Monthly Archives: December 2014

What the Mohammad Islam Hoax Says About Trading and Liberalism

One of the big stories making the rounds is that ‘trading prodigy’ Mohammad Islam is merely a paper trader and not a multi-millionaire. I concede to falling for the story because the alleged returns as purported by Mohammad, while highly improbable, are not – based on my knowledge of the market and trading – impossible. The bigger problem with the story is not that Mohammad lied, it’s the knee-jerk reaction by the media and the public and what is says about the state of liberalism in America today. It’s weird, but not surprising, that in America, the most successful nation in the world, so many people – none of whom have any personal ties to this kid or in anyway were victimized by him – derived so much pleasure and self-riotousness from the revelation that he wasn’t, in fact, a millionaire, and the loathing on the internet leveled against him seemed more appropriate for rapists and murderers – not a prankster that may have gotten in over his head. The overwhelming skepticism, especially by the liberals, was not surprising because, the left, they have scant knowledge of finance. They just assume the stock market is rigged and or you can only buy shares, not futures or options. Second, the left revels in the failure of successful individuals and institutions, as we’ve explained before.

Using highly leveraged financial instruments such as futures and options, it is possible to turn thousands of dollars into millions in a short period of time. There are thousands of professional traders and fund managers who have achieved consistent, market-crushing returns, although they don’t go around bragging about it. The most famous examples are Warren Buffet and Jesse L. Livermore. Another is Richard Dennis, who in just ten years turned $1,600 into $200 million. Although the methods Dennis employed stopped working in the 80′s and 90′s, he was smart and savvy enough to find and exploit inefficiencies in the market to make an enormous windfall. There are many other stories like this 20-something penny stock trader. Although he cost his firm over $100,000 in a single day due to a botched trade, he turned his personal account of just thousands of dollars into hundreds of thousands of dollars in the span of six or so years. Jim Simons’ quant Renaissance Medallion fund has annual compounded returns of over 35% – turning an initial seed investment of a couple million into over $25 billion in just under three decades. Timothy Sykes, a well-known daytrader, turned his $12,415 Bar Mitzvah gift into $2 million. All of these examples show that, yes, you can get rich quickly trading. Mohammad’s returns were not impossible, as many immediately assumed.

Such great fortunes are amassed not by statistical chance, but by innate skills and talent in much the same way some people, by virtue of genetics, excel at math, athleticism, or any other ability. This demonstration of individual cognitive exceptionalism by Mohammad in order to make his illusory fortune is why the left was so eager to trash this kid because they hate it when someone succeeds without the government’s help, and they also hate elite schools like Stuyvesant that admit based on raw brain power over ethnic diversity and whose students often become very successful as adults. Hence, we see the ‘outrage porn’ is mostly motivated by leftist class envy and the liberal enjoyment of seeing successful people fail. Some non-neo republicans joined in, but this mostly seemed like a leftist feeding frenzy.

Peter Boockvar Writes the Stupidest Article Ever?

This plea to the fed to end QE is so stupid it necessitates a response: Peter Boockvar: Dear Federal Reserve

He writes:

The path ahead will be disruptive but that can no longer be avoided as 6 years of ZIRP and a 5 fold increase in your balance sheet has already way overstayed its welcome. The longer you wait, the worse the consequences will be when you do. Again, happy holidays and happy 2015.

If market participants were really concerned about the fed balance sheet, such concerns would be manifested in the bond market in real-time in the form of rising yields. And with QE over, the left can’t blame the fed on depressing yields. Instead, yields for 10-year treasuries are at historic lows. So the fed has no pressing need whatsoever to unwind the balance sheet.

Thanks to those two sayings, the US economy has become the US ‘boom and bust’ economy.

Wahh wahh cry me a river. Since 2000, the US has had the strongest inflation adjusted growth of most developed countries. That includes Britain, Canada, Germany, an Japan. Boom and busts are a small price to pay for such steady and robust growth. And no one is putting a gun to anyone’s head forcing them to invest in whatever sector is booming. That’s the whole reason people use index funds – to help mitigate the risks of sector-specific boom and bust cycles. Boom cycles bring cool technologies like the modern web browser, the personal computer, Facebook, Uber, etc. And bust cycles prune away the losers.

