won't skyrocket? I am conservatively guessing that truly opening the borders would result in short order absorbing 20 million additional people just from Mexico, Central America and northern South America. Things are getting worse, not better, south of us (The WSJ just ran a piece on the chaos in Brazil). That doesn't even count "migrants" from Africa and Asia. Included among the nations we would expect a flood of immigrants to come from are the top three nations in the world in terms of murder rates (El Salvador, Honduras, Venezuela). As I am fond of saying, we already have plenty of our own violent criminals, we don't need to import anymore.

Expenditure on the welfare state will contract because even if immigrants vote for welfare spending, existing residents will vote for less generous benefits when they believe these accrue to recent immigrants.

So a guy from Harvard thinks that dumping millions of poor, low skill immigrants will result in less spending on the welfare state. Oh I see how that works! Actually no. Social welfare spending, already under enormous strain, would be flooded with new applicants. People already migrate from Africa and Central America to Europe and the U.S. precisely because of social welfare benefits, why would that decrease by making it easier to get here? The exact opposite would happen, not to mention the crushing burden on schools dealing with children from homes where English isn't spoken, even more inmates in our already overcrowded jails. In a recent piece for the Federalist, Open Borders Are Not Libertarian So Long As America Is A Welfare State, Bruce Majors argues the old Milton Friedman line that we can have open border or we can have a welfare state but we can't have both.

Libertarians object that in denying a Honduran family the freedom to cross the U.S.-Mexican border we limit their freedom. But in allowing them in, they force American citizens to work to pay for schooling and other social services for their families. What morality—and what electoral strategy—prioritizes the right of a Honduran (who has already escaped violence in having reached Mexico) to cross the border, over the right of an American not to be subjected to forced labor to feed, house, and clothe her family? This is a question libertarian open borders advocates in any political party cannot answer.

That is a serious issue. No one can seriously look at the state of South/Central American immigrants in the U.S. and argue that having more of them will magically cause a reduction in welfare spending. That is like arguing that having the government provide unlimited "free" Mountain Dew and skittles to all school children starting at kindergarten will result in less childhood obesity. 

Plus, increased immigration will lower wage differentials across countries, reducing the incentive to immigrate.

What does that mean, "lower wage differentials across countries"? That is just a fancy way of saying that mass migration via open borders will depress wages in the U.S., so the standard of living and wage levels in America will be less advantageous versus other nations. I am sure that is not how he would define that, but that is what the reality is. Flooding the U.S. with low skill, low wage workers is going to depress wages in America. Why would I pay a decent wage for an American carpenter when I can hire a Guatemalan to do it for half price? That is great for keeping wages low, which benefits billionaires like the Cato-affiliated Koch brothers but for average working class American already battered by crappy trade deals (also championed by "libertarians")? It could be a death sentence. But hey on the bright side, we won't have to feel guilty about having a higher standard of living than El Salvador and Somalia anymore! That isn't libertarianism, that is socialism: universal shared common misery.

There is more but in general it is just a lot of pie-in-the-sky theories, lack of understanding of human nature, bait and switch (lumping all immigrants together when he knows full well that most immigrants that would flood here are not physicists from Sweden or engineers from Korea, but laborers from Mexico) with a heaping dose of dishonesty.

Quite a difference from that to Llewellyn Rockwell who rightly argues that Open Borders Are an Assault on Private Property or Hans-Hermann Hoppe. Indeed there are a valiant few libertarians like Rockwell and Hoppe that are trying to, in Hoppe's words "rescue libertarianism from left-libertarian flakes and fakes".

Not only do I agree with Rockwell and Hoppe on open borders as a philosophical matter, it is also even more so a pragmatic issue. I assert that if you truly want a libertarian society, you must have meaningful borders.

If open borders becomes a reality, we will never have a libertarian society.

For a lot of libertarians, human beings are mostly anonymous economic units. Therefore an immigrant is an immigrant is an immigrant. It doesn't matter where they come from or what their motivation for coming here is. A married couple from India that comes here to start a retail business is no different from a single guy from Mexico that is only here for higher wages that he can send back home.

Libertarians also seem to subscribe to the "magic dirt" theory that says once someone steps foot onto American soil, they will suddenly jettison all of their cultural baggage from back home and become small government and liberty loving Americans, indistinguishable from any other American.

The reality is far different. Hispanics vote pretty overwhelmingly for Democrats, something around 65-70%. That is not as bad as the monolithic black vote that often approaches 90% Democrat but it still is pretty overwhelming and I don't see any reason that would change. Oddly enough even Asian voting patterns mimic Hispanic voting. In 2016 Asians voted 65% for Hillary. That should strike you as weird. Asians are known for valuing family, being hard-working, ambitious, many of them are small business owners and entrepreneurs. They are shafted by liberal policies like affirmative action which favors less qualified black college applicants to the detriment of Asians. Even though Democrat policies are antithetical to them cultural and harmful to them personally, Asians still vote Democrat. Perhaps that will start to shift. Perhaps not.

