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Bitcoins vs. Bud-Coins on a Slow News Day

Today’s big story is that Southern Gothic novel of a Senate race taking place down in Alabama, but there’s no telling how that will turn out, and yesterday was a slow news cycle by recent standards. The biggest name to be added to the growing list of sex monsters was some celebrity chef we’ve never heard of, although a few more women came forward to credibly accuse President Donald Trump of sexual misbehavior, while his United Nations ambassador Nikki Haley said they should be heard, and as interesting as that is we didn’t feel like revisiting the topic just yet.
Our favorite story of the day was our beloved Wichita State University Wheatshockers climbing to third in the men’s college basketball rankings, but we won’t bore you out-of-towners with that, and a close second was that tear-jerking story about the bullied boy whose video went viral and prompted an outpouring of support from all sorts of sports and entertainment celebrities, but we don’t have anything to add to that. The other story that caught our eye was on the business pages, where they report that “bitcoins” are currently the hottest stock market offering, which reminded us of a favorite essay we penned about that scam way back when it launched, and it seemed a good opportunity to take a day off by reprising that scathing satire.
“Hello, I’m Bud Norman. You might remember me from such Gridiron skits as ‘God Testifies at the David Brace Trial,’ ‘North High Honky Mo-Fos,’ and ‘Chip Wilson and the Museum of Random Crap.’ Or maybe you vaguely recall me as that kid you used to beat up in the boys’ room at Brooks Junior High.
“In any case, you know me to be a honest man. Back in my hometown of Wichita they call me ‘Honest Bud,’ a nickname I have proudly carried ever since the day I found that glass eye on the bar at Kirby’s Beer Store and returned it to its rightful owner. With that kind of reputation for rock-solid integrity on the line, I’m proud to offer you fine folks the investment opportunity of a lifetime.
“Now, to the untrained eye this might look like an ordinary piece of stamped metal (holding up an ordinary piece of stamped metal), but in fact is is a revolutionary new financial instrumentt that will transform the world economy. This, ladies and gentleman, is a ‘Bud-coin.’
“Every Bud-coin is made from the finest tin, supplied by local gypsy scrap metal merchants, and is emblazoned on one side with a rendering of my own smiling face. On the other side are the words ‘caveat emptor.’ This is Latin, and I’m told that  roughly translated it means ‘You can trust this guy, he’s all right.’
“That doesn’t really matter, though, because we aren’t actually going to stamp many of them. Instead, every purchase of a Bud-coin will be duly recorded on the Bud-Co Industries super-computer. When you purchase a Bud-coin the price will be subtracted from your account and transferred to whatever company your purchase from, along with our cut. This is what’s known as a ‘virtual currency,’ and you have to admit that sounds pretty darned high-tech and up-to-date.
“Still, you might be wondering why you shouldn’t keep making your financial transactions with those dirty and wrinkled dollar bills you’re used to. They were good enough for grandpa, you might be thinking, so why quit now? Well, for one thing, how much do you really know about your grandfather? God only knows what that old coot was up to when you weren’t around, and if you think back you’ll remember that your grandmother was always giving him that suspicious look. Perhaps more importantly, Bud-coins offer a number of advantages over those low-tech, old-fashioned dollars that are currently cluttering your wallet.
“For one thing, transactions made with Bud-coins are not taxable. Ordinarily you would have to move to Montana and arm yourself to the gills to achieve zero tax liability, but thanks to the miracle of Bud-coins you can now achieve that blissful state right in your own hometown. We still recommend a concealed carry permit, just to be safe, but for now the feds aren’t on to us.
Also, Bud-coins have no serial numbers or other identifying marks that allow the authorities to follow your transactions. This makes Bud-coins ideal for purchasing a gift for that special someone in your life that your spouse doesn’t know about, or even something so simple and mundane as buying a bag of weed. Even when weed is legal you’re still going to want to buy the tax-free good stuff from that hippie with the grow light in his closet, and Bud-coins are the prefect way to make that all-important score.
“What’s more, your holdings in Bud-coins could significantly increase in value. Some financial experts are calling Bud-coins the 21st Century version of Dutch Tulip Mania or the Beanie Baby craze, and others are saying it could be the next dot-com or housing bubble. For those who got out in time, as I plan to do, all of those worked out pretty well.
“As an added bonus, every purchase of a Bud-Coin also gives you a copy of my latest album, ‘The Many Moods of Bud.’ The crooning on this collection expresses the full range of my emotions, from ennui to despair.
“I know, I know, despite all these advantages you still have questions. You’re probably wondering what happens to all your money if the Bud-Co Industries super computer crashes while I’m watching one of those kinky Japanese porn videos with the pixilated private parts. Not to worry, as every entry is backed up on what the IT guys call ‘hard copy’ on abofficial Big Chief tablet. To ensure your security, every entry is indecipherably encrypted in my illegible handwriting.
“You might even be thinking this is a convoluted scam. You might be thinking, ‘Hey, I’m paying a guy to add a few digits to a computer program? What’s backing this up? Where’s the real value in this currency?’ Well, Mr. Picky-picky-picky, I would point out that Bud-coins operate on the same basic economic theory as the Federal Reserve Board, and if that doesn’t make you feel confident about your financial future, well, it’s not my fault.
So, if you’re bold enough and imaginative enough to trade some of those low-tech and old-fashioned dollars for something more high-tech and up-to-date, just drop us a line. Don’t be a luddy-duddy. Don’t be a moon calf. Don’t be a jabbernowl. You’re not those, are you? Step right up, and we’ll be glad to let you in on this exciting new venture.
“By the way, bitcoins and other virtual currencies are not accepted, as we deal strictly in cash.”