Cheap money that you created fueled a drilling boom that oversupplied a market that now has shrinking demand. Now with lower oil prices, headline inflation and inflation expectations as a result, you may actually use low inflation as an excuse to keep rates low for longer…

Correlation does not equal causation, pert. As shown below, historically there have been instances of oil prices rising during periods of monetary tightening, such as in the 2000′s. Oil is very volatile and is influenced by many factors, with monetary policy just one of them.

Second, at any given time there will always be at least one sector that is struggling. In 2007-09 it was the financial sector. Between 2000-03 it was tech. Now it’s energy’s turn. A lot of these speculative hydraulic fracturing companies issued tons of junk bonds, and the companies themselves were dependent upon oil staying above a a high threshold in order to be profitable. That just sounds like a recipe for disaster, and the blame falls on company management instead the fed. One could argue that ZIRP cased investors, in search of yield, to flock to these risky asset classes, but even if that is true it’s ultimately the responsibility of the investor to understand that with great yield comes great potential risk. Like the 2008 financial problem, everyone was looking for someone else to blame for losing money – the rich, the fed, Washington, bankers – never themselves. The concept of ‘mal investment’ is ambiguous in that it’t impossible to access if an investment was a waste until a long time has passed.

In Defense of the 2008 Bank Bailouts, Again

Believe it or not, one need not be a liberal to be a supporter the unpopular but necessary bailouts. Republicans voted 133–65 in favor of the bailouts, although no one wants anything to to with it anymore due to the overwhelming unpopularity of the program despite its great success.

The problem has always been liberalism and entitlement spending – not Wall St., bank bailouts, or corporate welfare. The 2008 bailout was a success and a necessity, by stemming the bleeding in the financial sector and allowing the healthier sectors of the economy to thrive instead of being dragged down. By early 2008, interest rates were close to zero, making the bailout essentially free, and it indirectly paid for itself multiple times over in the form of the huge post-2009 stock market rally and economic boom. Unlike Greece and other economic weaklings, when a country with reserve currency status such as the USA has a crisis it causes government bond yields to plunge due to the flight to safety; this made the bailout nearly free. Furthermore, the treasury reported a profit from TARP just two and a half years later, and all of the banks have long re-payed the money.

Perhaps too big to fail sucks, but there’s nothing we can do about it given how interwoven and interconnected everything has become. The people I talk to are happy that their home and retirement accounts have recovered so strongly since 2009. Many wanted the financial system to fail to get Obama elected. Others wanted it fail to stick it to the rich. We shouldn’t view bailouts as necessarily a partisan issue, but a matter of necessity during national crisis such as 911 and the bombing of Pearl Harbor.

Furthermore, none of the much-feared ‘worst case scenarios’ ever materialized. There was no hyperinflation, no dollar collapse, and taxes didn’t need to go up to pay for it. In fact, the exact opposite happened: the dollar and treasuries have surged and inflation is still rock bottom. Six years later, still no hints of relapse.

Perhaps Bush was right in temporarily suspending the free market to save the free market. Letting politics and semantics get in the way of good policy can have disastrous consequences; after the dust settles we can debate if the bailouts were compatible with free markets or not. There is no such thing as a free market purist. Greenspan for example, was Ayn Rand’s greatest disciple. What proponents of monetarism and supply-side understand is that rather than aim for the impossibly high standards of market purism, it’s more effective to create – through occasional interventionism, low taxes, and deregulation – optimal macro economic environments for the free market to thrive. So while you do have the occasional bailout, you also get free market success stories like Tesla, Snapchat, Tinder, Uber, and Facebook.

From National Review’s Kevin Williamson:

Bailout politics is still very much with us: People resent — rightly — what was done and how it was done.

What exactly was done to whom? What about the GOP message of personal responsibility? No one forced these homeowners to take out a zero-down 30 year adjustable mortgage. No one forced these home builders to keep building when supply was obviously vastly exceeding demand. No one forced these liberal crybabies to sell their stocks at the bottom in 2008, or buy a home at the peak in 2006.

Universal Healthcare Not So Great

Modern, timely healthcare is expensive. Despite what you may read about the virtues of universal healthcare, there are caveats such as long waiting times and poor quality treatment. Cancer survival rates are lower in countries with universal healthcare than in America. Many times, people in countries with universal healthcare will opt for private treatment if they can afford it, which is the treatment all Americans both rich and poor already get.