A line parroted by many "conservatives" is that Hispanic voters are natural conservatives, they just need to realize it. The rationale behind that statement is that Hispanic voters tend to be fairly religious and place a high value on family. There are a number of major flaws with that theory. For example, for a long time working class Catholic voters were a solidly Democrat constituency. Many working class, especially union, Catholics in places like my home town of Toledo still vote reliably for Democrats because Democrats are "the party of the working guy". More and more of them are realizing that is not true but the major social welfare programs like Social Security, Medicare/Medicaid and food stamps came about under Democrat administrations elected in large part by working class Catholic voters. So being family oriented and religious is no guarantee of being "conservative".

Another problem is that the media has effectively painted Republicans as being anti-Hispanic. Like it or not, we are deeply embedded in an era when tribe trumps ideology for virtually all non-white voters. Black voters vote for Democrats because they have been indoctrinated to believe that is where their tribal interests lay. Even self-identified black protestants voted overwhelmingly for Hillary Clinton and they voted almost unanimously for Barack Obama in 2012, even though Obama was an open supporter of abortion which disproportionately kills black babies and homosexual marriage. I think many black protestants opposed those things, perhaps even quite strongly, but their racial allegiance to the Democrats overrode their own personal beliefs. This is becoming very apparent even among once-"conservative" black evangelicals. I have written quite a bit about people like Anthony Bradley and Thabiti Anyabwile who are abdoning Biblical orthodoxy in favor of racial tribalism dressed up as "woke theology". Lee Kuan Yew, the "founding father" of Singapore made a rather controversial statement:

"In multiracial societies, you don’t vote in accordance with your economic interests and social interests, you vote in accordance with race and religion.”

That is the case for non-whites in America, at least racially, and it will be true for Muslims as they grow in numbers. A recent study showed that Muslims were a staggering 75% more likely to support a candidate if they were a fellow Muslim.

In other words, Hispanics will vote along with other Hispanics just as black will vote along with other blacks and Muslims with other Muslims and Jews with other Jews and that means that they are going to keep voting Democrat for the foreseeable future no matter how many socially liberal policies the Libertarian Party adopts. For now the only identity group that doesn't vote in lockstep is the majority white group but that is slowly changing, as we saw with the last election.

The biggest issue is that immigrants from Central and South America drastically disproportionately use government social welfare programs. If you look at immigrants by country of origin, you can see that immigrants are a massive net negative when it comes to social services when you include the disparity in the property taxes they pay versus the cost of education their children, many of whom speak English poorly or not at all (see any number of articles here from NumbersUSA or the previously linked article by Bruce Major).

Why would they suddenly decide to forgo the free stuff in favor of eliminating the income tax? I just don't see how libertarian ideals are an electoral winner for immigrants. People who are of European ancestry with a family lineage that has been here for centuries will have their eyes glaze over when you start talking about fiat currency, why would we suppose a new immigrant from Honduras will be at all interested?

*** Thought-Crime Incoming ***

Let's face it. Libertarianism is a European white and Jewish thing.

Think about well known libertarians. There are people like ranging on the "right" of libertarianism like Ron Paul, Lew Rockwell, Tom Woods all the way to people like Gary Johnson and David Boaz. Old famous libertarians are people like Ludwig von Mises, Murray Rothbard, Friedrich Hayek, Milton Friedman. Look at the staff experts of the Cato Institute. There are no black faces smiling back at you. There are a few pretty light complexioned Hispanics but the page is mostly white or Jewish. The same with the staff at Reason magazine. Sure you can point to Walter Williams but he is a pretty significant exception.

Black and Hispanic politicians and pundits don't talk about liberty, they talk about equality and justice. They are overwhelmingly pro-regulation, pro-gun control, pro-speech regulation, pro-income redistribution. They bang on about Medicare for everyone which is a way to get universal "health care" without calling it that. They push for the mythical "living wage" of $15, which will turn into a mandatory "living wage" of $20 and so on. They think that everyone should get a "free" college education (to which I reply, if you think college is expensive now, just wait until it is free).

In short, open borders is a sure fire recipe to make sure that libertarian ideas never progress beyond memes and hearty discussions over a couple of craft beers. Perhaps you can dismiss this as crass pragmatism but it is simply the truth. Current immigrants are disinterested in libertarian ideas. There is no reason to believe that future immigrants will be any different. If you are a libertarian and your goal is to live in a libertarian society, then pushing for open borders is perhaps the worst thing you can do. Just because you can make a flowery argument based on a perfect world scenario doesn't translate to that policy having the intended effect in the real world.