— Bud Norman

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Hillary and the Dog That Didn’t Bark

Former First Lady and Senator and Secretary of State and presumptive First Woman President Hillary Clinton was barking like a dog on the campaign trail the other day, and lest you think that’s some sexist slur please understand that she was quite literally barking like a dog. The bit got a good laugh from her fans, who are so humorless they’ve kept a straight face through all her explanations about her e-mails and Benghazi and the numerous other Clinton family scandals, and it was approvingly noted by the liberal press, which is eager to show her lighter side, while the more conservative media made sport of it. Donald J. Trump, the foul-mouthed real-estate-and-gambling-and-professional-wrestling-and-reality-show carnival barker who is currently leading the Republican field, seemed to find it undignified.
We found the impression a failed but harmless attempt at humor, and hardly worth mentioning, but we wish more attention was paid to what she was barking about.
After recalling an ad that once ran on rural Arkansas radio featuring a dog that would bark whenever a candidate said something untrue, sounding very folksy as she related the story, Clinton said “I want to figure out how we can do that with Republicans. We need to get that dog to follow them around and every time they say things like ‘Oh, the great recession was caused by too much regulation, then ‘bark, bark, bark.'” The crowd roared its approval, of course, but they failed to realize the joke is on them.
Any competent lie-detecting dog would not be only barking furiously at the implied argument that the great recession was caused by too little regulation, it would be straining at its leash and salivating for blood, and Clinton surely knows this better than most. The last round of significant financial de-regulation was signed into law during the administration of her hound dog husband, former President Bill Clinton, and the subsequent Republican administration added the countless regulations of Sarbanes-Oxley and countless regulators to enforce them, and the banks didn’t make hundreds of billions of dollars of loans to people with little chance of paying them off because the Republicans had deviously repealed some rule against it but rather because Clinton’s husband’s administration coerced and cajoled and incentivized them to do so in the name of fairness. At first the policy fed a housing bubble that seemed to make the entire country richer, and those suckers with the subprime mortgages were able to stay afloat on the rising real estate tide, and Clinton successfully ran for the Senate bragging about it, but eventually it all came crashing down into a very well regulated pile.
The notion that greedy Wall Street bankers eager to get rich by making hundreds of billions of dollars of loans that were unlikely to ever be paid back were to blame, and that even more government coercion and cajoling and incentivizing were therefore required, quickly became the widely accepted story. Even Republican presidential nominee Sen. John McCain went along with it, and the dissenting voices with their facts and arguments and lack of any recognizable villains other than well-intentioned government servants were quickly drowned out in the boos. Now it’s just one of those things that every knows even though it’s not at all true, much like that “Bush lied, people died” theory of the Iraq War that even the current front-runner for the Republican presidential nomination is peddling, and at this point Clinton’s barking dog shtick will be very difficult to refute.
Still, we’d like to see someone in the Republican field make a stab at it, and not just by mocking the barking dog impersonation. Texas Sen. Ted Cruz is still defending the free market system, and he does some pretty convincing impersonations of characters from “The Princess Bride” and “The Simpsons,” so perhaps he’s up to the task. The boastful billionaire front-runner is more inclined to criticize Wall Street’s greed than the regulators’ good intentions, the rest of the field seems reluctant to champion that good old red-in-tooth-and-claw capitalism that doesn’t make bad loans even for fairness’ sake, and we certainly can’t expect the unfashionable truth from the self-described socialist who is currently the front-runner in the Democratic race.
All in all, it’s enough to make us barking mad.