Don’t believe me? Here is a story of a young woman ‘Kate’ from New Zealand, who was diagnosed with colon cancer and opted for private treatment:

At my age, I could have been waiting for a considerable time for this through the public system but luckily I had private health insurance and was able to make an appointment early the next week.

But isn’t universal healthcare supposed to be the best thing ever, says the left? How could any sane person refuse it?

Americans diagnosed with cancer have better survival odds than those receiving treatment under a universal plan.

Cancer Survival Rates Far Worse in Great Britain than U.S.

Cancer Survival Rates
USA vs. England
90.5% Breast Cancer 78.5%
69.9% Bowel Cancer 51.6%
66.3% Prostate Cancer 44.8%
62.9% All Cancers (Female) 52.7%
66.3% All Cancers (Male) 44.8%
71.18% OVERALL AVERAGE 54.48%

And from

Fact No. 1: Americans have better survival rates than Europeans for common cancers.[1] Breast cancer mortality is 52 percent higher in Germany than in the United States, and 88 percent higher in the United Kingdom. Prostate cancer mortality is 604 percent higher in the U.K. and 457 percent higher in Norway. The mortality rate for colorectal cancer among British men and women is about 40 percent higher.

Another problem with healthcare is we’re spending too much money prolonging life for people with terminal conditions. Everyone, regardless of ability to pay, gets access to these super-expensive drugs that may only have a 30% chance of adding two months of life for someone with terminal cancer versus placebo. That’s great for biotech companies and hospital stocks, but it does strain public resources that could be better spent elsewhere. Ironically, Steve Jobs, despite being a billionaire, set a good example by refusing treatment for his cancer. If more people do the same, healthcare costs would be reduced dramatically. Make the ‘last-ditch’ drugs only available to those who an afford them and or have insurance that will pay for them; otherwise you die two months sooner. I’m not taking about chemotherapy and other standard protocols, but these speculative drugs that seldom prolong life more than a few months. This is the problem with liberal democracy – the idea that all lives are precious and worth prolonging. No they aren’t. Sometimes it’s your time to go, and the graceful thing to bow out without having to leave a big bill for taxpayers.

End of life care is cited as one of the 10 causes of rising healthcare costs.

When adjusted for subsidies and other programs, Americans pay little out of pocket for education and healthcare. Prices are rising, but the burden falls on the government and the insured to pay for the millions who have no health insurance and insurmountable student loan debt. That’s why, despite being a Republican, I’m sympathetic to the idea of Obamacare and getting people insured, but the implementation was faulty.

There’s Plenty of Room at the Bottom

We’re still in the eye of the slowest news cycle in history. From Rolling Stone to Cosby, there are plenty of stories about rape, but those are more like tabloid stories than news. Most people – including many on Reddit and 4chan – know the accusers are lying, which is why these alleged ‘victims’ (or what I call storytellers) didn’t go to the police but instead went to their lawyers and the press, because filing a false police report is a crime. Rape is a very traumatic event, anyone who is raped and isn’t under captivity would immediately seek help, not wait 30 years or go to the press.

For those who fall between the cracks in today’s super-competitive economy, to quote the title of a popular Richard Feynman lecture, There’s Plenty of Room at the Bottom. What this means is we need to lower our standards for what the American dream really means, especially for those who are not smart enough to succeed. Maybe the American dream is greeting strangers at Walmart or asking patrons if they want fries with their burger. These are jobs that don’t pay much, but are fulfilling and do create economic value. Maybe the American dream is uploading pictures to Facebook or taking selfies – two activities that also create value. Maybe it’s watching Keeping up With the Kardashians, which we believe should be required viewing for women who can’t cut it in STEM.

Through the schools and through popular culture, we need to teach the millions of people who reside on the left side of the bell curve how to be economically useful, productive individuals. Have the high schools and Jr. high offer classes on how to flip burgers, for example. Or how to set-up a Facebook profile (assuming anyone doesn’t still have one). We need to teach consumer spending, as well as broadcast FOX News in schools to counteract the liberal bias found in the curriculum. These are just some tentative ideas. They are probably terrible, but it’s a step in the right direction.

But really, why are wasting untold billions and countless hours teaching room-temperature IQ kids stuff that will go in one ear and immediately out the other? You pose this question to a typical welfare liberal and they will be outraged that you imply that not every kid has an inner Einstein that can only be unleashed with taxpayer dollars, or they will go on about how low-paying jobs are just as important and prestigious as STEM jobs. We argue, that while low-paying jobs do create economic value, individuals in the low-paying service sector are inferior to STEM workers and no amount of whining by the left will change this. The sooner these low-paying jobs can be fully automated, the better society will be. The people who lose their jobs and are unemployable can be warehoused in condominiums with tiny rooms that resemble egg cartons at little cost. Or maybe warehouse them underground, away from sight, in which case there is indeed plenty of room at the bottom.

Beyond the Blank Slate: How Libs Turn High-IQ Into a Handicap

With the exception of homosexuality, many on the left adopt a ‘blank slate’ approach to human biology in that upon conception, all individuals have the same potential and that socioeconomic outcomes and cognitive ability are influenced heavily by environmental factors. Therefore, it’s the job of a paternalistic society to ‘program’ these ‘blank slates’ in much the same way a computer is programmed so that egalitarian outcomes can be achieved. Furthermore, no one is intrinsically better than anyone else, and if some individuals are more successful than others it’s because of some ‘unfair’ environmental advantage, never innate talent that can be attributed to superior genes. To close this achievement gap the left seeks redistribution in the form of higher taxes, higher interest rates and other initiatives that specifically punish the most successful and useful members of society, or by wasting money on useless programs such as ‘universal pre-K’.

In the intervening years between Jon Entine’s Taboo and David Epstein’s The Sports Gene, incremental progress has been made in that to make the link between biology and outcomes in physical activity, such as professional sports, is no longer off-limits. But to make a connection between IQ and socioeconomic outcomes or to suggest that some individuals, upon conception, are smarter than others and therefore are more likely to succeed at life, is a position that still garners much criticism by the blank slate left.

The left doesn’t really care about biology as it pertains to things such as running and jumping, because those are skills are are less pertinent in America’s post-2008 hyper-competitive economy. But IQ has a direct influence all of our lives, especially in our winner-take-all economy where the cognitive differences between individuals can have great ramifications from standardized test scores, to income, employment, and professional success. Globalization, hyper-capitalism, technological progress, and financialization has widened the wealth gap between the cognitive elite and everyone else, threatening the left’s vision of some egalitarian utopia. From multi-billion dollar web 2.0 valuations, to surging stock prices and nosebleed prices in high-end real estate, the cognitive elite have been the among biggest winners of the post-2008 economy. Social Darwinism isn’t just some fringe belief of a bygone era; it’s blaring at us, deafening and immutable.

But the left is resourceful. When pressed, many will concede that, yes some people are smarter than others and this intelligence may have a biological origin, but that’s where it ends. The left’s most effective strategy in downplaying the benefits and significance of IQ is turn high-IQ into handicap. Yes, being better now means you’re worse. Some of the excuses used by the left to marginalize IQ include:

…people with high-IQs are deficient in ‘street smarts’

…there is no correlation between IQ and success

…early to ripen, early to rot

…individuals with high-IQs are less ethical, have poor social skills, etc

…humans are irrational, and smart people are the most irrational of all because they fall for the conjunction fallacy (invoking Amos Tversky and Daniel Kahneman to downplay IQ, in part by trying to show how smart people are irrational. Libs like Nicolas Nassim Taleb habitually cite Long-Term Capital Management of an example of when ‘genius failed’. Nevermind when genius created electricity, rockets, or computers.)