— Bud Norman

Reinvesting the Truth

Three cheers for Sumit Agarwal, Efraim Benmelech, Nattai Bergman, and Amit Seru. Their recent research for the National Bureau of Economic Research comes far too late to have averted our current financial woes, and will likely be little noticed by the people charged with averting future catastrophes, but it’s nice to hear the truth spoken even when only for its own sake.
The quartet of exotically-named economists titled their paper “Did the Community Reinvestment Act (CRA) Lead to Risky Lending?,” and before delving into some very complicated analysis they answer the titular question with a simple “Yes, it did.” This admirably plain-spoken truth isn’t just a matter of academic interest, easily relegated to the pages of obscure economic journals, but rather a matter of importance to anyone hoping to make a living. Simply put, it exposes a widely-believed lie that has done much to bring America to its current sorry state.
Readers with reliable memories will surely recall the sudden bursting of the housing bubble back in ’08, which of course was immediately followed by a recession said to be the worst since he Great Depression, and they might also remember how it was all blamed on the voracious greed of top hat-wearing, moustache-twirling bankers who had tried to get rich by making hundreds of billions of dollars worth of loans to people who would never be able to pay them back. Republicans in general and George W. Bush in particular were also blamed, for it was their superstitious fetish for de-regulation that had removed the rule that previously forbade bankers to make loans to people who would never be able to pay them back. The economic downturn was fortuitously timed for Barack Obama, who stood foursquare against greedy bankers and promised all the regulations that a liberal heart might desire.
It was all utter nonsense, as a moment’s reflection could have revealed. There are no possible circumstances that might occur in a truly free market which would cause a banker, especially a greedy one, to make loans to people who will not be able to pay them back. There had never been a rule against making such futile loans, just as there had never been a rule against bankers giving all their money away to the panhandler on the corner, because there was no need for it. One didn’t even need to know that no financial de-regulation had occurred the Bush administration, and that on the contrary he had signed the Sarbanes-Oxley bill that added far too many new regulations, as simple logic should have sufficed. That panic that followed the crash didn’t allow for a moment’s reflection and overwhelmed logic, though, and the greedy bankers and ideological Republicans made for convenient scapegoats.
The truth, which even the Republican presidential ticket dared not speak, was that the federal government had tempted, cajoled, and at times outright compelled the banks to make the mortgage loans that brought down the financial industry. Although it had gone largely unnoticed, despite the Democrats’ occasional campaign boasts while the housing bubble was being inflated, the sub-prime loan was the culmination of a 30 year effort that began with the usual good intentions. Bankers had refused to make to loans to people who couldn’t pay them back from the dawn of commerce until 1978, but that year Congress and the reliably wrong Jimmy Carter decided to rectify this blatant discrimination with the Community Reinvestment Act to induce loans to law-income borrowers with bad credit scores.
The law was more or less ignored by the Ronald Reagan and George H.W. Bush administrations, an oversight that was little noted at time except in the occasional outraged editorial, but starting in 1993 the Clinton administration began to enforce it with an evangelical zeal. Lawsuits brought by the Justice and Housing Departments forced billions of loans to borrowers who had previously been denied credit, while a concerted effort by activist groups such as ACORN, newspapers such as the Atlanta Journal-Constitution, and leftist lawyers such as Barack Obama increased the pressure. The Clinton administration eventually agreed to a wide range of financial de-regulations intended to minimize the risks of the policy, including the hated “derivatives” for which George W. Bush is usually blamed, and it even ordered the industry-dominating Fannie Mae and Freddy Mac mortgage institutions to fill half their portfolios with sub-prime loans. When a construction boom inevitably followed, Clinton was pleased to take the credit.
As the great French economist Frédéric Bastiat observed, “it almost always happens that when the immediate consequence is favorable, the ultimate consequences are fatal,” but by the time all those loans started going bad Clinton was out of office and basking in his reputation as an economic genius. George W. Bush was the one who was there to deal with the mess, and despite his frequent efforts to convince the congressional Democrats to reform the various sub-prime policies he was the one who would be forever blamed. With no one in the press willing to admit their own culpability in the fiasco, an economic catastrophe caused by well-intentioned governmental meddling led to the election and re-election of the most meddlesome government in American history.
There’s not much that Agarwal, Benmelech, Bergman, and Seru can do about it now, but it’s good to have such highfalutin evidence to back up the obvious truth.

— Bud Norman