…IQ, as measured by an IQ test, is just one of multiple intelligences, many of which cannot be measured by the traditional test format (If you create enough intelligences, anyone can be a genius at…something)

…high-IQ comes at the cost of ‘common sense’

…IQ and standardized tests, such as the SAT, are biased and don’t measure practical skills

…’I have a friend who has a high-IQ and he did nothing in life…blah blah’ (anecdotal evidence)

…high-IQ people burn out quickly, squander their potential, and achieve nothing in life (the Terman study is often cited)

While the Terman study produced no Nobel Prize winners or technology billionaires, statistically speaking, a higher IQ increases the likelihood of success as measured by academic output, creative output (like punishing a book), income, and other indicators. There is a fascinating tedx talk about how standardized tests, contrary to what the left says about such tests being useless, can predict lifetime outcomes such as wages, being published in a journal, level of academic attainment, and so on. You look at the most successful web 2.0 companies and all of the people involved – from the investors to the founders to the employees – all have above average IQs. The same goes for Wall St., or the vast majority of high-paying professions, where high intellect is required. The next Bill Gates or Zuckerberg isn’t going to have an average IQ. While there are low-tech ways to get rich such as skilled trades, the vast majority of people in unskilled professions, such as the low-paying service sector, make little money and barely get by. That’s not to say we should try to help these people – we shouldn’t because that would be a waste of resources that could otherwise benefit more useful members of society, and entitlement spending is already too high.

The importance of IQ, especially in the post-2008 era, is self-evident and cannot be overstated. In debunking these leftist misconceptions about IQ, we can educate and implore policy makers to create pro-growth policy that will allocate more resources to allow individuals with superior IQs to achieve their full potential, which will help the economy and make all of our lives better.

The Left is Losing the Culture Wars

Like gravitons leaking from the brane into the bulk, the liberal media is ensconced in an insular ideological bubble adrift from the plane of reality. To understand how the majority of Americans really feel about the issues, go to Reddit and 4chan and you’ll see perspectives that the liberal media refuses to entertain, and that’s why – after a string of victories spanning three generations – the left is starting to lose the culture wars because, thanks to the internet, millions of people are waking up to the lies of the liberal media. But not only are people becoming more aware, but changing economic conditions are threatening the left’s vision of egalitariasim, and the left’s explanations (rich people are greedy, wealth inequality) and solutions (regulation, higher taxes and useless social programs) are not only wrong, but economically detrimental. In a new era of hyper-capitalism and the most competitive economic environment ever, the post-2008 aura of cynicism, skepticism and empiricism has rendered the comforting platitudes – from both the right and left – of neatly-wrapped-with-a-bow-tie politically correct, non-biological explanations for social problems nearly obsolete.

For example, following the Ferguson incident, many posters on sites like Reddit and4chan were giving Wilson the benefit the doubt while the leftist media had already written him off as guilty, and sure enough, video footage is released showing Brown the aggressor and not the ‘innocent’ youth that media had tried to portray him as. Many commenters on these sites, most of whom are well-educated and don’t meet the profile of the ‘racist republican redneck’, agree that Michael Brown deserved his fate for instigating the situation, endangering the lives of the store clerk and Darren Wilson, and for having no redeeming values as an individual. They believe that the protestors’ crusade against Wilson and the police is without merit, similar to how creationism doesn’t agree with the empirical evidence supporting evolution. Hence, they disagree with the left not on partisan grounds, but because the cold-hard facts don’t agree with the liberal narrative, and like creationism, the onus falls on the smartistsphere to debunk it, and rightly so.

An article last year by Slate columnist Emily Yoffe defending men against unsubstantiated accusations of campus rape, while initially panned, has now garnered critical acclaim for her prescience in that women often bring it on themselves though poor decision making. Slate, to their credit, is publishing her follow-up article amid the plurality of political correctness found on most liberal websites. Same for Slate’s occasional other stories debunking Gladwell’s ‘IQ is not important’ and other liberal sacred cows. Millions of smart, young people on Reddit an 4chan, including many women, agree that feminism has not only achieved it’s goal of gender inclusiveness, but modern feminism is potentially sabotaging earlier progress by using gender as just another form of affirmative action, as well as by undermining America’s meritocracy. These smart people understand that the occasional feminist being offended is a small price to pay for the economic and technological dividends yielded by great, talented minds who are better at creating wealth and innovation than playing by the inscrutable, arbitrary rules of modern feminism. This trend of young Obama voters at least questioning an raising criticism the ideological foundation of welfare liberalism should give me and others on the right hope for the future.

Whether it’s campus rape, shirtgate, gamergate, or a story about Rick Perry not paying the National Guard, the the lies spun by the liberal media are quickly debunked online, and as shown by the examples, these are not right-wing sites doing the debunking.. Because of these fabrications and deliberate omissions of facts, the left is losing credibility, and ultimately the hearts and minds of their invaluable demographic – young people. With the rise of the alt-right, internet libertarianism, the manosphere and the redpill movement, along with HBD/biological determinism gaining mainstream acceptance, you see evidence of educated young people abandoning the left. Of course, the SJW still has a large presence, but after a string of losses in the court of public opinion, such as shirtgate and gamergate, the tide is turning.

Taxes, Debt, and QE

Megan Ardle writes

And as I’ve argued before, deficit-financed government spending is a tax
hike. It may not seem like one, but over the long run, that debt has to
be paid, one way or another. And the way it will be paid is with tax

Even though I agree with most of what Megan writes and also identify as a Conservative/libertarian, this isn’t quite true. It may seem that way, but technically taxes don’t have to go up because of the insatiable demand for the US debt, especially as evidenced by the rising dollar. Second, the national debt is perpetually rolled over. The only reason why taxes did go up in 2013 was because of Obama’s refusal to compromise, not because of some economic necessity. Otherwise, income taxes have not gone up a penny sine 1993. But that doesn’t mean we should fritter our reserve currency status on worthless stuff like entitlement spending. Instead, we should use the $ on pro–growth policy like defense, tax cut, a basic income for high-IQ people, and investment in promising start-ups like the next Tesla and the next Uber.

Another common argument is that the fed is artificially propping up stocks with QE.

But the fed ended QE and yet stocks still keep going up. It’s been over a year since the fed began the taper and stocks are up 30% since then, which kinda throws water on the whole ‘QE propping up stock market’ theory. Stocks are surging because of economic fundamentals like consumer spending, exports, profits & earnings…stuff like that.

You see this trend..of a certain political party choosing to go back instead of forward, if it means more employment. We need to come to terms that jobs will be lost, but creative destruction is a net-positive on society and should be encouraged. Traditional gender roles may offer the most hope for women who cannot cut it in STEM, and many can’t. This is where the left fails, by thinking that society should make accommodations for those cognitively incapable of keeping up in today’s hyper-competitive economy.

Wake me up when the crisis happens. Meanwhile people like myself will keep making effortless $ with stocks and real estate. People who wait for the end just end up waiting for nothing. In choosing between ‘we are doomed’ and Pinker’s argument that the world is becoming less violent and more prosperous, the evidence favors Pinker. There’s a lot of problems with America and American society, but relative to population and growth, other places are worse.

Most Financial Analysis is Crap

Like the news, most of what is passes for financial advice/analysis is just noise and should be ignored. This is no exception:

Comment: The small correction off the overbought high levels was expected and the question is whether it will develop into a short-term correction. The recent massive redemptions in hedge funds are alarming. Recall that those investors put their money in hedge funds to literally hedge against a possible decline in stocks. Recently they have gotten too greedy and they have pulled out the money and bought stocks. We know what that could possibly mean for the next few months. Unless Mr. Draghi is convincing with another verbal intervention, something that is getting less likely, we may want to guess where the market is heading to: the trade is now too crowded in the short-term.

Price Action Lab has a history of bad analysis. None of this shit means anything. Like the ongoing developments with Putin and Russia, no one outside of the echo chamber of the media cares that much about Draghi the drag queen. Whatever he does will not have a long-term impact on stocks, but odds favor more intervention because that is what has happened in the past and there is no reason to expect a change.

Hedge fund inflow/outflows are of no predictive value. Hedge fund withdrawals were high in 2009 and that was the market bottom, so one could argue that withdraws are a bullish indicator. Maybe more people are waking up to the the lousy returns provided by most hedge funds and their inability to actually hedge large declines. Even when a hedge fund does hedge, it’s no guarantee you will make money. A hedge fund that falls less than the market on the way down will almost always rise at a slower rate than the market on the way up, providing no final benefit over an index fund. You may as well just put your money in 3-5 year treasuries than fritter it away in management fees just so you can say you ‘only’ lost 30% of your money in a crash instead of 50%.

The golden rule is whatever narrative the doom and gloom liberal media cooks up for why stocks should go lower, 99% of the time they will be wrong. It can be wealth inequality, home prices going up too much, not enough ‘good paying’ jobs being created, oil, youth unemployment in Spain, pain at the pump, student loan debt, Putin, China, auto debt…the list goes on and on.

American Exceptionalism & The State of the Labor Market

As Americans gripe about the weak labor market, ‘America being in decline’, and wealth inequality, foreigners cannot get enough of America:

Libs awaiting the next financial crisis that will never come:

Brad Delong, who is a Democrat, writes:

Question for Tyler Cowen: Haven’t we gotten foreign policy right since World War II, more or less? Haven’t we created a world in which everyone save for the oligarchs of Muscovy and the princes and princelings of China wishes that their country was more like ours, and hopes that their grandchildren will have the option to move here if they want? What could we have done better over the past fifty years–aside from a lamentable tendency to think that right-dictatorships are more likely to evolve into democracies than left-dictatorships, that our soldiers can train “third forces” that will stand up on battlefields, and that we can intervene to both make people, in Woodrow Wilson’s words, “elect good men” and to make those we imagine are democracy-minded strongmen actually hold fair and honest elections?

Despite being a liberal, he’s correct. Again, to clarify the differences between a welfare liberal and a pragmatic neo/classical liberal, read this. ‘Liberals’ like Sheldon, Summers, Delong, Clinton and Gates are not leftists like OWS leftists, but are neoliberal/neoconservative pragmatists who believe in policy that maximizes the creation of wealth, technological innovation, and prosperity – even if it means more wealth inequality. America, especially in the post-2008 era, has become the envy of the world. Smart foreigners can’t get enough Bay Area and New York real estate and are also inundating our most prestigious institutions of higher learning with applications, while also coming work at America’s most innovative companies. Despite all the whining about intransigence and dysfunction, Congress, to their credit, has always risen to the occasion during trying times, and that has helped make America a safe place to invest in a world of dysfunction. Despite setbacks in Iraq, maybe spreading capitalism could have long-term benefits as we’ve seen in instances like Vietnam, China, and the Philippines. Every country that has abandoned communism has experienced a rise in standards of living.

You cannot bring up the middle class by attacking the top, and that is usually what happens in these discussions about wealth inequality. We need to change our perspective: despite record wealth inequality, the middle class of today has a much higher standard of living than the middle class of 70 years ago. For $10-20 a month you can have access to pretty much every TV show and movie ever made, whereas generations ago people only had 5 black and white TV channels. Adjusted for inflation, your dollar today buys much more utility than 100 year ago. So why is this possible? Because of rich people and the technologies they create within a free market.

This romantic idealization of ‘old economy ‘ jobs is counterproductive. Those jobs are gone or dying off. We need to teach individuals the skills and mindset to be competitive in today’s hyper-competitive economy. The millennials to their credit are getting this right, while the old economy folks call this ‘entitled’. We need to lower our expectations; unless you major in a good field, a lifetime of low paying service sector work should not be out of the question. Degrees from good schools signal intelligence and competence. In today’s competitive economy, the huge labor pool gives employers the luxury of only choosing only the best and brightest.

Economics is useful, despite the whining from the left that economists ‘failed to predict the crisis’. Economists are better at fixing crisis than preventing them. The tradeoff between less growth in exchange for stability is not a worthwhile one, especially when policy makers have become so adept at stopping crisis as soon as it arises.

Economists being paid more is part of the post-2008 trend of high-IQ people earning more than everyone else. This trend of the cognitive elite coming apart from rest of society is longstanding, but has accelerated since the 2008 financial problem and will continue a long time to come. More automation and offshoring is inevitable, I hate to say. Trying to bring millions of people of average IQ up to speed on STEM is also an impossible task. There are few solutions to the problem.

Speaking of coming apart, Charles Murray – who is held in high esteem by millennials, neoconservatives and neoliberals – is a pragmatist who understands that the solutions to society’s problems won’t be solved with political correctness, but by understanding the inherent differences between individuals and the importance of these differences in determining life outcomes and utility-maximizing policy. In the 90′s there was a strong backlash to the ideas in The Bell Curve, but I think now in light of recent economic events and more wealth inequality people are starting to see where he was coming from, and his legacy is being redeemed. The basic income is one such example that is being endorse by even libertarians. People are like, ‘hmm.. maybe he was right’.